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I I Managing Health Costs: Strategies for Coalitions and Business is a publication of the Clearinghouse on Business Coalitions for Health Action, a project of the Chamber of Commerce of the United States. This publication was prepared by Sharon F. Canner, under the direction of Jan Peter Ozga, Director of the Clearinghouse. Opinions expressed herein are not necessarily those of the Clearinghouse on Business Coalitions for Health Action or the Chamber of Commerce of the United States. Additional copies are available postpaid: 1-9 copies $9.00 each 10-24 8.00 25-99 7.00 100 or more 6.00 Add appropriate sales tax for deliveries in the District of Columbia and California. Make check or money order payable to: Chamber of Commerce of the United State: 1615 H Street, N.W. Washington, D.C. 20062 Or dial direct: (301)468-5128 U.S. Chamber Publication # 6615 Copyright 1982 bv the Chamber of Commerce of the" United States ISBN: 0-89834-051-9 Library of Congress Catalog Number: 82- 74269

Advisory Committee to Clearinghouse on Business Coalitions for Health Action Gerald A. Gleeson, Chairman Joint Health Cost Containment Program Philadelphia, Pa. George S. Gamble Employers' Health Care Coalition of Greater Los Angeles El Segundo, Calif. Willis B. Goldbeck Washington Business Group on Health Washington, D.C. Robert R. Henderson, M.D. Fairfield/Westchester Business Group on Health Stanton, N.J. Ronald A. Hurst Peoria Area Chamber of Commerce Health Cost Containment Program Peoria, II1. Fritz G. Ihrig Colorado Coalition for Health, Inc. Denver, Colo. Robert E. lvancevich Lehigh Valley Business Conference on Health Lehigh Valley, Pa, James B. Kennev, Ph.D. Minnesota Coalition on Health Care Costs Minneapolis, Minn. Joseph G. Kozlowski Greater Cleveland Coalition on Health Care Cc~st Effectiveness Cleveland, Ohio John H. Kreamer Mid-America Committee on Health Cost Containment Kansas City, Mo. David A. Lieser Atlanta Chamber of Commerce Atlanta, Ga. Gerard E. Maver South Florida"Health Action Coalition Miami, Fla. James D. Mortimer Midwest Business Group on Health Chicago, 111. Jan Peter Ozga (ex o~ficio) Clearinghouse on Business Coalitions for Health Action Washington, D,C, Patrick N. Renaud Marvland Health Care Coalition Sparrows Point, Md. Richard A. Rix Greater Portland-Vancouver Buisiness and Labor Group on Health Portland, Ore. Leon J. Warshaw, M.D. New York Business Group on Health New York, N.Y. Loring W. Wood, M.D. New York Telephone ¢,,0

4~ j" Foreword Concerned with their increasing share of the nation's $300 billion bill for health care, employers are insti- tuting numerous measures to control these costs. Businesses are forming coalitions of firms, which in many cases include health insurers and providers. Employers are negotiating rates with providers. Business associ- ations are educating management on rising costs. Also, the federal govern- ment is developing an inventory of these private sector efforts. The Chamber of Commerce of the United States has taken an active role in encouraging the development of these private initiatives to contain costs. In 1978, the Chamber pub- lished a national health care strategy for employers contained in its widely acclaimed Health~Action Kit. It has since produced a primer for business members of hospital boards, and nu- merous articles on health care costs. Continuing its role as a resource to business, the Chamber established the Clearinghouse on Business Coalitions for Health Action in February 1982. On June 1-2, 1982, in Chicago, the Clearinghouse convened a meeting of representatives from more than 30 business coalitions, and individuals from major corporations, health care provider organizations, state and fed- eral government agencies, local chambers of commerce, and policy research centers. This inaugural meeting of the coalitions focused on specific approaches being taken by coalitions as well as other major de- velopments in health care cost containment. This publication is based, in large part, on the proceedings of that inau- gural meeting. Chapter II is a sum- mary of the five workshop sessions held and includes comments of the moderators and participants. The re- maining chapters summarize the re- marks made by the speakers at the meeting. The Appendix lists refer- ences for additional reading, and public and private organizations ac- tively involved in health cost containment. Managing Health Costs: Strategies for Coalitions and Business has been writ- ten for individual companies, for emerging and established coalitions, for health care providers and insur- ers, and for others concerned with today's high cost of health care. The material presented here is intended to inform as well as to provide a springboard for further discussion and action. 00

