If you build it, we will come - rural health care insurance plans in Iowa - Column

Business & Health, May, 1996 by Dan Wise

In the movie "Field of Dreams," a baseball diamond built in an Iowa cornfield lured the ghosts of the national pastime. In south-central Iowa, employers concerned about the future of health care in the region told providers that if they built the right plan, employees would come.

Acting in concert but without formally organizing, a handful of employers in the towns of Pella, Oscaloosa and Knoxville agreed on a common benefit design. Then they asked local providers to build a managed care product that fit the bill and ensured access to hospitals in all three towns. Dennis Brass, human resources director at Precision Inc., a manufacturer of conveyor components that's one of the key players, says the employers didn't want their independent hospitals to be swallowed up by urban chains. Neither did they want to administer a health plan. "We didn't develop the product," Brass says, "and we didn't want to become a purchasing coalition. Instead, we said, 'If you offer us this, we'll offer it to our employees.'" The result was South Central Iowa Health Care Partners Inc., founded last year by 40 primary care physicians and three local hospitals.

The physician-hospital organization (PHO) initially forged a fee-for-service plan with a 10 percent withhold, although it plans to accept capitation eventually. Since it began operating a year ago, Health Care Partners has contracted with a small group of local employers, all self-insured, that collectively cover 3,000 individuals through the PHO. The employers say it's too soon to compare costs with their other plans, but the fact that they're pursuing ways to add workers' comp coverage to the contract is a mark of purchaser satisfaction.

Who are those purchasers? Three major manufacturers--the Pella Corp., which makes doors, windows and skylights and is the area's leading private employer, and Vermeer Manufacturing, an equipment maker, in addition to Precision. All are based in Pella, the region's manufacturing center. The PHO's hospitals--Mahaska County, Pella Community and Knoxville Community--are purchasers as well. While the PHO's current product is exclusively for self-funded firms, Health Care Partners is teaming up with Seaboard Life Insurance of Indianapolis to develop a fully insured product due out later this year.

The current plan lowers reimbursement for out-of-network coverage, but adds an unusual wrinkle to the gatekeeper system: Primary care physicians in the PHO have almost unlimited referral authority. Typical managed care plans do the opposite, explains Myron Linn, Pella Corp.'s manager of compensation and government affairs. They give employees a broader choice in primary care, usually statewide, but limited access to a tighter network of specialists. Linn and other employers that contract with Health Care Partners say this broad referral authority combined with partial risk if doctors fail to meet agreed-upon utilization and spending targets puts primary care physicians in charge of their destiny and gives them power in bargaining for specialty care.

Indeed, specialty practices from Des Moines and other major centers are courting the communities because of the power local physicians have. In the past year alone, Linn reports, several specialists have set up part-time clinics in the area to capture referrals, a reverse of the recent (and costly) trend in which a lot of medical care for residents has been delivered by out-of-town specialists.

For employers, the benefits of preserving local health care are significant: Rural providers generally have lower overhead costs and rural risk pools often have better utilization rates than their urban counterparts. Nonetheless, Pella's employers say, if the hospitals, clinics and providers of Pella, Oscaloosa and Knoxville hadn't organized, they'd likely have become an extension of someone else's expanding network. Instead, South Central Iowa Health Care Partners commands a substantial bloc of lives.

Brass, for one, is surprised that more communities haven't taken the self-sufficient approach of building a managed care plan to suit their own needs. He's certain other rural practitioners will find that if they build it, employers and patients will come.