Charles Ornstein Article – GTE

The Henry J. Kaiser Family Foundation

Sleuths Scope Out Benefits:

GTE Seeks Quality at the Right Price


By Charles Ornstein
Reprinted with permission of The Dallas Morning News

CHAMPAIGN, Ill. If George Crowling put pencil to paper, his job description would read something like this: fortune-teller, penny-pincher, paper pusher and private detective.

In short, Mr. Crowling manages health benefits. He is the person charged with finding health insurance programs for thousands of workers at GTE Corp. and the voice that soothes irate workers when they have problems with their HMOs.

Each spring, Mr. Crowling assumes the role of sleuth. The regional health-care manager travels Texas and the Great Plains, ferreting out information on the HMOs that insure GTE’s workforce. He’s looking for signs of trouble, proof of improvements and a personal commitment to the telephone company’s quality-driven focus.

Mr. Crowling and two other regional health-care managers have kept an eye on GTE’s medical spending for years. And they continue doing so despite a merger with Bell Atlantic Corp. that created Verizon Communications Inc., the nation’s largest local telephone company.

Last year, GTE spent about $1 million on salaries and travel expenses for Mr. Crowling and the two other health-care managers. That’s a fraction of the $548.7 million cost of covering health care for its employees, retirees and dependents in 1999.

Yet, their negotiating prowess and knowledge of health plans has held GTE’s increase in medical expenditures to 8 percent for 2001 at a time when competitors have seen their costs skyrocket by 15 percent or more. The savings amount to millions of dollars.

In using in-house experts instead of hired consultants to negotiate with health plans, GTE breaks ranks with most of corporate America, as it has done since the early 1990s when it aggressively sought to shift employees into HMOs.

On the road – again

Mr. Crowling logged thousands of miles in his pursuit of the right health plans. One two-day trip in May found him visiting four insurers.

The first day, he racked up frequent-flier miles from Albuquerque, N.M., to St. Louis before renting a car for a three-hour drive to Champaign, Ill. But he wasn’t done there. In the course of a two-day stay, he made two round trips between Champaign and St. Louis – a total of 900 miles.

On every site visit, Mr. Crowling carried a black binder prepared by his assistant, JoAnn Phillips, whom he credits with maintaining his sanity. Inside the notebook are directions to his meetings, HMO enrollment figures and the HMO’s responses to a standard GTE questionnaire.

At his first stop in Champaign, Mr. Crowling spent 21/2 hours at PersonalCare, an HMO that covers about 100 GTE employees. He discussed prescription drug costs and efforts to reduce medical errors.

Todd Petersen, PersonalCare’s senior vice president and chief financial officer, is more accustomed to dealing with consulting firms. GTE is one of the few national clients to visit his health plan, he said.

His health plan has benefited from GTE’s emphasis on quality. PersonalCare has won a coveted spot as one of GTE’s benchmark plans because of its high scores on national quality and satisfaction surveys. The honor means that GTE pays a greater share of the premium for employees who enroll.

“They’re probably the only company that we do business with that actually backs up what they say,” Mr. Petersen said. “Every other company gives lip service to quality. But at the end of the day, it’s really about our provider network and price, as opposed to quality.”

A veteran of the health-care business, Mr. Crowling knows what questions to ask. As a consultant, he helped stabilize financially troubled Bay Pacific Health Plan in California.

Each of his counterparts has credentials in finance or health care. On the West Coast, Tom Davies had been a senior vice president at Blue Cross of California. Jim Astuto, who handles the East Coast, worked in the finance department at H.J. Heinz Co. before coming to GTE 13 years ago.

“It’s always an advantage, in relating to vendors, to have worn their shoes, to have worked in their arena,” said Mr. Davies, who is based in San Ramon, Calif. “When it comes to developing market strategies and plan designs, having this background has been one of the keys to our success.”

Mr. Astuto, who works in the Atlanta suburbs, said he made 19 trips this season from Florida to Maine to review about 50 health plans. He is also the point man for designing prescription payment plans that make consumers aware of costs.

“If you’re dedicated to providing the best, you need to get out there,” Mr. Astuto said. “You can look at all the quantitative markers on them, but sometimes you just need to get out there and hear the speeches.”

Benefits of site visits

It’s amazing, Mr. Crowling said, what he learns just from site visits.

At PersonalCare in Champaign, for instance, he saw data illustrating how patients shifted away from specific, high-cost drugs when the HMO increased their co-payments. Those patients moved to lower-cost drugs that the HMO described as equally effective.

“People are remarkably honest with us, sometimes shockingly honest about what’s happening or what’s going to happen,” Mr. Crowling said.

When trouble is brewing, he and his colleagues said, insurers in their regions call to prepare them before flare-ups prompt employee questions. Mr. Astuto, for example, learned of contract stalemates between hospitals and HMOs in Massachusetts, Florida and Kentucky long before the providers made the information public.

In Kentucky, Mr. Astuto encouraged the health plan to stand its ground and avoid paying the higher reimbursements requested by the physicians.

