BHCAG GOES TO MARKET

MINNEAPOLIS-In an effort to measure the market, the Buyers Health Care Action Group is putting its administrative services out to bid.

The Twin Cities coalition of about 25 employers will issue requests for proposal for the 2000 plan year during the first quarter of 1998. BHCAG is in the fifth year of a seven-year contract with HealthPartners and expects the health maintenance organization to make a strong bid to keep the business.

BHCAG members and executives say the move has been on the back burner for some time and in no way reflects any dissatisfaction with the Minneapolis-based HealthPartners, which has been providing administrative services to the group since 1993.

"Given how aggressive we are with pursuing value on the provider side of the equation, we want to be just as aggressive with the value of our administrative service dollars," said Steve Wetzell, executive director-public policy and public affairs for the BHCAG. "We feel the best way to do that is to test the market."

"We have no problem with HealthPartners," Mr. Wetzell added. "We've renewed with them four times. They've obviously done a good job for us."

BHCAG's decision to test the market comes eight months after the coalition's new "care systems" model became effective for its approximately 250,000 employees and dependents. The BHCAG approach is considered novel and is being closely watched by the health care community.

Under the new model, 15 care systems-groups of physicians and hospitals approved by the coalition to compete for patients based on coverage offered and rates-replace managed care plans. HMOs under this system function strictly as administrative service contractors, and that role primarily has been fulfilled by HealthPartners and its subcontractors (BI, Dec. 23/30, 1996).

"We always had it in the back of our mind that we would eventually go out to bid," concurred Fred Hamacher, vp-compensation and benefits for Dayton Hudson Corp. in Minneapolis, one of BHCAG's founding employer members."We weren't ready to do that earlier."

"We originally thought about going out to bid a couple of years ago

. . .but we were evolving into a new model and HealthPartners was helpful in getting it all together," Mr. Hamacher said.

The group also decided to wait until 2000 to give vendors time to look at the BHCAG's business and respond to what it is seeking, he explained.

BHCAG will issue RFPs during the first quarter of 1998 for various administrative services, including account management, enrollment administration, provider reimbursement administration, claims processing, risk adjustment, pharmacy management and coverage determinations.

While HealthPartners and its subcontractors currently provide the majority of these services, BHCAG is willing to look at both bundled and unbundled proposals from local and national vendors.

"Our minds are wide open," Mr. Hamacher said.

Whether the group ends up with unbundled services from a variety of vendors or bundled services from a few vendors depends on the value that vendors bring and at what price, he explained.

Also, the group will be looking for state-of-the-art technology in claims adjudication and a high level of quality service, Mr. Wetzell added.

Messrs. Wetzell and Hamacher do expect the group's current administrator to be a tough competitor for other vendors.

George Halvorson, president and chief executive officer of HealthPartners, agrees.

"It's hard to imagine anyone other than us who can respond to the RFP. This is probably the single most complex administrative task in the country. We're basically administering 20 separate HMOs simultaneously. . . .It took a year and a half just to build the infrastructure to accomplish this.

"I'm comfortable with our prospects."