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BOSTON -- Mergers by health care provider organizations are quietly running rampant in health care markets across the country, forcing up prices and putting unprecedented pressure on HMOs, a managed care executive says.
George Halvorson, president and chief executive officer of Minneapolis-based HealthPartners, told an audience at the American Assn. of Health Plans conference June 14-17 in Boston that the health care industry has observed health maintenance organizations consolidate en masse in the past couple of years without noticing that providers are taking more control of their markets by doing the same.
"The provider consolidations that are happening in our (Twin Cities) marketplace are not unique," he said. "You can go to market after market around the country and find that you're down to two or three dominant care systems.
"We're seeing hospital systems acquiring clinics. We're seeing clinics acquiring clinics. We're seeing hospitals acquiring hospitals. What we're seeing basically is consolidation resulting in regional monopolies and oligopolies on the caregiver's side. This is going on below the radar screen. The HMO consolidation is pretty visible. The provider consolidation is pretty invisible because nobody notices when an individual clinic is acquired," he said.
According to Mr. Halvorson, 90% of smaller employers and more than half of large employers offer only one health plan to workers, partly as a result of a lack of choices within their markets. In addition, any time that providers obtain "sufficient market leverage," prices will rise for both managed care plans and employees, he said.
"It's an inevitable consequence," he said. "It's a natural backlash to the negotiating power of managed care organizations."
In Minneapolis, 135,000 employees of companies that participate in the Buyers Health Care Action Group, a coalition of more than two dozen large employers in the Twin Cities area, are able to overcome new monopolistic trends by choosing among "care systems" for medical insurance, Mr. Halvorson said.
In January 1997, BHCAG introduced a new system of care in which employees -- using vouchers from employers -- could select from numerous combinations of physician groups and hospitals after comparing price differences, service availability and quality ratings.
Extensive information about each care system is available from multiple sources, including the Internet and kiosks at worksites. The desired goal could be likened to a farmer's market, with shoppers able to browse among many stalls, or "managed competition at a very direct level," he said.
HealthPartners for the past several years has had contracts to perform the coalition's administrative processing. At the end of 1999, however, that relationship will end, Mr. Halvorson said at the session. BHCAG announced last year that it planned to rebid the contract (BI, Aug. 25, 1997). HealthPartners did not submit a bid.
Although Mr. Halvorson said he still has faith in BHCAG and the care system approach, recent philosophical differences have made it awkward to work with BHCAG. He said BHCAG recently began aiming its marketing at customers who were already enrolled in HealthPartners' non-coalition health plans. Instead, Mr. Halvorson said, HealthPartners wants to market to entirely new groups of potential enrollees.
"BHCAG decided to do some private-label branding and to almost, in effect, become a competitor to us while using our infrastructure. We talked it over and decided it didn't (make sense) for us to be competing against ourselves," he said.
In addition, disagreement arose over provider fees, he said. HealthPartners wanted to limit how much providers in the program could charge, while BHCAG wanted to take a free-market approach and eliminate limits, he said. The HMO also found it difficult to sell its products and project objectivity to clients while serving as central administrator of the coalition's program, he said.
Steve Wetzell, executive director of BHCAG, said last week that HealthPartners executives "view us as a competitor, and our employers have a real problem with that." He said BHCAG in no way competes with the health plan, though large employer coalitions commonly engender those feelings among HMOs that wish to market new products aggressively.
At the AAHP session last month, Dr. Mark Robbins, a health care researcher affiliated with Boston-based John Snow Inc., reviewed the findings of interviews of benefits executives from companies in Boston, Minneapolis, San Francisco and Orlando, Fla. The employers represent health plans covering a total of 1 million lives.
Dr. Robbins found the benefits profession puzzled about how to use basic sources of industry data.
"We really don't know very well how consumers make decisions," he said. "We don't know if healthy consumers make decisions in different ways than chronically ill consumers. There's some information to suggest that consumer information that's disseminated by the company, particularly in the setting of downsizing, is not very trusted and needs to come from an outside agency. (But) as we know, the roles of NCQA (National Committee for Quality Assurance), HEDIS (Health Plan Employer Data & Information Set), FAACT (Foundation for Accountability) and coalitions are unclear as to which indicator to use."