Fountain Valley-based MemorialCare Health System is the first local participant in an early movement by big employers to rein in healthcare prices.
It will become a direct healthcare provider for Chicago-based Boeing Corp.’s operations in Orange County, Long Beach and the South Bay area in Los Angeles County on Jan. 1 through its Health Alliance accountable care organization. The aerospace company is the county’s fifth largest employer, with 6,470 workers through October, according to Business Journal research.
MemorialCare operates Orange Coast Memorial Medical Center in Fountain Valley and Saddleback Memorial Medical Center in Laguna Hills, along with hospitals in Long Beach. It also includes several doctors’ group practices and outpatient clinics, including 71 surgery centers, urgent-care facilities and other freestanding clinics.
Value
Boeing could be the first of more corporate relationships to come for Health Alliance as businesses—particularly large entities—seek alternatives to traditional insurance products such as health maintenance organizations and preferred provider organizations in order to gain more control over their healthcare costs, promote a healthier work force and receive good value.
Health Alliance’s goals for the Boeing partnership include keeping participants healthy and out of the hospital by focusing on best practices, evidence-based preventive care, and diagnosis and treatment of patients’ underlying problems before they develop into chronic conditions.
Boeing employees who select Health Alliance as their plan choice will receive benefits such as decreased paycheck deductions; no co-payments if they visit a network doctor for primary care; 100% coverage of generic prescription drugs; and the ability to choose specialist doctors within the network without a referral.
Health Alliance enrollees have access to nine hospitals, about 2,400 doctors, and other healthcare providers.
MemorialCare Chief Executive Barry Arbuckle said that if another employer were interested in directly contracting with it, the system would have the ability to bring several other partners into the relationship, dependent upon the employer’s needs.
MemorialCare’s Boeing care partners are UC Irvine Health, Torrance Memorial Health System and Whittier-based PIH Health.
“UC Irvine Health is pleased to offer members of the Boeing family convenient access to the latest evidence-based medicine across a wide range of primary and specialty care,” said Dr. Howard J. Federoff, University of California-Irvine’s vice chancellor of health affairs and UC Irvine Health’s chief executive, in a statement.
“As Orange County’s only academic medical center, we are deeply committed to advancing each person’s health by preventing disease, managing chronic conditions and offering novel treatments when needed.”
Arbuckle said in an interview that he fully expects other large employers in OC and surrounding areas to look into a relationship with MemorialCare and others similar to the one his organization has forged with Boeing.
He offered some caveats, saying that for such a relationship to work, an employer must have a large concentration of workers, dependents and retirees in a certain geographic region.
“You think of like, Chevron-Exxon. It’s a massive company; they probably have a lot of employees, but they are just spread throughout the entire state, as opposed to Boeing, which has some major plants or headquarters or activities in more localized geographies,” Arbuckle said.
“We know it’s happening (in the area.) There’s early dialogue with some employers,” he said. He later added that MemorialCare and other systems in the area have had dialogues, “depending on the employer and the geographic reach of their employee and/or retiree base.”
Large employers in other areas have added direct contracts to their benefits mix. Boeing offers plans through direct contracting at its Puget Sound, Wash.; St. Louis, Mo.; and Charleston, S.C., operations.
Santa Clara-based Intel Corp., a multinational technology company, contracts directly with Albuquerque, N.M.-based Presbyterian Healthcare Services for its healthcare delivery.
A December article in trade publication Trustee mentioned that industry experts foresee growth in direct contracting in the coming years “as providers hone their skills in such things as population health management and are better able to meet the requirements sought by employers.”
The article mentioned a report by New York-based debt rater FitchRatings that said vertically integrated systems such as MemorialCare, “with a strong market presence and the ability to provide a continuum of healthcare services are in the best position to adopt direct relationships with employers.”
Expansion Anticipated
Other providers could eventually follow in MemorialCare’s footsteps.
Irvine-based St. Joseph Hoag Health would be interested in pursuing similar direct contracting relationships with employers, according to Chief Executive Richard Afable.
St. Joseph Hoag Health currently doesn’t have a Boeing-MemorialCare-style relationship with employers, although it does have a direct contract-type model for its own employees, Afable said.
It acts in a noninsurance role for Irvine-based storage products maker Western Digital Corp. by running Western Digital’s on-site wellness center, one of what Afable said are a half-dozen such relationships.
“We did a very deep dive, along with their broker, into the health needs of the employees of Western Digital, and then we designed and operate their on-site health center specifically around the needs that are known about their employees on-site in Irvine,” he said, adding that St. Joseph Hoag Health is paid for the services it provides at the clinic.
St. Joseph Hoag Health, which was established in 2012 when Irvine-based St. Joseph Health teamed up with Hoag Memorial Hospital Presbyterian in Newport Beach and Irvine, was created with businesses in mind, Afable said.
“The creation of St. Joseph Hoag Health, now in collaboration with [Renton, Wash.-based] Providence [Health and Services], our colleagues in L.A., in many ways was specifically designed for us to be a partner with employers large and small,” Afable said.
He said the goal is to provide better health for workers and lower costs.
Afable added that he believes the trend will migrate to midsized and smaller employers in coming years if health systems get better at delivering care through direct relationships and insurers are “willing and able to aggregate small and medium-sized employers into larger purchasing groups that could function like a large employer—that’s when it can begin to [start].”
