Two routes to reform in Alabama's premier city; while the state creeps toward health reform, employer groups do their best to quicken the pace - Birmingham, Alabama - Coalition Report - Column

Business & Health, Oct, 1995 by Dan Wise

While the state creeps toward health reform, employer groups do their best to quicken the pace.

Alabama ranks 47th for health-care quality but fifth for spending as a percentage of gross state product, according to a Lewin VHI state-by-state comparison. In Northwestern National Life's latest ratings based on quality, cost and access to care, it comes in 45th. Those statistics are not surprising, for the nationwide trend toward restructuring health-care delivery slows to a glacial pace in this state. The exception is Alabama's largest city. While statewide HMO penetration hovers at 8 percent, for instance, Birmingham has 25 percent penetration. It also has two health-care coalitions that are approaching change from entirely different angles.

The newer group, dubbed the Coalition for Employee Healthcare (CEH) even though its members are employers, introduced managed care to its six self-insured companies a year ago. CEH Executive Director Lee Crapet says the plan, PremierCare, now covers 5,200 of a possible 40,000 lives, and he expects that number to grow.

CEH considered opening its own clinics, says Frank Wright, personnel manager of Thompson Tractor Co., a coalition member, but employees and dependents were too dispersed to make that route economical. Instead, PremierCare forged capitated, direct-contract agreements with three major PHOs.

Capitated agreements are rare here. "We thought we had this radical idea, but the doctors were more accepting of it than we expected," Wright recalls. "They said, 'We thought something like this might be coming.'"

PremierCare has some unusual wrinkles. One of its three primary care networks is exclusively pediatric, for example, while another does not offer obstetrical-gynecological care. Thus, some women must use providers from two different systems. Crapet acknowledges that this can be frustrating, but there are no immediate plans to change the structure.

While the negotiated per member/per month rate produced a 20 percent savings over the cost of self-insured indemnity coverage in the plan's first year, the cost differential has narrowed. The main reason: Health-care costs have cooled off, but the coalition is locked into a three-year deal. Limiting increases in capitation to no more than 5.6 percent annually until 1997 seemed like a good idea at the time, he observes. But other insurers are now renewing client contracts with no increase at all.

The focus is more on quality than cost at Birmingham's other coalition. The Alabama Healthcare Council, with 58 member companies representing about 100,000 employees, is collaborating with 11 area hospitals on a demonstration project to measure performance on two DRGs--pneumonia and Caesarean sections--using the Mediqual system. Last year's first phase of the project collected data on lengths of stay, cost and mortality measures. Later this fall, in the second phase, employers will get a comparison report based on the data and national norms.

"Eventually, we will use the lessons learned from the demo project to develop a standardized way of measuring hospitals," says Katherine Capps, president of the council. A subgroup of six self-insured employers is also pooling claims data for some 26,000 people and comparing it to state, regional and national norms over a 30-month period. The data will provide a baseline for measuring progress and focusing future efforts on cost management--a much-needed service, according to Capps, because Alabama employers previously had little basis for comparison. Even hospitalization data is sketchy at best because the state has minimal reporting requirements, she says.

To Wayne Houston, director of compensation and benefits for Vulcan Materials Corp., a crushed stone and chemical company, quality measurement and collaboration with hospitals is a small but vital step on the long road to changing the way health care is delivered in Alabama. "Hospitals here have not been truly competitive," says Houston. "There has not been genuine supply and demand because they controlled the demand. Now we're helping them change the way they practice."