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• A~ Coalitions: Framework for Local Cooperation --Gerald Gleeson The success of the Joint Health Cost Containment Program, which was started in 1977 by the Greater Phila- delphia Chamber of Commerce, dem- onstrates the positive impact that such cooperative action can have at the local level. In addition to the pur- chaser's perspective, the coalition also includes members from the hos- pital sector, the medical society, and local government. The City of Phila- delphia, in fact, is a very active mem- ber and is also one of the largest pur- chasers of health care. In many cities, government is the largest purchaser in the community. The Philadelphia Coalition, repre- senting companies in five southeast- ern counties of Pennsylvania, south- ern New Jersey, and northern Delaware, has led the way in review- ing appropriateness of care. Working with Blue Cross of Greater Philadel- phia, the Coalition compiled a com- prehensive three-part report on hos- pitalization of employees of member firms. The report provides diagnosis and age-specific data on lengths of stay, average charges, admissions by day of the week, and days of preop- erative stay. Employers now have a "yardstick" for evaluating utilization by their own employee groups against the experience of others. Prospective reimbursement for area hospitals is also a goal of the Coali- tion. Currently, the Philadelphia group is designing a system for nego- tiating fixed departmental budgets of "Local coahtions must move to assume greater responsibility. That is not to say that coalitions are a panacea for govern- ment involvement in health care policy and legislation. Rather, each sector has a specific role to play.'" --Gerald Gleeson hospitals. The system will be part of the Blue Cross contracting mecha- nism, and since all but one hospital is under Blue Cross contract, it is hoped that prospective reimburse- ment can be accomplished without government regulation. Both the ap- propriateness review project and that on prospective reimbursement would not have been possible without com- munity-wide cooperation. While Philadelphia and other busi- ness coalitions are having some suc- cess in managing health costs, much remains to be done. Because most Americans receive their health bene- fits from their employers, business has become the largest single source U1 ¢.0

of payment for medical care. Various estimates have been put on this bill. General Motors alone spends approx- imately $1.5 billion a year on health insurance premiums, and Ford spent $520 million in 1979, or $2,300 per employee. However, decisions on how re- sources are allocated are not made by the purchasers of such health care services. It is for this reason that providers, who make the decisions, must be involved in efforts to restrain costs. Recently, Uniform Bill 82, a standardized hospital billing form de- signed to cut excessive reporting and paperwork, was released for imple- mentation. This billing form was made possible through the coopera- tive efforts of providers and insurers, and it is expected to cut hospital costs, which will ultimately result in savings to employers. Business coalitions are a framework for local cooperation. Local needs and medical practice patterns dictate the objectives and membership for these groups. National developments also have a key influence in their for- mation and direction. In the current anti-regulatory and pro-competitive climate, with a declining federal role in health planning, local coalitions must move to assume greater respon- sibility. That is not to say that coali- tions are a panacea for government involvement in health care policy and legislation. Rather, each sector has a specific role to play. Now is the time for businesses to organize and take an active role in fighting rising health costs. Today, many businesses are facing serious fi- nancial difficulties with low produciv- ity and sales decline, while a signifi- cant portion of payroll is consumed by health insurance premiums. Workers, faced with growing unem- ployment, are willing to trade re- duced benefits for job security. As or- ganized groups of business coalitions, employers can make the difference and slow the cost spiral. -4 ¢,a I,a,

