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Minnesota's Smart-Buy Alliance

Summary: The state of Minnesota has joined with private business and labor groups in a "Smart-Buy Alliance" to drive quality improvements and efficiencies in the health care delivery system. While Alliance members continue to purchase health care individually, they have agreed to set uniform performance standards, cost/quality reporting requirements, and technology demands on health plans and providers and to favor providers and health plans that are certified for highest quality. Together, the Alliance members buy health insurance on behalf of about 70% of state residents.

Issue: Minnesota, like the entire U.S., has experienced years of double-digit growth in health care premiums and persistent reports of poor quality care. In response, the state of Minnesota has joined with private business and labor groups to change the way they purchase care. The coalition hopes to reduce an estimated 30% of direct health care outlays resulting from inappropriate and poor quality care and to achieve an estimated 10% of savings from health information technologies.[1]

Objective: The Smart-Buy Alliance members pool their purchasing power to drive value in the health care delivery system. Their goals are to improve quality and lower costs by reducing inappropriate and unnecessary care, encouraging evidence-based medicine and use of highest-performing providers, and reducing providers' administrative costs through common reporting requirements. That is, the Alliance hopes to achieve savings in the long run through coordinating their members' expectations on quality and value.

"Members are shifting from simply paying for health care insurance to reforming the system by the way we purchase services," said Brian Osberg, assistant commissioner of health care for Minnesota's Department of Human Services (DHS).

Background: The formation of the Alliance, announced in November 2004, resulted from months of study by a "Health Cabinet" comprised of members of Minnesota Governor Tim Pawlenty's Administration and representatives from business and labor groups, some of whom had been involved in other quality purchasing initiatives. The participating organizations agree to common principles in their purchasing decisions, which translate into similar demands in health plan contracts, shared use of tools and technologies, and greater empowerment of members.

Participants: Alliance members purchase health insurance for 3.5 million people, or 70% of the state's residents. DHS represents about 660,000 members of Medicaid, the State Children's Health Insurance Program (CHIP), and state health care programs. Minnesota's Department of Employee Relations purchases care for more than 100,000 state employees and their dependents.

Private sector participants include:

  • Buyer's Health Care Action Group, a coalition of employers in the forefront of developing new purchasing strategies;
  • Minnesota Business Partnership, representing Minnesota's largest employers;
  • Minnesota Chamber of Commerce, representing employers of all sizes across the state;
  • Labor/Management Health Care Coalition of the Upper Midwest;
  • Minnesota Association of Professional Employees;
  • Employers Association; and
  • Advocates for Market Place Options for Mainstreet.

Process of Change: While Alliance members continue to purchase health care individually, they are encouraging higher quality and efficiency by collectively pursuing four key strategies:

1. Reward or require "best in class" certification. Alliance members will build on existing "best in class" certification programs in development that identify health care providers achieving certain levels of expertise, experience, proficiency, and results. Currently, the Health Value Partnership for Heart Care identifies and rewards the top-performing cardiac care centers in the Minnesota. Cancer care will be certified next. Alliance members will consider certification when selecting providers and will encourage patients to do the same.

2. Adopt and utilize uniform measures of quality and results. The Alliance will adopt uniform methods of measuring quality of care and results and use them in purchasing. To facilitate comparison of health plans, Alliance members will use a common purchase order that delineates specific kinds of information the plans must provide about performance and outcomes. This is based on the "eValue8" value-based purchasing tool (described in the box below). Medicaid, for example, will incorporate features of eValue8 into their contracts with health plans. Some of the private purchasers will use the eValue8 tool to request proposals from various health plans. The state already has notified the managed care plans that cover two-thirds of public health program enrollees that they will incorporate new benchmark indicators into the 2006 contracts.


EValue8, an initiative sponsored by the National Business Coalition on Health and Watson Wyatt Worldwide, is a Web-based tool that allows health care purchasers to assess and compare health plans on a local, regional, or national basis.

EValue8 uses standardized requests for information to collect vendor-specific data from health plans and then analyzes the data using automated scoring based on best practice standards.

