Business, labor unite to fight rise in health-care costs

January 16, 1992|By David Conn | David Conn,Annapolis Bureau of The Sun

ANNAPOLIS -- A group of Maryland businesses and unions, frustrated with the runaway increases in their health-care costs, is taking matters into its own hands by applying business principles to the purchase of medical care.

Just in case the General Assembly fails to reform Maryland's health-care system this session, a labor-management coalition has created a non-profit company called Medalco to review doctor bills and try to identify physicians who either charge too much or see patients too often. Members of the coalition could then pressure those doctors to lower their charges or send their business to other doctors.

"I don't know if any of these legislative proposals are going to pass in this legislative session in their present form," said Don S. Hillier, MNC Financial Inc.'s senior vice

president for corporate human resources and a co-chairman of the coalition that formed Medalco.

"In the meantime, medical costs are charging ahead, and I can't afford to wait. It's an unbearable burden," said Mr. Hillier, who is scheduled to explain his group's plan today to a committee of legislators looking at ways to lower health-care costs.

The idea behind Medalco (short for Medical Data Analysis Co.) is to collect medical data from its members and determine the average medical cost of treating most physical ailments. The company would use those figures to make sure doctors weren't needlessly going beyond the average by performing too many tests or charging too much.

While overall health-care costs are rising about 20 percent a year, the state-regulated hospital costs in Maryland are growing only by about 9 percent, Mr. Hillier said.

That means that non-hospital costs -- the care delivered by individual physicians and other providers -- are rising 30 percent a year. Non-hospital costs constitute about half of the medical care provided.

By targeting the physicians, the companies and unions who havetentatively agreed to participate in Medalco hope to lower their costs without legislation. All participating companies or unions will see the aggregate data, but the pattern of a specific physician will be available only to the companies he or she serves.

"If there is a problem, then there's an opportunity for Dr. Jones to turn his practice around," Mr. Hillier said.

Physicians themselves have shown interest in a similar effort.

Baltimore's Barton-Gillet Co., a marketing and consulting firm, is signing up doctors willing to share their practice data and submit to audits that show whether they cost too much. If the doctors participating in the Barton-Gillet program lower patients' costs, a number of insurance companies have agreed to send more business their way.

But Ernest Crofoot, a Maryland AFL-CIO official who co-chairs thegroup sponsoring Medalco, questioned how effective a plan would be that requires physicians to police themselves.

"They may rein in the most flagrant practices," Mr. Crofoot said, "but I don't think they're going to use" the Barton-Gillet data to significantly lower costs. Officials at Barton-Gillet could not be reached for comment yesterday.

The state's medical society, which now embraces the Barton-Gillet program, last year fought a labor-management effort to have the state create a Medalco-like program.

Medalco said it will share some of its data with a University of Maryland medical researcher, Dr. James Hudson of the medical school's epidemiology department. Dr. Hudson will try to confirm whether some of the "average" levels of care within a community are medically proper.

So far, about 250,000 insured people, including the families of employees, are represented by the dozen or so companies and unions that have said they'll sign up with Medalco. The company expects to charge no more than 75 cents per employee each month for its services.

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