Health-care cooperatives are one of those political trial balloons that floated briefly in full view, then blew quickly away in the gusts of barbed rhetoric about the future of the nation’s health-care system.
Floated over the weekend by the Obama administration, and now nearly out of sight, health-care cooperatives were dismissed as an unworkable idea almost from the moment they were first mentioned.
Hold on just a minute.
It is easy to dismiss co-ops as a soft-shouldered approach to doing business. To the extent Americans know them at all, they think of agricultural co-ops such as dairy outfit Land O’Lakes, dozens of rural electric co-ops that helped bring power to the farm belt and, for granola crunchers, the outdoor equipment-maker REI.
Co-ops tend to emerge when a group of people with similar economic needs band together to share resources and increase their market power. Co-ops do not pay dividends, so they tend to operate at lower cost than shareholder-owned companies, and they typically have a one-member, one-vote approach to corporate governance.
David Knott, leader of the global health practice at consultancy Booz & Co., has studied co-ops and sees no major role for them in health-care reform. “They’re like bringing a knife to a gun fight,” he said.
Co-ops, Knott said, are unlikely to have the wherewithal to compete against big-bucks insurers or negotiate low-cost contracts with hospitals and doctors. They likely could not afford computer systems for electronic billing, or the complex technology that helps direct the cost-efficient delivery of doctors’ services, he said.
Co-ops would be unlikely, too, to attract enough members to negotiate prices that would be lower than those obtained by health-insurance giants, which use their market power to beat down prices from doctors and hospitals.
There are only a handful of health-care co-ops in the U.S. The two largest — one covering the Seattle area, the other in the Twin Cities — have more than 500,000 members each and operate their own hospitals, clinics, doctors groups and insurance plans.
People such as Larry Zanoni find it strange that co-ops could be discussed so dismissively. The executive director of Group Health Cooperative of South Central Wisconsin, Zanoni believes his relatively tidy co-op — with only 62,000 members from an area with Madison at its center — is faring well, and disproving the sort of critiques Knott and others make.
Group Health has used electronic records for seven years, making it a relatively early mover in that trend, thanks to a $5 million investment. The co-op has invested in a new “complementary medicine” practice, offering its members acupuncture, chiropractic and other alternatives to traditional medicine. One prominent industry group ranks it eighth nationwide among HMOs for the quality of health care.
“If you’re not competitive, you’re not going to stay in business,” Zanoni said. “We slug it out every day.”
Not every co-op has been able to make the fight. Group Health Association of Washington, D.C., failed in the 1990s, and a co-op called Group Health Inc. of New York City is converting to not-for-profit status.
Even so, the larger co-ops can pack a powerful punch.
With no dividends to pay, they reinvest profits. They have a record of providing productive, innovative, cost-effective medicine on par with some of the industry’s biggest players, according to an in-depth report on the health industry’s best practices sponsored by the Commonwealth Fund.
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The case of HealthPartners, based in Bloomington, Minn., disproves the argument that co-ops cannot achieve operational efficiencies of for-profit providers. Beginning in the late 1990s, the Commonwealth Fund reports, HealthPartners introduced a program that compensated doctors mainly based on productivity. Over four years ended in 2002, the co-op saw the doctors’ productivity jump 38 percent and costs drop 20 percent.
In 2007 alone, HealthPartners paid out $27 million in incentives to caregivers who met certain productivity and patient satisfaction goals. While that may sound like a big cost, it’s actually a measure of success at improving productivity while keeping patients happy.
Co-ops are not the only answer to the nation’s health-care problems. Perhaps, in fact, there is no single answer. The “government option” — government-backed insurance — may be one good tool to bring health care to nearly 50 million uninsured Americans.
But co-ops deserve more-serious consideration as another potential option.
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