Coalition Strate ies he management ~ of health care ~ costs at the local ~ level is being tac- kled through a ~ variety of strate- ~ gies. Formation of business coali- tions is a common starting point for many communities. Once organized, they have undertaken a range of re- lated projects aimed at managing costs: data collection and analysis, benefits design and alternative plans, employee wellness programs, and hospital trustee education. Developing a business coalition is a major challenge. How best to organize interested parties, obtain financial sup- port, formally incorporate the group, determine objectives, establish a dues structure, recruit staff, and work with the greater community are formidable tasks in themselves. Fortunately, more than 90 communities have already formed coalitions and their experiences can be tapped. National groups, repre- senting employers, providers, and in- surers have published directories and guides, and have provided on-site as- sistance to developing groups. Through data collection and analy- sis of hospital utilization, some groups are discovering that various hospitals in the same community charge vastly different rates for the same procedures• This disparity may be a function of many factors, includ- ing incentives in the health care mar- ketplace. Such information has prompted many employers to re-ex- amine their employee health benefits and redesign these packages. Preventing illness and disability be- fore they become acute conditions is being recognized as a way to save on health care spending. A recent study by the Health Insurance Association of America showed that work-site disease prevention programs are saving some major employers millions of dollars a year in reduced health care and time- off costs. Support for employee well- ness programs through technical assis- tance is a key activity of many coalitions. Finally, the management and de- velopment of health care facilities as these operations affect the total bill for services has become a topic of concern to employers. Many corpo- rate managers and business execu- tives are members of hospital boards of trustees and are asked to make de- cisions on expanding bed capacity, purchasing new equipment, and in- stituting new services. Because hospi- tal costs are the fastest rising part of health care expenditures, it is essen- tial that trustees understand how their hospital works and what factors outside the hospital influence its op- eration, particularly its financing. Coalition development, data collec- tion and analysis, benefits design, employee wellness programs, and hospital trustee education rank high on the agenda of most coalitions. Hence, the inaugural meeting of these groups conducted five work- shops on these issues, which were [~h moderated by coalition leaders. The presentations and ensuing discus- sions are the basis for the informa- tion in the following section• ~,~

i~-,i9~~ • Forming Coalitions usiness coalitions may originate from a major em- __ ployer who is concerned with the organization's rising insurance premiums. Or the local chamber of commerce may form a health care committee whose task is to monitor costs and determine strat- egies for approaching providers to discuss the area's bed capacity. Regardless of the initial purpose, the organizing group will be con- fronted with an array of problems to solve, ranging from basic housekeep- ing decisions to overall mission and membership. Robert R. Henderson, M.D. is ex- ecutive director of the Fairfield-West- chester Business Group on Health, and a consultant to the New Jersey Business Group on Health. Patrick Renaud is chairman of the Maryland Health Care Coalition, which is multi-constituency based. Their expe- riences in developing coalitions sug- gest that the following topics are im- portant considerations for most beginning groups. Membership How a coalition is organized and de- veloped, and what form it will take, will depend to a large extent on the area it covers, the type of industry involved, and the experience of the community in working with business on health issues. For example, has there been an ongoing interest in health planning beyond that man- dated by federal law? Have busi- nesses and providers served together on committees? Also, does organized labor play a significant rote in the community? Are private insurers and Blue Cross/Blue Shield active, and what is the role of regulators as well as individual consumers and civic groups? Although all of these may not become full voting members of the coalition, it may be necessary to understand the potential clout 6f these groups and the history of simi- lar community efforts. The employer-only versus the multi-constituency coalition has stim- ulated debate among would-be coali- tions. The employer-only faction con- tends that employers can reach consensus among themselves and then act as a catalyst to stimulate ac- tion by providers and the insurance carriers. Multi-constituency groups, on the other hand, defend their membership strategy by saying that it is necessary to include the health care industry, so that once an action program is defined, the group can act in a consensus manner to implement plans, objectives, and projects. Broad-based groups have been criti- cized for accomplishing more talk than action, but their slower pace some- times results in wider gains by enlist- .ing cooperation for the long term. Jo- seph Kozlowski of the Greater Cleveland Coalition, which includes employers, organized labor, hospitals, physicians, and health planners, sup- ports the broad-based group: bah ¢,0

