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Boeing negotiates directly with more health systems

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Airplane manufacturer Boeing Co. will soon offer more employees the option of health benefits negotiated directly with local health systems.

The employer, skilled in the art of negotiations, first used the strategy last year in Seattle to better control healthcare costs.

Boeing added direct contracts with Roper St. Francis Health Alliance in Charleston, South Carolina, one major location for Boeing's commercial airline business, and with St. Louis-based Mercy. Boeing's defense, space and security business operates in 10 U.S. cities, including St. Louis.

Roughly 19,000 Boeing workers will have the option to choose new health plans for 2016 under the contracts. That's in addition to the 30,000 Puget Sound employees, dependents and retirees eligible for benefits under a similar Boeing contract with Providence-Swedish Health Alliance and the UW Medicine Accountable Care Network in the Seattle area.

Boeing is one of a few national employers that now negotiate directly with hospitals and medical groups to provide employee health benefits or specific services. Intel Corp. contracts directly with Presbyterian Healthcare Services in New Mexico. Lowe's Corp. and Wal-Mart Stores have limited contracts for orthopedic and cardiac surgeries with select U.S. health systems.

Early results from Boeing's first contract in the Puget Sound are not yet available, but the employer is eager to expand its use of direct contracts to exert more influence over the cost and quality of care, said Jeff White, Boeing's director of health care strategy.

“We hope to provide a program like this to most of our employees,” he said. The company is not expected to announce any additional contracts for 2016. Boeing also operates in Los Angeles; Salt Lake City; Philadelphia; Mesa, Arizona, San Antonio and Houston, Texas; Oklahoma City; Washington; and Huntsville, Alabama.

Boeing manufactures its money-losing Dreamliner in South Carolina, but the company is expected to reverse those production losses later this year as efficiency improves, the Charleston Post and Courier reported in late July. The International Association of Machinists has stated plans to organize Boeing's North Charleston workers, the newspaper reported. Nonunion employees are typically eligible for health benefits under Boeing's contracts with Roper St. Francis, Mercy and Providence-Swedish because union benefits cannot be changed without talks between Boeing and the union members.

Expansion will depend on the number of employees in each market; the ability to develop adequate health system networks; and the degree to which Boeing can contract with health insurance companies for data analytics and communication. Boeing finances its employee health plans, but contracts with health insurers to handle administration.

Sophisticated negotiators

Boeing has so far found health systems willing to contract, Mr. White said. “I have something to offer them, which is patient volume.” In return, health systems that enter contracts with Boeing must agree to reach targets for cost, quality and patient satisfaction. He declined to say what financial targets Boeing set for health systems.

Employers such as Boeing have been sophisticated negotiators, according to health system executives.

“Obviously, they bring serious business pressure into the equation,” Dr. Joseph Gifford, chief executive for accountable care for the Providence-Swedish Health Alliance, told an audience in Washington earlier this year.

Employers set demands for services that exceed typical expectations in the health care industry, he said. “Working for Boeing, working for Intel, working for these employers, just really gives us good pressure to understand we're in a serious, complex service industry,” he said.

Boeing approached health systems looking to contract and successfully pushed for “very detailed” performance targets, said Donn Sorensen, president of Mercy's operations in eastern Missouri. “If they can do one thing, they can procure,” he said. “They are very data-driven.”

Mr. Sorensen said investments have positioned Mercy to achieve Boeing's targets. Mercy potentially gains “market share and volume” under such contracts, he said.

Employees do not have to choose health plans offered under the new contracts, but those that do will select a narrow network in exchange for free primary care and generic prescriptions, reduced premiums and larger contributions to health savings accounts.

Financial incentives were a draw for the 30% of eligible Puget Sound employees who selected the new option this year, Mr. White said. More are expected to enroll.

Limited and early quality indicators suggest improvement in preventive care in the Puget Sound, but no data is yet available for possible savings, he said.

Melanie Evans writes for Modern Healthcare, a sister publication of Business Insurance.