Mass. group to HMOs: limit rate increases - Massachusetts Healthcare Purchaser Group; health maintenance organizations - Coalition Report

Business & Health, Oct, 1993 by Dan Wise

A newly formed group of 36 major public and private health care purchasers in Massachusetts is challenging its managed care providers to limit annual cost increases and publicly relealse standardized indicators of quality.

Supporters and organizers of the challenge say their goals were designed to be simple enough for the general public to understand. To some skeptics, the challenge is too simplistic to be effective.

The purchasers in the coalition represent nearly 1 million covered lives, including the Commonwealth of Massachusetts as purchaser of health care for 250,000 Massachusetts workers and 450,000 Medicaid recipients. Among the employer members is The Boston Globem, which reported the challenge on its front page June 23.

The challenge, by the Massachusetts Healthcare Purchaser Group (MHPG), calls for managed care plans to limit 1994 price increases to no more than 4% above the Consumer Price Index and a maximum of 10%. In future years, the cap on increases would be lowered so that by 1997, rate hikes could not exceed more than 1% of CPI. Additionally, the plans are being asked to publicly release standardized, plan-wide "quality indicators" on their rates of asthma-related hospital admissions, Cesar can sections, hypertension screening, mammography screening, mental health readmissions, and unspecified prenatal care measures. The first quality measures are to be reported in the first quarter of 1994.

William Hubert, corporate benefits manager for Polaroid Corp., Cambridge, Mass., and a spokesperson for the MHPG, says group members want to use their market clout to influence the plans to control costs and make it easier to compare individual plans on quality measures.

"Most of the purchasers are somewhat frustrated," Hubert explains. He oversees benefits for 8,000 U.S. employees of the photographic equipment maker. "The HMOs are lelss expensive than indemnity plans, but there is a sense that the plans possibly were shadow-pricing. We have a couple of cynics in the group who see the health industry roaring, talking about 20% annual inflation. Then when the plans come in with a 15% increase, everybody says, 'Thank God, it wasn't 20%.' We wanted to give the plans a new standard to manage to."

HMOs pledge cooperation

So far, HMOs--Tufts Associated Health Plans, Waltham, Mass., and Harvard Community Health Plan, Brookline, Mass., to name two--which were invited to a closed-door meetings where the cost-quality challenge was elaborated have pledged to cooperate with the group. With overall inflation low and intensified hospital competition holding down charges, both employers and plans seem to believe that reaching the first year's projected goal of 8%, counting an expected annual inflation rate of 4%, is attainable. Last year, according to the Massachusetts Association of Health Maintenance Organizations, HMO rate increases ranged from 9% to 11%.

"Meeting the goal in the first year will be relatively simple because competitive marketplace pressures are pushing us in that direction," says Alan Raymond, vice president, public affairs for Harvard Community Health Paln, the state's largest HMO with about 550,000 members. "Projecting a straight line down through the years makes a lot of sense. But there will be variations from year to year and whether the group's target will be met every year, we don't know."

Group members say they are aware that implementing the cost challenge, if not monitoring closely, could produce a cost shift that would hike charges for employers and purchasers that are not members of the group. "We want to avoid giving a group of purchasers an advantage over other purchasers," Hubert says. "We are trying to effect change in the entire delivery system." The details are yet to be worked out.

One of the biggest unanswered questions is what the group will do if its targets aren't met. The MHPG is not a collective buying organization, and since it is dealing with all of the managed care providers at once, skeptics are asking where will the buyers go if the plans don't meet their targets?

While praising the broad representation and intentions of the group, Sean Sullivan, president of the National Business Coalition on Health, a Washington organization that represents employer health coalitions, says "the acid test will be, 'what are the consequences?" Is there anything in place to enforce the challenge?"

Another organizer of the group, Michael Bailit, assistant commissioner for managed care for Massachusetts' Medicaid program, admits that the consequences of not meeting the challenge "will be up to individual purchaser." Both Bailit and Hubert believes that the glare of publicity and the market clout of the purchaser will pressure managed care plans to exert greater control over costs.

On the quality side, MHPG is asking HMOs to publicly release performance data on the quality indicators. However, the group has not set quality benchmarks for the plans to meet. Again, publicity is seen as key to improving the marketplace. Hubert says group members have been dissatisfied with the data they have been getting because each plan developes and reports data according to its own standards. And purchasers are limited seeing only the data from the plans with which they do business. "We don't know how to say something is good or bad," says Hubert. "Looking at all of these comparisons will make us more effective purchasers."