Contents ~%,~-~ ~ ~'r INTRODUCTION .................................................................................................... .................. 1 Overview of Business Coalitions for Health Action ....................................................... 1 Coalitions: Framework for Local Cooperation .................................................................. 5 COALITION STRATEGIES .................................................................................................... 7 Forming Coalitions .................................................................................................... ................ 8 Data Collection and Analysis ................................................................................................. 11 Benefits Design and Alternative Plans ................................................................................ 13 Employee Wellness Programs ................................................................................................ 16 Hospital Trustee Education .................................................................................................... . 18 CORPORATE STRATEGIES ................................................................................................. 21 Business Roundtable's "Health Initiatives". ...................................................................... 21 PROVIDER STRATEGIES .................................................................................................... .. 25 Preferred Provider Organizations .......................................................................................... 26 A Physician's Prescription for Managing Costs ................................................................30 PUBLIC SUPPORT FOR PRIVATE INITIATIVES ..................................................... 35 The Federal Government's Role in Competition ............................................................. 35 IMPACT OF RISING COSTS ................................................................................................ 41 Payment Systems and Cost Shifting ..................................................................................... 41 EPILOGUE .................................................................................................... ................................. 47 APPENDIX .................................................................................................... ................................ 49 Publications .................................................................................................... .............................. 49 Organizations .................................................................................................... .......................... 53

¢" A" • Introduction ince employers m _.~ are paying for al- --1 most half of the nation's annual -- --" $300 billion bill ] for health care, business has be- gun to take action against these costs. They are forming business/health coalitions, sometimes sponsored by state or local chambers of commerce. Using their collective leverage as major purchasers of health care, these coalitions are look- ing for voluntary, cooperative meth- ods of improving local health care systems. In addition to representa- tives from business, some coalitions also include leaders from hospital, physician, and insurance organiza- tions as well as government and academia. There are approximately 90 busi- ness coalitions, according to a recent survey by the U.S. Chamber's Coali- tion Clearinghouse, and new groups are continuing to form. This level of activity has stimulated much discus- sion, from concern with basic organi- zational problems to proposed agen- das and legal issues. Local organizers have communicated informally with groups in other areas. An effort of this magnitude requires coordination, however, especially the information being generated by the large num- bers of employers involved and pro- jects being undertaken. In February 1982, the U.S. Chamber of Commerce established the Ch'ariny, house on Busi- ness Coalitions for Health Action. The Clearinghouse conducts sur- veys; publishes a directory of coali- tions and a monthly newsletter; pro- vides technical assistance to some established and emerging coalitions; operates a referral service; and holds periodic meetings on selected topics. Its inaugural meeting in June 1982 brought together coalition staff, other business representatives, and individ- uals from provider groups, govern- ment, and health policy research. The presentations and ensuing dis- cussions provide examples of con- temporary trends in managing health costs at the local level. Jan Peter Ozga, director of the Clearinghouse, was moderator for the Chicago meeting. Gerald Gleeson is chairman of the Advisory Commit- tee to the Clearinghouse and director of the Joint Program on Health Cost Containment (Philadelphia). Ozga and Gleeson, catalysts for coalition development at national and local levels, offer some comments on the past, present, and projected growth of local efforts to manage and contain health care costs. Overview of Business Coalitions for Health Action --Jan Peter Ozga This inaugural meeting is a milestone in the development of private sector initiatives to contain health costs. As demonstrated by their attendance here, coalition staff, company benefit managers, and health organization representatives are expressing their concern over rising costs and the

"" need to exchange information on the status of local initiatives. As a starting point for these discus- sions, it is useful to look at the origins, size, and number of business coalitions, as well as some general background on their composition. Origins of Business Coalitions The name "business coalitions for health action" is an amalgam of terms developed by the Advisory Committee to the Clearinghouse on Business Coalitions for Health Ac- tion. It attempts to identify those groups that are guided by the pur- chaser perspective on health care. By definition, coalitions include repre- sentatives from different interest groups. In many instances, however, the coalitions identified by the Clear- inghouse consist of business repre- sentatives only. Nonetheless, "coali- tion" has become an accepted term of convenience and is being used with that understanding. There are several origins of busi- ness coalitions for health action. The first known formally organized coali- tion was the Joint Program on Health Cost Containment, formed by the Philadelphia Chamber of Commerce in 1977, although similar but less for- real groups have existed as parts of larger organizations for manv vears. Forerunners to today's Heaffh'Svs- terns Agencies were essentially I~usi- ness groups consisting of chief execu- tive officers from major corporations. These groups were concerned pri- marily with the community's abilitv to support hospitals and related pro- jects, rather than cost containment. "'Coalitions were formed in response to a need to develop local solutions to local health care problems, primarily high and risiny, health care costs. Their continued dedication to this mission will result in the success of Business Coalitions for Health Action. "' --lan Peter Ozy, a At the end of I978, the U.S. Cham- ber released its now widely acclaimed Health~Action series, based on "A Na- tional Health Care Strategy," from a study commissioned bv the National Chamber Foundation and conducted by InterStudy of Minneapolis. This five-part series, to which was added a guidebook, has inspired the crea- tion of many business coalitions for health action. The Health~Action series proposed a list of recommendations that closelv .j 60

