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Market Forces

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Business coalitions have the potential to buy health care quality as well as contain costs

A study by the Agency for Health Care Policy and Research and the National Business Coalition for Health (NBCH) suggests that most business coalitions—regional, State, and local groups of employers with common interests in health care coverage for their workers and dependents—have processes in place that could be tapped to promote quality, just as their market power helped contain health care costs earlier this decade by encouraging the growth of managed care. The study was led by Irene Fraser, Ph.D., director of AHCPR's Center for Organization and Delivery Studies.

The analysis, which was based on data from a 1998 NBCH survey of business coalitions and on interviews with nine coalition leaders, shows that many coalitions are involved in a broad range of activities designed to exert influence in the marketplace. Ninety percent of the 75 coalitions that participated in the survey said they collect or analyze data about health plans or providers, and nearly two-thirds of these said their involvement is extensive. Four of every five coalitions negotiate the terms of one or more health benefits with health plans, providers, or others. These benefits can range from narrowly defined services to comprehensive coverage. The most commonly negotiated services are narrowly defined speciality services, also known as carve-outs, such as prescription drug benefits, vision care, and psychiatric services.

Thirty-five percent of business coalitions bypass health plans and negotiate comprehensive coverage directly with providers. Almost 6 of every 10 coalitions that negotiate coverage, whether from health plans, providers, or purveyors of carve-out services, write performance incentives such as bonuses and premium rebates, and penalties such as withholding payment, into their contracts.

According to the authors, these incentives can be used to foster cost reduction and improved customer service, but they can also be used to encourage and reward good clinical care if the coalition chooses to use them that way. The real challenge—especially in the face of what appears to be an impending resurgence of rising health care costs—will be to use this market power for improving quality as well as containing costs.

For more information, see "Pursuit of quality by business coalitions: A national survey," by Dr. Fraser, Peggy McNamara, Gregg O. Lehman, Sandra Isaacson, and Kelli Moler, in the November-December 1999 issue of Health Affairs 18(6), pp. 158-165. Reprints (AHCPR Publication No. 00-R003) are available from the AHCPR Clearinghouse.

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