Health Co-ops: Checking out Group Health Cooperative

by Clive Riddle, August 20, 2009

Health Care Cooperatives are certainly getting more than 15 minutes of fame as the health reform debate intensifies. Group Health Cooperative has been perhaps the most visible and referenced example referenced in discussions from all sides. For the less initiated, what follows is a quick overview of all things GHC. Group Health Cooperative is based in Seattle, Washington, with almost 10,000 employees and serves around 550,000 members in twenty Washington counties and two counties in Northern Idaho.

Governance

As a cooperative, GHC arranges the delivery of health care benefits and services for its members as a non-profit, member controlled organization. Unlike the traditional structure of a member-owned cooperative, financial surpluses are reinvested and not distributed to the members.

Group Health is governed by an 11-person Board of Trustees of volunteer consumer members, which hires the chief executive officer and makes major policy decisions. Any member of GHC eighteen years or older is eligible to vote to elect the Board of Trustees, and to vote on bylaw changes. The GHC bylaws are available for review online. Members must register to vote, and the registration deadline just passed (August 18^th) to vote at the 2009 annual membership meeting (Oct. 17^th 2009.)

Public Board meetings begin with an open microphone session during which any GHC can address the Board directly on all matters except those related to personal health care. Some GHC medical centers also have volunteer-led Medical Center Advisory Councils that work with staff to address care and wellness issues and meet at least four times per year. The councils are open to GHC members who reside near or receive care at a respective medical center.

GHC’s President and CEO is Scott Armstrong, who has been with the organization since 1986, starting as an assistant hospital administrator. He became president and CEO in January 2005. Prior to GHC he was the assistant vice president for hospital operations at Miami Valley Hospital in Dayton, Ohio.

Provider Network

GHC care is delivered by Group Health Permanente providers (880+ physicians) at Group Health-operated medical facilities, and in outlying areas and through POS options, also through a network of almost 9,000 providers and 40+ hospitals. After five decades serving as a staff model, the physicians formed Group Health Permanente, an independent professional corporation, in 1997, which operates under exclusive contract to serve GHC. 

History and Growth

In 1946, GHC, known as Group Health Cooperative of Puget Sound, was developed, acquired a Seattle medical clinic and hospital and starting with 1947 established a group practice, prepaid health plan. Initial coverage costs involved a $100 membership fee, plus $3 per month dues for each adult family member and $1.50 per month per child up tot four, with no charge for additional children. The local King County Medical Society undertook a highly organized campaign against GHC physicians and their members, resulting in a lawsuit and 1951 State Supreme Court unanimous ruling against the anticompetitive practices of the Medical Society.

Membership by the end of the 1950’s came close to 40,000. Enrollment surpassed 100,000 in 1967. Additional medical centers were developed and service area expanded each decade. In 1977 11,000 member Tacoma's Sound Health Association was acquired, and by 1979, enrollment surpassed 275,000. In 1982, the first agreement was signed to provide care by non-Group Health physicians on Vashon and Maury islands.  In 1983, enrollment surpassed 300,000 and GHC established the Group Health Center for Health Studies; the Center for Health Promotion; and Group Health Foundation., and acquired an existing Spokane 20,000 member health plan serving Eastern Washington, which evolved by 1987 into the affiliate Group Health Northwest, consolidating services east of the Cascades. In 1990, GHC launched Group Health Options, Inc., a subsidiary, which offered the Northwest's first POS plan. In 1994, Group Health membership passed 500,000. By the late 1990s membership approached 700,000.

In 1997, a strategic alliance was formed with Kaiser Permanente’s Washington operations, creating Kaiser/Group Health, a new non-profit corporation set up to oversee Group Health Cooperative, Group Health Northwest, and Kaiser Permanente Northwest.However, at the same time, GHC deficits began mounting, and GHC began cutting back in participation in various programs and markets, causing enrollment to begin shrinking down to its current level (550,000.). Kaiser and GHC agreed to dramatically scale back their affiliation to a more simple reciprocity of provider services agreement. GHC experienced a financial turnaround at the start of the new millennium. In 2005, GHC acquired KPS Health Plan, a 62-year-old nonprofit plan based in Bremerton, WA.

Additional historical information is available at HisotryLink.org and in the GHC web site.

Current Financials

GHC yielded $2.8 billion in revenue in 2008, up from $2.6 billion in 2007, with operating expenses of $2.7 billion in 2008 and $2.6 billion in 2007. External provider network expenses (non GHC owned facilities or Group Health Permanente) comprised 50% of operating expenses. 2007 yielded a $71 million surplus primarily due to $57 million in investment income, while 2008 yielded a $9 million loss, primarily due to $60 million in investment losses. In August 2009 Standard&Poor's Ratings Services “lowered its counterparty credit, financial strength, and senior secured debt ratings on Group Health Cooperative (GHC) to 'BBB+' from 'A-'. The outlook on the counterparty credit and financial strength ratings is negative. The rating action is based on GHC's downward revision to its 2009 earnings forecast. The company is now expecting a pretax operating loss.”

Accolades

A recent Commonwealth Fund case study notes that Group Health Cooperative is structured with incentives aligned "to launch innovations and organize services in ways that make the most sense operationally and clinically." The case study highlighted attributes contributing to the organization’s success:

• Information Continuity  with EHR

•  Care Coordination and Transitions and System Accountability, including medical homes and case management

• Peer Review and Teamwork for High-Value Care, including clinical dashboards and P4P

• Continuous Innovation

• Easy Access to Appropriate Care, including same day appointments for urgent care, after hours urgent care and telephonic nurse advise linked to HER, direct specialist access, group visits and electronic visits

GHC touts that it has the "Highest Member Satisfaction among Commercial Health Plans in the Northwest Region" ranking by J.D. Power and Associates;

"Excellent" accreditation rating from the National Committee for Quality Assurance (NCQA) for the seventh year in a row; "America's Best Health Plans" rating by U.S. News & World Report and NCQA; and Highest ranked for health plan quality and prescription drug plan quality by the Centers for Medicare and Medicaid Services (CMS) Medicare Plan Comparisons.

Doubts about GHC as a nationwide model

But for all the success, these doubts have publicly surfaced regarding how realistic it would be to duplicate GHC as a nationwide model for health reform:

1. As a recent New York Times article questions, is the governance aspect of a cooperative, as advanced by many reformers, the successful attribute of GHC, or is it the integrated delivery system, which is present in non-cooperative based programs such as Kaiser?


2. Considering the infrastructure required to operate the GHC mixed delivery model that at its core is an integrated group practice, is it realistic to develop something similar from scratch for new markets in any reasonable time frame?


3. Considering GHC’s financial position is no stronger, and perhaps weaker than other major health plans around the country, what are the financial dangers in replicating their model?