Negotiating Alliance - Promoting Value Based Purchasing through Pooled Purchasing and Collaboration

Problem: Currently, health care in California is beset by seemingly intractable problems, from provider insolvency to rural health care access. Cost pressures are impacting all stakeholders. Purchasers working together successfully moderated the cost of HMO coverage and put quality into the value equation in the 1990s, but they face new challenges with rising premiums and market consolidation of plans and providers.

• Negotiates annually with both commercial and Medicare + Choice HMOs.
• Fosters employer collaboration in developing a focused negotiation strategy and establishing a consensus around common goals.
• Places two percent of premium at risk for negotiated targets to promote health plan continuous improvement in customer service, satisfaction and quality.

In addition, PBGH serves as a platform to give collective voice to purchaser interests in promoting better value in health care. PBGH efforts to enhance value and improve health plan accountability extend to purchaser members' self-funded programs and to their negotiations outside the Alliance. The Alliance also collaborates with other coalitions and large national employers to create standard measures for cross-market comparisons. The Negotiating Alliance work is funded from dues contributed by members participating in this collective purchasing group and by general PBGH members.

Impact: Collective action has resulted in significant savings and in common performance guarantees that have pushed better service and quality. It has encouraged collaborative efforts among health plans to engage providers in promotion of patient safety and development of common strategies to minimize access issues and disruption for members. Individual employers reward quality and support value purchasing through their selection of health plans and by directed contribution strategies to encourage enrollment in high-value plans. This effort makes a difference both on an annual basis and in pursuing long-term purchasing strategies for PBGH members.

Collaboration has been the central focus of the "CEO Summit," convened by PBGH to address issues of mutual concern to key California purchasers, health plans, hospitals and medical groups. A cross section of senior executives from these sectors has met twice to discuss pressing issues including escalating costs, provider disruption/continuity of care, infrastructure investment, staffing and under-funding of Medicare and Medi-Cal. The goal has been to discuss solutions rather than continue the current zero-sum environment. Participation has been impressive and active, with development of discussion papers. The group will work together on an ongoing basis on select issues, most likely through sub-groups.

Current Activities: The Negotiating Alliance is exploring improved benefit design and financial strategies, including application of a quantified value metric to support negotiations and population analysis using risk assessment and predictive modeling tools. Other issues under discussion are retiree coverage, tiered networks, other new products and the impact of consumer-driven models. Regarding new products, PBGH is working to encourage use of standardized provider-level quality metrics and consumer incentives that differentiate provider value and engage plans and providers in offering greater value transparency.

Performance measures have been restructured in collaboration with the University of California to clearly reflect purchaser priorities and help plans focus resources, and to better coordinate between the insured HMO and self-funded ASO arrangements. Measures related to clinical guidelines, disease management and Leapfrog compliance sections have been expanded to assess the depth of each plan's activities.

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