A New Wisconsin Strategic Alliance
Wisconsin is a health care market with a greater use of health maintenance organizations than all but a few states and is already beginning to experience the consolidation of HMOs predicted to accompany national health reform. Wisconsin also has a high concentration of multi-group specialty clinics that have been aggressively investing in the vertical control of physician practices in smaller communities, primarily through their outright purchase. Amundson (1993) makes a strong case that external forces such as the inequity of Medicare payments and the shortage of primary care providers are not the complete story re the challenges facing rural health. He argues that the rural providers and communities themselves have been a significant part of the problem and can become a major part of the solution.
While the primary responsibility for the current situation resides within many rural communities, the strongest potential for sustaining rural services also resides primarily within our communities. The history of this nation is replete with documentation that the strength of community, particularly in rural America, is incalculable. The power of a group of residents, acting in concert to improve some aspect of their community infrastructure that they care deeply about, has been demonstrated for generations. It is the essence of rural America at its best to put such shared values above individual self-interests and to mount major action. Admunson, 1993
In the context of this environment, two existing strategic alliances, the Community Physicians Network and the Rural Wisconsin Hospital Cooperative have significant long range plans of their own but also recognize that specific joint ventures between the two alliances can foster local and regional community physician-hospital collaboration. The purpose of this initiative will be to form a united front to support community based health care in balance with the outreach of large regional HMOs and multi-specialty group practices.
For a change, seed capital may not be its usual problem: RWHC has already developed with the support of the Robert Wood Johnson Foundation a $500,000 loan reserve fund that is very suitable for the envisioned projects. The current holding company of HMO of Wisconsin, HMO-W, Inc. will be asked to invest in the maintenance and strengthening of the regional network of community providers that constitute its stock holders. Both organizations will be positioned to work with the merged health maintenance organization as well as with other regional health maintenance organizations.
The Community Physicians Network has significant experience organizing physicians around the negotiation of HMO contracts and the Rural Wisconsin Hospital Cooperative primarily has experience with shared services and advocacy among multiple partners. Both organizations have begun a discussion to explore the possibilities of developing selected joint ventures in the following areas: (1) Rural Network Negotiations, (2) Network Based Practice Support (3) Local Infrastructure Development and (4) Rural Network Advocacy.
Rural Network Negotiations - negotiating equitable relationships with regional and multi-state insurers, networks and regional purchasing alliances. "Where network arrangements among rural providers already exist, health plans (health maintenance organizations) seeking to serve these areas likely will attempt to take advantage of existing networks in establishing their delivery systems. This could, in turn, cause existing rural networks to organize more formally to function as contracting entities for negotiating with health plans. Once organized in this manner, rural networks could contract with multiple health plans." (Christianson and Moscovice 1993) "During the transition to the new health care system, physicians and other providers may require some protection to negotiate effectively with health plans. To protect physicians and other providers from the market power of third party payers forming health plans, providers are provided a narrow safe harbor to establish and negotiate prices if the providers share financial risk." (Clinton Task Force 1993)
Network Based Practice Support - developing an alternative for community physicians to that of selling their practice to large regional multi-specialty clinics. Extensive surveys by RWHC indicated that the availability of practice support and employment opportunities is a major factor in the decision in a physician's site selection decision. In 1992, a written survey was conducted by RWHC of over 1,000 physicians who graduated from Wisconsin's two major medical colleges during the years of 1983-85.With an impressive response rate of 44 percent (usable surveys) RWHC obtained valuable information regarding in-state practice site selection factors that are important to physicians. Four key area of importance surfaced as: assistance with malpractice premiums (66 percent of all respondents), practice management support (52 percent), practice set-up assistance (47 percent) and retirement/benefit packages (36 percent). In most cases, family practitioners, physicians practicing in small towns and small cities had higher percentages ranking the above areas as important.
Malpractice premiums were felt to be amenable to immediate intervention, RWHC is working collaboratively with Physician's Insurance Corporation of Wisconsin to develop a unique professional liability policy with rates reflecting a purchasing pool discount. The purchasing pool will consist of RWHC related health providers (hospitals and physicians). It is envisioned that this prototype will be expanded to all members of the partnership with CPN. Research and development is also underway for local practice management support that goes beyond a "consulting" relationship, providing support typically obtained only through joining a larger clinic. Various models, such as clinic without walls, are being explored. A partnership between CPN and RWHC will allow many of the physician services to be fast-tracked and the critical volume to support a shared service will be easier to obtain.
Local & Regional Infrastructure Development - supporting the integration of high quality, cost effective services within and among communities as noted earlier in this paper. In addition, we need to go one step further. Again I would like to quote President Clinton's address to the Joint Session of Congress: "Responsibility also means changing the behavior in this country that drive up our health care costs and cause untold suffering. It's the outrageous costs of violence from far too many handguns, especially among the young. It's high rates of AIDS, smoking and excessive drinking, it's teenage pregnancy, low-birth weight babies, and not enough vaccinations for the most vulnerable." (Clinton Task Force 1993)
Hospitals and physicians must break out of their traditional isolation from the community at large. Partnerships must be aggressively pursued with a variety of public and private community based organizations that do not lend themselves to a system of regional or intra-community vertical integration - schools, city councils, local public health agencies, community development agencies, churches to name just a few. From the perspective of community oriented primary care, one can argue that compared to inter-community networking, an equal challenge and perhaps greater pay-off will be the development of broad based intra-com?munity partnerships.
