Meeting Aimed at Boosting Medical Purchasing Power

A hastily convened meeting in Washington, D.C., later this month could be the first of several nationwide to focus on steps employers can take to use their purchasing power to lower health care costs.

The November 17 meeting is sponsored by the Business Roundtable, along with the U.S. Chamber of Commerce, the HR Policy Association and other business groups. Plans for it were launched in October, when Health and Human Services Secretary Michael Leavitt agreed to speak about practical steps employers could take in their contracts with health insurance companies. The goal is for employers who pay for health insurance to use common methods that focus on making the cost and quality of medical care more transparent.

Numerous public- and private-sector employers, including the Centers for Medicare and Medicaid Services, have been working on reforming the way employers purchase health care. Medical services are paid based on negotiated prices, which, unlike other markets, does not take into account the quality of what is provided. The effort, called value-based purchasing, begins by evaluating the quality of medical care against a standardized set of measurements and then makes the results available to employers and consumers. The last phase would be to develop a system where compensation is based on performance.

“It is one of the biggest changes in health care I’ve seen in the last decade: standard measures and transparency,” says Karen Linscott, COO of the Leap­frog Group, an employer-sponsored organization that has developed quality standards for hospitals.

Leapfrog is organizing the event, which will include presentations by employers with experience negotiating contracts that foster such goals. Invited speakers include executives from Boeing and IBM; Leslie Norwalk, acting director of the Centers for Medicare and Medicaid Services; Allan Hubbard, assistant to the president for economic policy and director of the National Economic Council; and Carolyn Clancy, director of the Agency for Healthcare Research and Quality.

Federal officials crystallized their commitment to those goals in President Bush’s executive order on health care transparency in August. But not enough is happening in the private sector, Leavitt said during an October 12 speech in Chicago. He told employers he had traveled to communities where quality standardization was unfolding.

“We still have a long way to go,” Leavitt said. “We’re far from developing a scalable capacity.”

During the November meeting, employers will learn how to make sure contracts require insurance companies to rate medical providers according to universal standards of care, then make that information available so doctors will be paid based on performance.

“We are urging employers to use their purchasing power, just as the federal government is using its purchasing power to transform quality,” says Maria Ghazal, director of public policy for the Business Roundtable. “That is absolutely the goal.”

Though the timing of the meeting may be difficult, since many employers are in the middle of open benefits enrollment, Leavitt says the reforms are urgent as the clock ticks on the Bush administration.

“I have 828 days and I’m feeling an urgency on this,” Leavitt said October 12. “Every day, this is my focus.”

The initial meeting, at Washington’s Ronald Reagan Building, is expected to be replicated in other cities.

—Jeremy Smerd