Early Experience With A New Model Of Employer Group Purchasing In Minnesota

PROLOGUE: For years Americans have looked to California as a model for health system innovations. Now another part of the country has taken the reform spotlight: the Twin Cities of Minneapolis and St. Paul, Minnesota. Ted Chien, a health care consultant for Watson Wyatt Worldwide, calls the Twin Cities market “a great laboratory in many ways.” One feature that contributes to this reputation is the Buyers Health Care Action Group (BHCAG), a group of Minnesota's largest employers formed in 1991. This paper explores the first two years of a new BHCAG purchasing initiative, Choice Plus, which for the first time attempts to facilitate contracting with care systems—integrated hospital and physician groups—rather than with health plans. The authors have a long association with health reform in Minnesota and nationwide, as both analysts of and participants in the health care system and its activities. Jon Christianson is James A. Hamilton Chair in Health Policy and Management, Department of Healthcare Management, Carlson School of Management, University of Minnesota. Roger Feldman is Blue Cross Professor of Health Insurance in the Division of Health Services Research and Policy, University of Minnesota School of Public Health. Jonathan Weiner is a professor of health policy and management at the Johns Hopkins School of Hygiene and Public Health in Baltimore. Patricia Drury is a health care consultant based in Minneapolis. ABSTRACT: The Buyers Health Care Action Group (BHCAG) in the Twin Cities has implemented a new purchasing initiative that offers employees a choice among care systems with nonoverlapping networks of primary care providers. These systems offer a standardized benefit package, submit annual bids, and are paid on a risk-adjusted basis. Employees are provided with information on quality and other differences among systems, and most have financial incentives to choose lower-cost systems. Generally, providers have responded favorably to direct contracting and to risk-adjusted payments but have concerns about the risk-adjustment mechanism used and, more importantly, the strength of employers' commitment to the purchasing model.