There was a time, decades ago, when Peter Schertz and his wife offered health insurance to employees at their small bookstore on Main Street in Durango.
But that was before hospital prices skyrocketed and insurance premiums rose along with them, to more than $1,000 a month for many families in southwestern Colorado. Now, Schertz said, his 14 employees scramble for coverage and some, he said, “are just winging it,” meaning they go without.
In addition to the heartache it causes him as a boss, it also hurts his business by making it tougher to attract and retain workers.
“We’re not able to compete with larger employers who do offer that package,” said Schertz, a co-owner of Maria’s Bookshop. “But we do other things. We bring cookies in and try to be nice.”
Being able to do a little more for his workers is what made the newly formed Southwest Health Alliance such an appealing idea — at least until the local hospital announced last week that it would not go along. The group is what is known as a health purchasing alliance, and it operates in conjunction with the Peak Health Alliance, the Summit County organization whose negotiations directly with its local hospital lowered insurance premiums this year by as much as 20% for some people — on top of what other state initiatives delivered.
These alliances have emerged as a major pillar in Gov. Jared Polis’ vision for health care in Colorado. While ideas like the public option are meant, at least initially, to help people who buy coverage on their own, purchasing alliances are seen as an option for employers to get a better deal for their workers. They allow employers to work together to negotiate prices directly from hospitals and then, deals in place, to get insurance companies to bid for their business. In other words, the alliances intend to put health care consumers in the driver’s seat.
“There’s been a lot of buzz, a lot of excitement,” Schertz said of the Southwest Health Alliance. “There seemed like a lot of movement in the right direction. So the recent turn of events has been disappointing.”
Last week, Centura Health, which operates Durango’s Mercy Regional Medical Center, announced that it will not negotiate with the Southwest Health Alliance, putting a major dent not just in the alliance’s hopes but also in Polis’ plan. Centura, which is a nonprofit, operates 17 hospitals across Colorado and western Kansas.
In an ad published in The Durango Herald, Centura said it will instead work with two insurance companies to deliver lower costs to businesses in southwestern Colorado. It said it plans to cut its prices with “health plan partners” by 20% in the region.
“Real solutions don’t come in third-party packages,” the ad stated, a not-so-veiled shot at the alliance model.
Alliance leaders are fuming.
“This precisely underscores the reason they are a hospital in our community but they are not a community hospital,” said Monique DiGiorgio, the executive director of the Durango-based Local First Foundation, which has helped put the Southwest Health Alliance together. “They are the only provider or hospital at this point that has turned away.”
Tensions rising over alliances
When the Peak Health Alliance launched last year, Centura — which owns St. Anthony Summit Medical Center in Frisco and which negotiated steep price discounts for Peak — was happy to share in the celebration.
And, as recently as Friday, Centura executives were still touting their work with Peak.
“Our biggest necessity was taking care of our local population,” Lee Boyles, St. Anthony Summit’s CEO, said at a forum on health care in Frisco. He called Peak a “unique, localized approach.”
“I think we’re on the right track for what we’re doing in Summit County, for sure,” he said.
But behind the scenes — and as hospitals have battled with the Polis administration over the plan for a public option, among other policies — tensions have been growing.
In addition to its work with the Southwest Health Alliance, Peak has announced plans to expand to other central-mountain counties. Leaders in Eagle County have been talking about forming their own alliance. And the Colorado Business Group on Health has won approval from regulators to form a statewide alliance.
“This was not easy to get done in Summit County,” Tamara Pogue, Peak’s executive director, said at the Frisco forum. “As we’ve started working in other counties, it’s gotten even harder.”
In an interview last month with The Colorado Sun, Centura CEO Peter Banko criticized the alliance model, saying hospitals can achieve greater cost savings for consumers by working more closely with insurance companies, not community organizations. He pointed to something called the Colorado Doctors Plan, which Centura negotiated with the health insurer UnitedHealthcare. The plan gives patients 24/7 access to a doctor or a nurse, either in person or on the phone, and can save employers up to 20% on their health care costs while improving the quality of care provided, he said.
Banko also raised questions about Peak, saying that the price cuts Centura gave Peak were not fully reflected in the alliance’s final rates.
“I don’t know where the money went,” Banko said. “I can’t disclose what our discounts were. But, just simple math, the discounts didn’t translate to the consumer.”
Pogue said she is surprised by Banko’s comment and has tried to show Centura how Peak’s insurance premium prices were set. The prices also factor in the cost of prescription drugs, independent doctors and other benefits — like mental health care — that Peak covers.
“That’s just not the way health care math works,” she said of Banko’s concerns.
Downhill in Durango
DiGiorgio said negotiations with Centura started promisingly enough. The Southwest Health Alliance had assembled a pool of employers representing more than 5,000 people, and there was a meeting where Centura was to deliver a pricing proposal.
But then, she said, Centura postponed the meeting, “knowing full well that they were pushing us almost to the deadline” to get prices in place so insurance companies could begin developing rates for next year. Then came the announcement that Centura was walking.
“It smacks of dishonesty,” she said.
In a statement, Banko said Centura’s work with insurance companies will result in a better deal for consumers. Mercy will also cut its prices for people paying their health care bills without any insurance. In total, he said, the hospital’s price cuts could impact more than 25,000 residents in southwestern Colorado.
“We are actively working with the two largest insurance companies in the Four Corners region to ensure our 20% price reduction directly translates to premium reductions for the families and businesses in Southwest Colorado,” Banko said in the statement.
But many who have worked on the Southwest Health Alliance effort are skeptical.
Suzy Phare, a local chamber of commerce board member, called Centura’s move “shenanigans” and said it reminded her of past moves by Centura when it chose to compete against a group of independent doctors in southwest Colorado.
“The cost savings they are proposing will be short-lived and over-promised, which is business as usual for Centura,” said Phare, who also sits on the Southwest Health Alliance’s steering committee.
Others pointed at Mercy’s existing prices. An analysis by the nonpartisan Rand Corp. last year found that Mercy, on average, charges privately insured patients three times what Medicare would pay for the same procedure. Lab costs for privately insured patients at Mercy are more than six times what Medicare pays, and other services are even higher, Southwest Health Alliance leaders said.
“When they say they’re going to reduce costs by 20%, I don’t know what that’s 20% of,” said Gary Keil, the director of human resources at American Heritage Railways, which runs the Durango & Silverton Narrow Gauge Railroad, among others.
“While I can be told what the discount is, I never have any ability to have any control over what the actual charge is,” he said.
Still, he and others are hopeful that an agreement can be reached. Banko was in Durango on Tuesday night for a meeting to talk about the hospital system’s new plan to reduce costs. DiGiorgio said community members planned to stand outside the meeting with signs urging Centura to come back to the table.
“We continue to hope,” she said, “that they will realize they made a pretty big mistake, or the community will start voting with their dollars.”
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