AHCPR Report Shows Businesses Can Negotiate Quality as Well as Lower Costs From Their Health Plans

Press Release Date: February 12, 1998

Employer market power can be a major force for promoting quality and value of health care for Americans, according to a new report by the federal government's Agency for Health Care Policy and Research (AHCPR).

Theory and Reality of Value-Based Purchasing: Lessons from the Pioneers—prepared as part of the agency's research initiative on employers and health care—describes how a number of major corporations, as well as business and health coalitions, are using their market power to promote quality by collecting data on quality as well as cost, using the data to select health plans and providers, and offering employees financial incentives to enroll in plans with good performance records. Some of the organizations are even working directly with providers to identify and implement best practices.

"Employers have been and will continue to be the major drivers of change in the health care marketplace," said John M. Eisenberg, M.D., AHCPR's administrator. "The information in this report will help employers follow the lead of these pioneers and use their purchasing power to promote quality as well as contain costs. It's a smart investment."

Irene Fraser, Ph.D., whose Center for Organization and Delivery Studies oversees research on the impact of the structure, organization and delivery of health care, said the report also challenges health services researchers.

"It's important that researchers find ways to evaluate and disseminate the efforts of pioneers such as these, so that America's business community can examine proven value-based purchasing strategies and adapt them to fit their individual circumstances," said Dr. Fraser.

Dr. Fraser also said AHCPR-funded research shows that employers in some parts of the country are teaming up with government purchasers, such as state Medicaid programs and local health departments, to develop common strategies for encouraging quality care in their communities.

The pioneering groups whose activities are described in the report are the Dallas-Fort Worth Business Group on Health, Chicago Business Group on Health, Gateway Purchasing Association, General Motors, Digital Equipment Corporation, GTE Corporation, Pacific Business Group on Health, Iowa's Community Health Purchasing Corporation and Pacific Bell.

The report also says that most employers continue to focus exclusively on the cost of health plans and are doing little or nothing to integrate quality with health care contracting. Authors Jack Meyer, Ph.D., Lise Rybowski, M.B.A., and Rena Eichler, Ph.D., also found that a middle group, whom they call "dabblers," are taking the first steps toward value-based purchasing by beginning to collect some quality information from plans and providers.

Dr. Meyer, the lead author, is president of New Directions for Policy, a Washington, D.C.-based health care consulting firm; Lise S. Rybowski, M.B.A., is founder and principal of Severyn Healthcare Consulting, a health care research and communications firm in Fairfax, Va.; and Rena Eichler, Ph.D., is a health economist with AHCPR's Center for Organization and Delivery Studies.

Free, single copies of the printed report (AHCPR 98-0004), are are available from the AHCPR Publications Clearinghouse, P.O. Box 8547, Silver Spring, Md. 20907; tel: 1-800-358-9295. Select for online version the report.

A related report, Public-Private Healthcare Purchasing Partnerships, which resulted from an AHCPR-sponsored conference, is available from the Midwest Business Group on Health, 8765 West Higgins Road, Suite 280, Chicago, IL 60631; tel: (773) 380-9090.

For additional information, please contact AHCPR Public Affairs: Karen Migdail, (301) 427-1855 (KMigdail@ahrq.gov), Salina V. Prasad, (301) 427-1864 (SPrasad@ahrq.gov).