Robert Henderson, M.D. (left) Fairfield-Westchester Business Group on Health, and Pat- rick Renaud, Maryland Health Care Coalition, co-moderate one of five workshops on coalition strategies at the June 1982 meetiny, of coalitions in Chicago. "A multi-constituency coalition can bring diverse groups together to start talking about cost containment. Rather than providers being defensive and con- tinually justifying maintenance of the status quo, they're willing to explore alternatives, and are more likely to dis- cover the merit of alternatives." On the other hand, Gordon Decker of Allis Chalmers, a member of a business-only coalition, the Midwest Business Group on Health, believes that business people are the only ones who can exert enough pressure to get things done: "Take the example of a hospital want- ing to add a wing. One way it raises money is to go to corporations and ask for it. Corporations can sit back and ask if a wing is really wanted or needed--and decide, do we want to contribute?" As the debate continues, employers, coalition organizers, and others agree on several issues, particularly the need to take cooperative action to reduce the private sector's increasing share spent on health care each year. It is their belief that no coalition, whether business-only or broad-based, can work alone. Each must eventually de- velop a dialogue and a working rela- tionship with the other groups in the health care marketplace. The advantage of the business-only group is that it provides an organiza- tional base for business to become an equal partner with the other organi- zations and entities. The disadvan- tage is that business-only coalitions exclude other stockholders in the health system. lab

:.5 ~ ~i ,~!~ ...... Objectives Although the overall problem is ris- ing costs, coalition organizers must clearly define what they expect the group to accomplish. The following actions are necessary to help coali- tions set their objectives and priorities: • Familiarize members with current health care issues and politics. • Identify cost-control alternatives by analyzing selected health care cost strategies. • Provide information on state and federal regulatory developments as well as information on upcoming state and local hearings. • Encourage employer/employee ini- tiatives, including health education programs and the assessment of benefit packages. • Brief upper management. Identify health cost problems and their im- pact on broader corporate concerns. Structure Several organizational structures are possible. Almost one-half or 20 coali- tions contacted by a survey in May 1982 said they were incorporated as a 501(c)(3) or (6). Six listed their status as "incorporation pending." The re- mainder described their structure as "informal" with no plans to incorpo- rate at this time. Under the Internal Revenue Service tax code, coalitions may qualify for the two tax statuses mentioned above. The 501(c)(3) classification gives tax exemptions to a "Corpora- tion and any community chest, fund, or foundation, organized and oper- ated exclusively for religious, charita- ble, scientific, public safety, literary or education purposes." Such exempt organizations may receive tax-deduct- ible donations and they are prohib- ited from influencing legislation. The ability to receive tax-deductible dona- tions makes this attractive to prospec- tive member companies. Although some coalitions have identified legis- lative goals, they are careful to struc- ture their efforts as educational activi- ties and they present testimony to state legislatures only if requested to do so. Classification 501(c)(6), which cov- ers business leagues and chambers of commerce, is another organizational structure. Since many coalitions have started under the umbrella of local chambers of commerce, they some- times maintain this status until they have recruited sufficient membership and resources to establish an inde- pendent organization. Staffing and Budgets As with many new and developing movements, the coalition field in- cludes a large number of volunteers, many of whom have been loaned by the major employers taking a lead role in trying to manage costs. Out- side of the usual voluntary board of directors, it is a common practice for companies to assign personnel to lead and staff coalitions. Individuals who manage employee benefits and direct other related personnel func- tions frequently volunteer or are re- ha, bah

