Two Massachusetts Employer Organizations Endorse Contracting Directly with Providers for Employee Health Care

"[F]rustrated over another year of double-digit increases" in health insurance premiums, two of Massachusetts' largest employer organizations have endorsed a program in which businesses would sidestep managed care companies and contract directly with doctors and hospitals to provide care for their employees, the Boston Globe reports. At the request of the Associated Industries of Massachusetts and the Massachusetts Healthcare Purchasers Group, which represent 6,000 companies with two million insured employees and dependents, Minnesota-based Patient Choice will launch a direct-contracting program Jan. 1, 2003, that aims to "save employers money by cutting out the middleman and by requiring hospitals and doctors to compete more aggressively on their fees." The company runs similar programs in Minnesota, Colorado and Oregon. Patient Choice will ask doctors and hospitals to form 15 to 20 small networks, which will submit their prices for various services to employers. According to Patient Choice, most business will choose to cover the full cost of care for employees at the least expensive network and make workers pay the difference if they choose a more expensive network. Patient Choice also will provide quality measures on each network. "We're creating a market dynamic that encourages providers to care about the cost of care they're providing," Patient Choice Chief Operating Officer and President Ann Robinow said.

Will it Work?
The Massachusetts plan is the latest attempt by employers nationwide to bring down health costs by shifting more costs and responsibility over their health care onto consumers (Kowalczyk, Boston Globe, 3/26). AIM President Rick Lord said, "Patients don't want restrictions, but at the same time, none of us can continue dealing with double-digit cost increases year after year after year" (Powell, Boston Herald, 3/26). It remains uncertain whether the Patient Choice program will take hold in Massachusetts. The company says it has kept premium increases below the market average in its plans in other states, which serve 120,000 employees. But the number of employers participating elsewhere remains relatively small, and Massachusetts businesses have questioned whether direct contracting actually saves money. For example, without HMOs, Patient Choice would have to hire a company to perform administrative functions such as paying claims. The state's HMOs "don't seem especially worried about Patient Choice," the Globe reports. Jon Kingsdale, senior vice president for planning and development at Tufts Health Plan, said, "We use an awful lot of negotiating leverage to get the best price we can for our clients. I'd be surprised if the new boy on the block can get better prices. But if they can, it's fair to say we'll be looking for the same deals ourselves" (Boston Globe, 3/26).