Minnesota effort has health care revamp lessons for Amazon and its partners

The effort rolled out last week by three of the nation's most influential companies to revamp health care is the latest in a series of such pushes by corporate America, including a widely heralded effort in the Twin Cities that ultimately failed.

For a period during the late 1990s, big employers in Minnesota launched an innovative program that gave workers data to help them shop for health care based on the cost and quality of care provided by competing groups of doctors and hospitals.

What happened next offers key lessons, health policy analysts and key players involved in the program say, as executives at Amazon, Berkshire Hathaway and JPMorgan Chase plot the next moves in an initiative that last week shook the stock of health care giants including Minnetonka-based UnitedHealth Group.

"Everyone said: 'This is a model — this could really work,' " said Tom Forsythe, a retired General Mills executive, recalling the '90s program. "And then, it really didn't."

On Tuesday, the three companies announced a vague plan for launching a partnership that would develop technology solutions to improve the cost and quality of care for workers in their employee health plans.

Despite the lack of details, the big names behind the announcement commanded attention. Amazon and Jeff Bezos, the chief executive of the online retail giant, have a history of disrupting industries via technology. Berkshire Hathaway is led by famed investor Warren Buffett, while at JPMorgan Chase, Jamie Dimon runs the nation's largest bank.

Together, the companies employ around 1 million people. While Wall Street investors initially seemed to sense a threat for big established players, stock analysts said the news could create opportunities for incumbents like UnitedHealth Group, which is the nation's largest health insurer.

"Our view is that a new entrant, rather than trying to 'start from scratch' will quickly realize that better deploying what is already available and collaborating with the national [health insurers] in their endeavors is the quickest path to success," Credit Suisse analysts wrote in a note to investors last week.

In Minnesota, employers launched in 1997 a cutting-edge program called Choice Plus through a group called the Buyers Health Care Action Group. It counted among its members Dayton-Hudson Corp., Pillsbury, Norwest Bank and General Mills.

The companies were all "self-insured," meaning they took the financial risk for claims and also had a lot of data about how much care their employees collectively used. The employers pooled their data and launched research groups that helped generate data on the cost and quality of different medical groups.

Employees who opted for coverage via Choice Plus picked one of several networks of clinics and hospitals that would provide their care. The competing networks were assigned to one of three tiers based on cost, with workers paying lower premiums if they opted for a clinic system that provided better quality at a lower cost.

The program came from an employer coalition that the Wall Street Journal in 1998 called "one of the most innovative campaigns in the nation's war on health care costs."

For a time, it was successful, said Jon Christianson, a health researcher at the University of Minnesota who published studies on the program. Employees paid attention to the information they received about choosing among care networks. There was some evidence of cost restraint, without a negative impact on quality.

But there were a number of hitches that prevented Choice Plus from achieving a critical mass of enrollees. In the end, employers started dropping out in order to take advantage of lower prices offered by health insurers.

"I think it's very hard for employers to commit to a long-run health care strategy aimed at changing the health care system, when the CFO is monitoring health benefit costs on a quarterly basis and saying: 'You need to do something to reduce these costs next quarter,' " Christianson said. "So, if somebody comes in and gives you a really strong offer, it's hard to reject that."

Insurers maintain the program didn't survive for reasons other than competition from carriers.

Many workers never opted for Choice Plus because the structure was complex, said Marcus Merz, the retired chief executive of the health insurer PreferredOne.

Employers bristled at putting financial barriers in front of workers whose doctors fell in the high-cost tier. And employers with workers in many states didn't like the idea of having different benefits in different regions, Merz said.

"There was a lot of rhetoric at the time about eliminating the middle man," he said. "But the whole idea of directing volume never took off. The basic reasons are: The employers didn't support it; the health care providers didn't have the infrastructure; and low-cost providers didn't get the benefits."

While employers and insurers stress different points in the history of Choice Plus, some said it still offers lessons for Amazon, Berkshire Hathaway and JPMorgan.

The first is to partner with health insurers, rather than be seen as competition, said Steve Wetzell, a health care consultant in the Twin Cities who was executive director of Buyers Health Care Action Group. One reason the program lost momentum, Wetzell said, is that insurance carriers viewed it as a threat.

"The carriers are not the primary cause of the fundamental problems facing the U.S. heath care system, they're just not solving them," Wetzell said via e-mail. "Any employer coalition that ends up being viewed as a competitor and threat to the insurance industry's core business interests is probably not going to win that battle over the long term."

Another lesson is that driving fundamental change takes a long time, said Carolyn Pare, the chief executive of the Minnesota Health Action Group, the employer group that has continued since Choice Plus was sold off in the early 2000s. To this day, Pare's group tries to promote transparency, quality and value in the products and services that employers buy from health care vendors.

In the vague proposal from Amazon, Berkshire Hathaway and JPMorgan, Pare said she sees the chance for something more.

"We've been talking about the same kinds of things, the same ideas in terms of transforming health care for as long as I've been involved in this, and yet we make very minor strides forward," Pare said. "So, perhaps — perhaps — when we have some very large employers, their CEOs who are purpose-driven in what they want to achieve … I'm very hopeful that this could change the game."

The Minnesota coalition failed to transform health care, but has good company in that failure, Forsythe said. He pointed to a long history of employer initiatives that had to settle for small victories after trying to make big changes.

Even so, Forsythe said he's excited about the new coalition, particularly because Amazon is involved. For decades, the missing ingredient in the health care market, Forsythe argues, has been the lack of transparency about the actual price of medical services.

If employers and individual patients knew more about the actual cost of care at different health care providers, he said, they could direct business to the doctors and hospitals that provide the best combination of quality and cost.

"Imagine if Amazon could leverage what I think is one of their core competencies — making pricing available and transparent — in the health care space," Forsythe said. "It could change everything."

Christopher Snowbeck • 612-673-4744 Twitter: @chrissnowbeck