r ' cruited to manage local cost contain- ment groups. The number of core staff is limited, averaging two to three professionals, and the'number of support personnel is similarly limited. Consultants are used on an ad hoc basis. A small staff tends to encourage the volun- teer representatives of the member- ship to become more active and therefore more interested in the af- fairs of the coalition. Half of the coalitions (24), accord- ing to the Clearinghouse's May 1982 survey, operate without a budget and, of those that have a budget, only eight exceed $100,000 annually. In this group are: the South Florida Health Action Coalition, with five paid employees; the Midwest Busi- ness Group on Health with one part time and two full-time paid employ- ees, and the Minnesota Coalition on Health Care Costs, with one full-time and one part-time paid employee. Each coalition has existed more than two years and conducts an extensive program of activities. As local groups become more in- volved in specific projects, a discrete budget becomes necessary. Revenue has come from the membership with fee structures usually based on the number of employees per member. Additional revenue is derived from issuing publications, holding semi- nars and workshops, and by con- ducting utilization review for member companies. Several coalitions (e.g., South Florida and Utah) have re- ceived multi-year grants from private foundations. Another 10-12 coalitions mav be funded through the Robert Wood Johnson Foundation's "Com- munity Programs for Affordable Health Care." Awards for this pro- gram will be made in January 1983. Program of Activities The choice of program activities is limited only by available resources. Five broad categories comprise the scope of most coalition programs: benefits design, data analysis, alter- native delivery systems, wellness programs, and hospital trustee edu- cation. A variety of specific activities emerge from these categories, such as: encouraging HMO development; supporting a rate review program; limiting acute care beds; monitoring testimony as well as presenting testi- mony on legislation; improving ac- cess to primary care; and educating patients and providers about cost containment. Data Collection and Analysis universally ac- cepted premise among health care policymak- ers, benefits man- agers, and coali- tions is that decisions for change must be preceded by sound data collection and analysis. How- ever, there is often disagreement on how this should be accomplished and how the funds and personnel can be

summoned to carry out this task. Co- alitions have additional problems: • Lack of adequate baseline data on community utilization of services. • Multiple employers, providers, and insurance carriers. • The need for confidentiality and the uniform reporting of data. • Lack of coalition staff with exper- tise in data collection and analysis. Further, although local efforts are usually concerned with a single is- sue, such as reducing premium costs, it is important for cost containment groups to consider the broader com- munity perspective. Will a reduction in premiums lead to cost shifting and a rise in public sector spending, which the employer will eventually pay for in increased taxes? Gerard E. Mayer, executive director of the South Florida Health Action Coalition, and James D. Mortimer, president of the Midwest Business Group on Health, represent coalitions that have undertaken regional data projects. Thev offer two different ap- proaches to data collection and analysis. Analysis of Hospital-Based Data The South Florida Coalition is broad- based, with 21 organizations located in Broward, Dade, and Palm Beach counties. In 1979, Medicare recipients consumed 50 percent of patient days in Dade County (which includes the Miami area). This compares to 39 percent for the national average. In 1980, coalition members paid $89 mil- liL~n toward the medical care costs of their employees and dependent fami- lies, a 46 percent increase over 1978. This large cost increase led the coali- tion to make a study of health bene- fits utilization data. Use of a stand- ardized billing form, Uniform Bill 16, which is required of all Florida hospi- tals, will facilitate comparison of hos- pital billing records of member com- panies, basic data for the project. The six insurance carriers involved in the billing project deleted patient identi- fiers before forwarding photostats of the billing records to the coalition. Data collection began in February 1982. Following the analysis phase, member organizations will receive in- dividually tailored utilization reports. Additionally, aggregated data will be made available to the South Florida community with the objective of dis- covering trends and experiences for the entire area. The coalition's objec- tives are to: • Develop an understanding of the hospital services consumed by the insured populations of member organizations. • Compare the utilization of services within and among hospitals, by in- dividual company, and in the aggregate. • Compare the charges incurred for those services among hospitals, by individual company, and in the aggregate. • Compare utilization and cost expe- riences for similar services between different companies. • Identify current trends in tile utili- zation of services and the costs of purchasing these services. • Train staff to use a data terminal to examine the utilization and cost ex-

