BUSINESS CO-OP SEEKS HEALTH CARE `BEST BUYS'

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, February 14, 1992                   TAG: 9202140316
SECTION: VIRGINIA                    PAGE: A-1   EDITION: METRO 
SOURCE: CHARLES HITE MEDICAL WRITER
DATELINE:                                 LENGTH: Medium
BUSINESS CO-OP SEEKS HEALTH CARE `BEST BUYS'
Roanoke Valley businesses - looking for value as well as price cuts in spending for health care - are organizing a "buyers cooperative" to negotiate directly with hospitals.
Employers can expect to save 10 to 15 percent on hospital bills if they join, co-op officials say. Among those expressing interest in joining are Appalachian Power and Norfolk Southern.
The major goal of the co-op, however, is not to slash prices but to identify where employers get the best value.
The co-op will serve as a sort of "Consumer Reports" for local medical services, identifying the "best buys" for various procedures, says Jack Rodman, vice president of Buyers Healthcare Cooperative Inc. of Nashville, Tenn.
"Our job is to tell the employers - the people with the money - where the best buys are," said Rodman, who will serve as executive director of Buyers Healthcare Cooperative of the Blue Ridge Region.
"The best place for a particular service may not be the cheapest," Rodman adds. "Consumer Reports usually never recommends the cheapest product as the best buy. Some facilities may be the best buy at full charges."
Buyers Healthcare is coming to Roanoke at the urging of the Blue Ridge Regional Health Care Coalition Inc., a group of 31 employers formed in 1984 to lower health care costs. Rodman expects to be in Roanoke by the end of the month to talk with business executives, hospital officials and physicians.
Several Nashville employers started Buyers Healthcare several years ago. It now has groups operating in Richmond; the tri-cities of Bristol, Kingsport and Johnson City, Tenn.; Knoxville, Tenn.; Fort Wayne, Ind.; and Fort Smith, Ark.
Business coalition officials, disappointed in the results of previous attempts to lower medical costs, approached Buyers Healthcare several months ago, says Lisa Craft, executive director of the coalition.
Community Care Network, or CCN, a California-based health benefits company, signed up several coalition companies 2 1/2 years ago after negotiating discounts from Community and Lewis-Gale hospitals. But Community Hospital dropped out last year, claiming it never got the additional business promised by CCN. Lewis-Gale plans to drop its CCN price discounts by April.
"A lot of coalition members were frustrated at the speed CCN was moving," said Dick Robers, president of the coalition and executive vice president at Maid Bess Corp. in Salem.
The co-op would be governed by a board made up of representatives from member companies. Buyers Healthcare agreed to come only after the coalition obtained commitments from companies representing at least 5,000 total employees, Craft says.
That threshold has been reached with letters of membership from seven employers. Craft expects to add at least another 5,000 employees before the co-op becomes operational here. Appalachian Power Co. and Norfolk Southern Corp. have expressed interest and Dominion Bank, while not formally joining in Roanoke, has joined in Richmond, Nashville and the tri-cities.
The channeling of employees to a particular hospital or group of doctors is not guaranteed by the co-op. But without a guarantee of more patients, why would hospitals negotiate with the co-op?
"They are taking some of this on faith right now," said Richard Browne, president of the co-op in Richmond, where eight hospitals offer discounts. But the hospitals seem willing to gamble the co-op eventually will bring patients by helping get out the word that they are quality providers, Browne said.
"There are plenty of hospitals here, but not much competition," Browne said. "We're trying to stir up the competitive juices."
Browne said Signet Bank, where he is an assistant vice president, recently saved 18 percent on a $100,000 batch of hospital bills because of the co-op discount.
Thomas Robertson, president of Carilion Health System, said Carilion hospitals are willing to look at the co-op concept, but he doesn't see much incentive to negotiate.
"There's something missing there," he said about the co-op. "It would work if it's coupled with some mechanism to steer patients to a hospital."
Although most insurers will work with the co-op, Blue Cross and Blue Shield of Virginia will not. "We view them as a competitor," said Edward Peple Jr., a Blue Cross official in charge of preferred provider organizations, or PPOs.
PPOs offer to steer patients to hospitals and doctors in exchange for price discounts. Employees are free to use providers that are not in the PPO, but they must pay higher charges.
Peple does see a bright side to the co-op's decision to come to Roanoke. "This tells us other people see the Roanoke market as an opportunity for these kinds of programs. It will make these kinds of arrangements more acceptable."
Blue Cross covers about 5,800 employees and their families in the Roanoke area through a PPO called KeyCare. Most of them are state and federal government employees.

by Bhavesh Jinadra by CNB