Three years ago, Mr. Davies helped facilitate an agreement between an HMO in Washington state and a large medical group. “[The two sides] painted themselves in a corner,” he said. “There was no way to get out without breaking the relationship.”

Because GTE provided insurance to 2,600 HMO members who used those doctors, Mr. Davies said he felt obligated to intervene.

“We were able to talk to both sides in very direct ways,” he said. “The top management of both the medical group and the company got together and hammered out an approach.”

First to the table

When GTE started offering HMOs to workers in 1988, it was part of the first wave of employers to embrace programs that offered $5 doctor visits, no claim forms and rules governing access to medical services.

But the company did not fully embrace the managed-care concept until four years later, when it hired its regional health-care managers to find quality HMO choices.

Since then, GTE has been a leader in transferring employees to managed care. In 1997, it was one of the first employers to increase patient co-payments for physician office visits to $10 from $5. A year later, it began charging varying co-payments for prescription drugs, separating medications into generic or one of two brand-name categories.

The moves gave employees a feel for the rising health-care costs that the company was paying and came on top of the monthly contributions that employees made to insurance premiums.

Unlike GTE, most companies hire consulting firms to manage health insurance benefits – or at least assist with managing it. In fact, GTE’s merger partner, Bell Atlantic, does so, leaving Verizon with something of a hybrid system for the 2001 benefit year.

Some employers prefer consultants because of their expertise, tools and relationships with health plans, said Erich Blumberg, a consultant for Hewitt Associates, which administers GTE’s benefits program.

“The process of selecting and managing plans has become very complex,” said Mr. Blumberg, who’s in Hewitt’s Dallas office. “For more employers than not, it’s a once-a-year event. … You just don’t want to have the staff.”

GTE’s use of regional health-care managers – almost unheard of today – began in 1992.

“Virtually nobody was doing this,” Mr. Crowling said. “The concept that we would actually bring on a crew of people that would do nothing but evaluate health plans full time, … we were speaking Greek to them.”

Holding costs steady

He, Mr. Davies and Mr. Astuto have tried to earn their keep by managing costs in an arena that seems ungovernable, and they have achieved success. The amount of money GTE spends per person was exactly the same – to the dollar – in 1999 as it was in 1994.

Today, the chief threat to their success lies no further away than the corner drugstore. Like other corporations around the nation, GTE has sought ways to cut the cost of prescription drugs.

In 2001, GTE will take over the prescription programs of 25 HMOs in a pilot program that sets different co-payments for the same drug. Working with its pharmacy-benefit manager, GTE will allow patients to pay $15 co-payments for certain drugs – such as Prozac for depression or Zocor for high cholesterol – after meeting certain requirements. Otherwise, they would pay a $25 co-payment.

To qualify for the lower co-payment on Prozac, for instance, a GTE employee must show treatment from a mental-health professional. (The information would not be shared with the company.)

“When the product is more appropriate and absolutely required for your good health, it’s covered, and it’s covered at a lower amount,” said Patricia Wilson, a pharmacy consultant who has worked with GTE for more than a decade.

The goal, officials say, is to get high-cost drugs in the hands of people who really need it while discouraging their use among those who don’t meet the criteria.

“If people are using a drug because their doctor wrote it and doesn’t know any better, that’s not going to fly,” Mr. Astuto said. “This area has to be managed. It’s eating us up.”

Although the cost of prescription drugs has grabbed the spotlight, the health-care managers perennially focus on containing increases in premiums.

No state has been more conducive for cost-cutting in this area than California.

There, HMOs abound, and Mr. Davies has called the shots for the last two years. He has specified what GTE is willing to pay and told HMOs to take it or leave it.

“They all gave us proposals, and we came back and said, ‘We’ve read your proposals. They’re all over the map,'” Mr. Davies said. “None of them are adequately justified and this is what we’re willing to pay.

“It’s a free market, free world and they can withdraw. And several did.”

But don’t confuse Mr. Davies with a bully. “It’s a close working relationship. It’s not a bully thing,” he said. “We have a good deal of mutual respect and trust.”

GTE, for instance, provides its California HMOs with a detailed breakdown describing to which plans they lost members and from which plans they gained enrollees.

The firm also provides the HMOs with copies of all complaints and compliments. And it shows the HMOs where their premiums rank in relation to their peers.

Although Mr. Davies can virtually name his price in California, he and his colleagues say they’ve learned that the lowest price doesn’t always mean the best deal.

GTE is one of the few companies that turns down health premiums that are too low. Designed to recruit new members, such premiums often last for only one year, company officials said, and the subsequent increase will wipe out any gain.

One Texas health plan offered to reduce GTE’s rate by 3 percent for 2001. Instead of accepting, Mr. Crowling proposed a 3 percent increase. He said paying more now ensures stability later.

“We try to manage for the long term, and a one-year dip followed by a second-year increase is not what we have in mind,” he said. “We think we’re better off paying a reasonable amount for what we anticipate getting.”

Mr. Crowling’s job is to know what’s reasonable across a broad swath of the central United States that extends from his home base in Irving up to Champaign, Ill. That’s where his site visits pay off, he said.


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