k 'i:" ~,ii~¸: . I perience of member organizations on an ongoing basis, and to gener- ate specific analyses as needed. The project also will examine utili- zation and cost factors for length of stay; charges per day; charges per case; ancillary charges, by ancillary component; rank order distribution of the data listed above; and medical versus surgical care. Analysis of Insurance-Based Data Eight midwestern states are served by the Midwest Business Group on Health (MBGH) that began opera- tions in 1980. With more than 90 companies representing major indus- tries in the midwest, the coalition has potential access to a broad data base, as well as a broad variety of utiliza- tion experiences of its members. The MBGH has concentrated on identifying the uses of management information within the business com- munity and on specific questions re- lated to those uses. For example, management reports are needed to understand the workings of the health care system, more specifically, the use of particular hospitals, partic- ular physicians, and the patterns of claims in diagnosis and procedure groups. This helps to describe the corporation's relationship with the lo- cal health care system. Questions about benefits plan design and bene- fits plan administration can also be addressed with claims data reports. Additionally, the availability of a spe- cial data base aggregate enables the company to compare its experience against the average of other firms. The objective of developing stand- ardized output report concepts is to enable companies and providers to produce standardized reports for spe- cific types of analyses. The insurance carriers have worked with coalition members to produce effective report- ing tools, recognizing the legfitimate needs of the business community for management reporting. Such coopera- tion is recognized as a unique market- ing opportunity, by the carriers. In support of this effort, the coalition has conducted seminars to discuss particu- lar data applications and to develop in- surance carrier user groups. Analysis of patient claims data is a MBGH goal for 1982. Coalition mem- bers who have the Same insurance carrier have established claims data user groups. Through the sharing of these data, companies are analyzing utilization and hospital-pricing pat- terns. They are now looking at changing plan design, enhancing em- ployee communication, and meeting with selected providers. Benefits Design and Alternative Plans early half of con- sumer expendi- tures on physi- cians' services and 80 percent of hospital expendi- tures were paid through private insurance in 1980, and employee ben- efits cover 84 percent of these ex-

penditures. Faced with the rising costs of benefits, employers have be- gun re-examining how benefits are structured and how such policies can be changed to reduce costs and en- courage better use of health services. Various "pro-competition" legisla- tive approaches include mandating cost sharing, requiring that employ- ers offer multiple health plans, and limiting the current exclusion of em- ployer-paid health insurance premi- ums from an employee's taxable in- come. As Congress debates these issues, business is experimenting with new benefit designs. James B. Kenney, Ph.D., executive director, Minnesota Coalition on Health Care Costs, and Leon J. War- shaw, M.D., executive director, New York Business Group on Health, rep- resent coalitions that include health as well as business members. Both coalition leaders have conducted sur- veys among employers in their communities. Benefits Survey The purpose of the Minnesota survey was to establish a trend line in bene- fits experiences and costs for the last five years. The survey particularly sought to determine the extent of al- ternatives offered and methods of employer contributions toward the al- ternative premiums. Thirty-seven companies responded, with the fol- lowing results: • Overall benefits costs increased moderately in the five-year period and were approximately 30 percent of payroll; health benefits were slightly over four percent based on an average across the firms sur- veyed or 5.64 percent of payroll when averaged across employees. • The largest employers offered an average of 4.3 health plans. • Employers who contributed a level dollar amount, or the same to all premiums regardless of cost, were paying less overall costs as com- pared to other contributions. Results also showed that employ- ers who provided multiple offerings tended to experience increased costs as compared to the employer who of- fered only the single indemnity plans. The Minnesota Coalition has rec- ommended that employers offer mul- tiple health plans, although the sur- vey did not show cost savings. The guidelines also recommend that em- ployers make the same dollar contri- bution for all health plans, regardless of which plan is selected by employees. For example, an employer with three health plans with premiums of $90, $100 and $120 per month respec- tively, may decide to offer $100 as a level contribution. The employee choosing the $90 plan should receive some form of rebate, such as other benefit or salary equivalent to the premium. Under the $100 plan with full coverage, no rebate or further premium contribution should be made. At $120 per month, the indi- vidual would be required to pay the $20 difference between premium cost and employer contribution.