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Buying Coalitions New Wrinkle in Managed Care Market

Buying Coalitions New Wrinkle in Managed Care Market

WASHINGTON--Employers, who first embraced managed care as a way
to lower health care costs, are now joining together in buying
coalitions to extract even greater price reductions from organizations
such as HMOs from whom they purchase health care insurance for
their employees.

"The implications for providers are extraordinary,"
consultant Allan Fine, MBA, said at the annual meeting of the
Association of Community Cancer Centers (ACCC). "Clearly,
to the extent that you or your affiliated managed care organization
has a contract with one of these buying coalitions, you are in
a superior position, not only to secure additional market share
but, most important, to preserve existing market share."

Mr. Fine, a Chicago-based senior manager of Ernst & Young
LLP Health Care Consulting, cited two examples of the growing
power of these emerging purchasing groups.

A dozen companies, including Sears, IBM, and American Express,
have formed the HMO Purchasing Coalition, which intends to contract
with only one or two HMOs in each of 27 areas throughout the country
where its member companies have employees.

The Pacific Business Group on Health, consisting of large employers
in the San Francisco Bay area, has used its mass buying power
to obtain additional premium reductions from HMOs.

"It is these types of organizations that you are going to
have to convince as to the merits and value of the services that
you offer," Mr. Fine said.

The growth of carve-outs as a means of purchasing the services
of specialists is evolving, he noted, most commonly in the fields
of oncology, cardiology, ophthalmology, and orthopedics. Those
who pay the bills believe that limiting the number of specialists
they contract with is an effective way of managing costs.

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