Rural Network Advocacy - advocacy for community based primary care and working with state organizations to create a more favorable environment for primary care and rural health. CPN and RWHC leadership have traditionally been very active in the development of broader strategic alliances with many state-wide organizations in order to better serve Wisconsin, CPN and RWHC interests in primary care and rural health. CPN and RWHC has helped to develop the Wisconsin Primary Care Consortium, the Area Health Education Center System, the Wisconsin Rural Health Development Council and worked as part of major advisory committees or governing boards with the University of Wisconsin Medical School, the Wisconsin Department of Health & Social Services, the Office of the Commissioner of Insurance, the State Medical Society, the Wisconsin Academy of Family Practice, the Wisconsin Hospital Association, and the Wisconsin Health and Educational Facilities Authority.
With reform, additional organizational linkages will have to be developed in order to achieve the appropriate resolution of a series of reform issues critical to the future of community based health care:
a. Employees and individuals should be assured an unrestricted choice amongst all eligible plans offered through a regional health council. This is good politics because it maximizes individual consumer choice. It is good public policy because it reduces the likelihood of monopolistic systems forming based on a coercive claim that they can exclude non-participating providers from multiple employee groups.
b. Systems or HMOs, at least in rural counties, should be precluded from requiring participating rural providers to sign exclusive contracts.
c. If regional alliances will set fee schedules for self-insured and indemnity plans, assurances must be given that the negotiation process is not dominated by a few large multi-specialty clinics - that the interests of individual physician and other primary care providers and networks are fairly represented.
d. The shortage of primary care providers is expected to get worse before it gets better as we are faced with (1) the loss of a large number of retiring rural providers, (2) an increased demand for primary care providers due to the shift towards HMO delivery systems and (3) an increased demand for primary care services resulting from a larger insured population. This issue must be aggressively addressed and funded if rural areas are not to be made worse by the reform initiative.
e. More explicit language is needed re the scope of and development processes for retro-adjustments or risk-adjustments on payments from regional health clinics to networks and from networks to individual providers. The market needs to be managed so that networks compete based on the quality and cost of their services, not on their ability to avoid sick people.
f. "Charity care/bad debt" and losses stemming from government payments (at a level below reasonable cost) tend to make rural and inner city providers less competitive than they otherwise would be. To create an equal playing field, Council's should be required to spread these losses equally across all providers in a region so that competition is based on quality and cost and not one's ability to avoid the poor and elderly and uninsured.
Steps to Developing a CPN/RWHC Strategic Alliance.
After the initial work group finalizes its sense of what specific activities are appropriate for a joint venture between the CPN and RWHC, the focus will shift to the development of an initial business plan that will include at a minimum the following:
- Conceptual Approval by RWHC & CPN Boards.
- Development of an Initial Partnership Agreement.
- Draft Development of an Initial Operations Plan.
- Investigation of Corporate Alternatives for Joint Activities.
- Securing Commitments for Initial Capitalization.
- Establish Parameters of Current Wisconsin Limits on Joint Negotiation.
- Approval and Formation of the Corporate Structure for Joint Ventures.
- Approval of an Initial Partnership Work Plan by New Corporate Governance.
- Implementation of the Initial Operations Plan.
Summary
While leaders of both organizations are optimistic about both their individual futures and possibilities for joint action, neither minimizes the challenges to be faced. The development of strong mutually beneficial physician-hospital relationships at the local level are not easy, they are no more so when aggregated at the regional level. Experience within and outside of health care indicates that community based providers can develop effective alternatives that balance traditional preferences for local autonomy with our country's mandate that health care serve more, better, for less. In Wisconsin, two existing strategic alliances, the Community Physicians Network and the Rural Wisconsin Hospital Cooperative have significant individual objectives but are also committed to the development of selected joint ventures that can foster local and regional community physician-hospital collaboration to the advantage of both parties and the communities they serve.
Resources
Amundson, B. 1993. "Myth and Reality in the Rural Health Service Crisis, Facing Up to Community Responsibilities." The Journal of Rural Health (Summer), 182.
Associated Press. 1993. Prepared text of the speech delivered by President Clinton to Congress (22 September)
Christianson, J. B. and I. S. Moscovice. 1993. "Health Care Reform and Rural Health Networks," Health Affairs (Fall),61
Clinton Task Force. 1993. Working Group Draft 7 September, p. 170.
HMO of Wisconsin and Physicians Plus. 1993. Press release, 18 October.
HMO of Wisconsin. 1993. "Primary Care Physician Compensation Arrangements." Occasional paper, Madison, WI.
Kushner, C. 1991. "The Feasibility of Health Care Cooperatives in Rural America: Learning from the Past to Prepare for the Future." Working paper series, University of North Carolina Rural Health Research Program. Chapel Hill, NC, May, p.5.
Lautenschlager, S. 1993. "Two Area HMOs Planning to Merge," Wisconsin State Journal 21 October.
Silver, J. 1993. "Physicians Plus, HMO of Wisconsin Plan Major Merger," Capital Times 20 October."
Wakerly, R. 1993. "Info Networks to be Integral to Reform." Modern Healthcare, (25 October): 54.