L~ j' resemble the agenda of many coali- tions today. Specifically, employers were urged to: • Undertake a thorough analysis of their health care benefit packages, including utilization and costs. • Assess their community's health care delivery, infrastructures and the special dynamics related to them. • Implement long- and short-range cost containment strategies. • Become involved in health promo- tion and disease prevention programs. • Play an active role in the commu- nity's health plan and resource al- location efforts. Survey of Business Coalitions In May 1982 the Clearinghouse con- ducted a survey of established and emerging coalitions. Those included in the Clearinghouse directory were required to: • Have s(c, nificant representation by businesses as purchasers of health care. • Submit a list of members to docu- ment this membership. • Have begun to implement at least one health cost containment project. Forty-eight coalitions met these cri- teria. Since that time the existence of more than 40 additional groups has been confirmed. The information summarized in the next three sec- tions is based on the May survey. Membership Total membership in the 48 coalitions is 1,870, with a majority of the coali- tions having a membership of less than 25. Few have more than 50 members. Overall 23 (49 percent) have under 25 members, 16 (34 per- cent) have 26-45 members, and eight (17 percent) have 50 or more members. Business representatives predomi- nate, constituting 74 percent, fol- lowed by health members with 18.5 percent (health includes physician, hospital, and insurance organiza- tions). The remaining seven percent of membership come from govern- ment, labor, and other sectors. Approximately 35 percent have a membership that is exclusively busi- ness. Another six coalitions are al- most exclusively business, each hav- ing only one to three members from other sectors (e.g., health, labor, gov- ernment). In only five cases, the business sector is not dominant nu- merically. That is, the majority of the members in the Atlanta, Maryland, Cleveland, Minneapolis, and Peoria coalitions represent the health sector, although businesses heavily influence the agendas and activities. Nine coalitions have labor mem- bers. In each instance, labor repre- sents from one to three members. Government members are included in most coalitions, with approxi- matelv 24 (44 percent) having one or two government representatives.

Geographic Area Served The geographic area served varies from greater metropolitan areas to co- alitions covering entire states or groups of states. Twenty-five (52 per- cent) of the coalitions serve greater metropolitan areas (e.g., New York, Philadelphia), ten (21 percent) serve county-wide areas, and l] (23 per- cent) are statewide. Four coalitions (8 percent) are regional, crossing state lines. In this category are the Mid- west Business Group on Health, which serves eight midwestern states; the Fairfield-Westchester Busi- ness Group on Health, which serves New York and Connecticut; the Le- high Valley Business Group on Health, which serves Pennsylvania and parts of New Jersey; and the Joint Health Cost Containment Pro- gram of Philadelphia, which serves Pennsylvania, New Jersey, and Northern Delaware. Staffing and Budgets In 21 (44 percent) coalitions, a salaried staff is the rule, while in an equal number, volunteer staffing prevails. Of the remainder, six (12 percent) in- clude a combination of paid and vol- unteer staffing. Half of the coalitions operate with- out a budget, using volunteer staff and resources from their sponsoring organizations. The remainder have annual budgets ranging from a low of S1,300 to a high of $236,000. These budgets break down as follows: S5,000 and under (3); $5,001 to S50,000 (6); SS0,00I to Sll)0,000 (7); and over SI00,000 (8). Projects Generally, most business coalitions are implementing similar projects that fall into five broad categories: benefits design, data analysis, alter- native delivery systems, health edu- cation, and health planning. All of the coalitions reported activitv in one or more of these areas. Health education projects were un- der way in 39 coalitions, with such activities as publications, seminars for employers, and training for employ- ees on making the most of health benefits. Data analysis was a concern of 38 coalitions. Various approaches included utilization review, analysis of hospital billing records, and the development of standardized data formats. Alternative deliz,ery systems, including HMO development, and newer innovations, such as preferred provider organizations, was a project area checked by 33 coalitions. Finally, health plan~mlg, an activity reported by 31 coalitions, involved efforts to work with existing health systems agencies and other entities to bring about changes in the health care svs- tern of the greater community. Regardless of name, length of time in existence or source of inspiration, all of the coalitions listed were formed in response to a need to de- velop local solutions to local health care problems -- primarily high and rising health care costs. It is this rec- ognition and commitment that have helped create coalitions. Their contin- ued dedication to this mission will re- sult in the success of Business Coali- tions for ttealth Action. CO