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IHC: 'Holy Grail' for health plan?

Published August 29, 2009 4:00 pm

Health care reform » Firm shares traits with co-ops, which may get bipartisan nod.
This is an archived article that was published on sltrib.com in 2009, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

It is difficult to find a voice outside Utah critical of Intermountain Healthcare.

From President Obama to The New Yorker magazine, the company with $5 billion in annual revenue is admired for delivering low-cost, high-quality medical care in a way that could provide a framework for U.S. health care reform.

Intermountain, with 21 hospitals, 140 clinics and 800 doctors, is the Intermountain West's largest health care provider. Its SelectHealth division is also Utah's largest health insurance company, collecting more than a third of all premiums in 2007.

But whether its model as a one-stop provider of everything from treatment to insurance will emerge as the template for lowering costs and improving care remains to be seen. The nonprofit company has expressly said its improved practices achieve savings for insurers, but cost it millions. Were Intermountain a for-profit venture, it may not be able to sustain the losses.

"At a minimum, what we can do is learn from Intermountain what they do well," said Len Nichols, director of the Health Policy Program at the New America Foundation, a nonpartisan think tank in Washington, D.C.

"If I were going to get sick, I would be perfectly happy to be at Intermountain because I know their use of data has made their standards as high as you can get them," Nichols said.

A senior White House official who brought Intermountain to Obama's attention said it "has been dedicated to doing the right thing for many, many years."

"If the whole country were like Intermountain, quality would dramatically improve and costs would dramatically decline. We've got the Holy Grail," said the official, who The Tribune agreed not to identify because the Obama administration has not authorized him to speak on the record.

As Obama heaps praise on Intermountain in speeches around the country, the president also continues to press for a government-run insurance option operating alongside private plans such as SelectHealth. Opponents contend a public option would have the upper hand and eventually drive private insurers out of business.

Yet with political and public support for a public insurance plan waning, Obama also is signalling a willingness to consider alternatives as a way to control spiraling costs.

No one is advocating replication of Intermountain's nonprofit structure as a way to extend the low-cost, high-quality care it provides. But many recognize the company shares traits with health care cooperatives, which are gaining favor as an alternative that may get bipartisan support.

Consumers in control » Health care cooperatives are consumer-governed providers, which like Intermountain, provide insurance while also owning hospitals and employing doctors, giving them more control -over costs and quality.

Intermountain's SelectHealth doesn't have a position on co-ops.

"It depends on what the cooperative is empowered to do. For us, the key is whether the incentives [for payment] get modified," said Greg Poulsen, Intermountain senior vice president.

Currently, he explained, providers get paid for the tests and treatments they render instead of their outcomes.

"Health care providers are paid to do services, not to make people healthy and keep people healthy. As a result, physicians and hospitals are providing large numbers of services," he said. "Most of them are high quality, but it is not clear that is the most efficient or effective way to return patients to health and maintain their health."

If a co-op doesn't change that dynamic, "I don't think it's very beneficial," he said.

Poulsen also believes any number of workable models for delivering care would develop if incentives change.

Because the details are vague, how a cooperative would make a difference to for-profit and nonprofit providers isn't clear. The concept is still ill-defined, even by its main proponent, Sen. Kent Conrad D-North Dakota.

Ann Hoyt, a University of Wisconsin-Madison economics professor, points out significant distinctions between nonprofit co-ops and companies such as Intermountain.

Cooperatives are owned by their members. Assets of nonprofits are usually "owned" by the community, but are held in trust and controlled by their boards. Cooperatives operate for the benefit of members, which isn't always the case with nonprofits, Hoyt said.

"The major advantage for the cooperative in the current health care debate is it provides the opportunity to pool purchasing power, and it provides for consumer control," Hoyt said, adding co-op profits are returned to members in the form of new services or dividends. Members also deal directly with the co-op insurance arm, cutting out the cost of insurance companies.

"Where they are effective, cooperatives are very strong competitors," she said.

Washington's health care co-op » Co-ops can form in any industry, but are strongest in finance, insurance, utilities and agriculture.

The number in health care is small, and most have failed because they were unable to compete effectively or because tensions between doctors and consumer-oriented governing boards could not be resolved. Co-ops are also expensive to start.

But some, including a co-op in Washington state, have flourished. With 600,000 members, Group Health is the third-largest health insurance company and the largest health care provider in the state, spokesman Mike Foley said.

Whether Group Health's presence in the market has kept rates in check for all Washington residents is hard to prove. Its rates are on par or slightly better than its rivals, Hoyt said. But Washington has some of the lowest insurance rates in the country and medical costs are lower, too.

"The kind of care given here is less aggressive, more coordinated. People here are healthier and less money is spent to keep them that way," she said.

Other options » Cooperatives have a place in the debate, but they aren't a substitute for a public option, said Karen Davis, president of The Commonwealth Fund, a philanthropy engaged in research on health issues.

She said consumer-governed co-ops have incentives to keep insurance premiums low while providing excellent care. But they are difficult to establish and maintain in an environment of fee-for-service medicine and for-profit insurance, she said.

"A public plan is more guaranteed to control health care costs and the rate of increase in health care premiums over time," Davis said.

Nichols, the New America Foundation economist, reiterated the value of Intermountain's low-cost, high-quality care as a model. But he and others emphasize that reform hinges on developing a system that insures everyone and financially rewards quality care.

"The question is really not whether Intermountain is a model," said Aaron Katz, a University of Washington health policy expert. "The question is, what is the system around Intermountain that facilitates those good things [it] does."

A co-op primer

» Co-ops would be private and not-for-profit, providing affordable health insurance by creating a pool of consumers who could negotiate with health care providers. Co-ops would be the insurer. They might also be health care providers.

» New co-ops would need seed money to get going. Sen. Kent Conrad, a North Dakota Democrat, says the federal government could provide about $6 billion to help launch co-ops.

» Conrad says any cooperative would need at least 25,000 members to be financially viable. It would need about 500,000 members to negotiate competitive rates with health providers.

» Co-ops would not be run by the states or by the federal government. Members would elect a board of directors that would make decisions on premiums, benefits covered, deductibles and co-pays.

» Although there are lots of co-ops in the country, relatively few health care cooperatives exist today.

» One of the biggest co-ops is Group Health, based in Seattle. Group Health has almost 600,000 members and revenues of $2.7 billion. Some of its clients are Boeing, Microsoft and Nordstrom.

What do you think?

Should Intermountain Healthcare be a model for health care reform? Share your personal experiences as a customer of the health care provider for possible publication in a future story by sending an e-mail to hcreform@sltrib.com. Please include your name and telephone number.