EValue8 prepares comparative reports that cover several key areas of health plan performance, including:

• Adoption of health information technology
• Member and provider communication
• Disease management
• Program administration
• Provider performance
• Patient safety
• Pharmacy benefit management
• Behavioral health
• Financial stability

For more information visit:

3. Empower consumers with easy access to information. In addition to collecting information from providers, the Alliance will provide consumers with standardized, user-friendly information about health care costs and quality. Consumers will have access to:

  • The Community Measurement Project—This provides information on how well MinnesotaCare (state-subsidized coverage for eligible populations) systems meet certain proven standards, for example the extent to which physicians adhere to clinical guidelines and evidence-based medicine. It currently provides comparative measures for asthma, children's health, depression, diabetes, high blood pressure, and women's health. Also provides information on how to work with your doctor to stay healthy (
  • Compare Your Care—Consumers take an online survey about care they have received. Surveys exist for adolescent, child, and adult general and preventive health; pediatric and adult asthma; diabetes; heart disease; and depression. Consumers are provided with information and advice for self-care. The accumulated responses enable comparisons among clinics, networks, and care systems (
  • Minnesota Health Information Web Site—A clearinghouse that connects consumers with a wide range of information about the cost and quality of health care in Minnesota. The site includes links to numerous health-related sites that compare provider performance and costs, help consumers manage their health conditions, give tips on purchasing care, and offer strategies for staying healthy. The site was created by the Governor's Health Cabinet and is administered by the Minnesota Department of Health (
  • The Adverse Health Events Reporting Law—Passed during the 2003 legislative session and modified again in 2004, this state law provides health care consumers with information on how successfully hospitals and outpatient surgical centers prevent adverse events. Twenty-seven types of incidents will be tracked and publicly reported, including wrong-site surgery, retention of a foreign object in a patient after surgery, and death or serious disability associated with medication error. Under the legislation, hospitals must notify the Minnesota Department of Health (DOH) when any of these 27 errors occur. The DOH will then publish annual reports of the events by facility along with an analysis of the events, corrections implemented by facilities, and recommendations for improvement.

4. Require use of information technology. The Alliance will encourage efficiencies and quality improvements by supporting development and/or requiring adoption of new technologies. It is pursuing the following:

  • providing patients with "Smart Card" electronic insurance cards for instant information about their eligibility and benefits;[2]
  • supporting the development and widespread use of electronic prescription technology, intended to reduce medication errors and administrative costs;
  • requiring that health plans use the standardized, electronic insurance claim forms employed by Medicare (forms CMC-92 and CMC-1500); and
  • developing automated systems that track patient satisfaction and clinical outcomes and speed up payments to providers.

Next Steps: Members of the Smart-Buy Alliance can choose which initiatives to pursue. For example, the Labor/Management Health Care Coalition of the Upper Midwest is leading the best in class certification initiative, while DHS is working with other health plans on SmartCard technology. The members will share the results of their initiatives and are building the requirements—whether for quality standards, SmartCards, automated systems, or other measures—into this year's negotiations with health plans and providers. For most purchasers, the new contracts will take effect in calendar year 2006.

Challenges and Lessons for State Purchasers: State administrators emphasize that an effective purchasing coalition requires broad-based consensus, some compromises, and a bottom-up approach. According to Osberg, "this is a voluntary and market-based initiative, with no mandate. The Alliance will only work if we all have the resolve to implement the provisions we've agreed on."

So far there have been many questions but not a great deal of "push back" from health plans and providers. Cal Ludeman, Minnesota's commissioner of employee relations and chair of the Governor's Health Cabinet, said "some suppliers have been anxious, wondering how the world will change, but they're being as collaborative as possible."

Ludeman stressed the need for constant communication among stakeholders, as well as education and outreach. "Part of the job is training our own members—going to small towns and talking to employees and employers about how to contract, what questions to ask, and how to shop for health care."

[1] 30% poor quality estimate based on literature review summarized in Reducing the Costs of Poor-Quality Health Care Through Responsible Purchasing Leadership, Midwest Business Group on Health (2003); 10% potential savings from information technology based on 7/21/04 press release by the U.S. Department of Health and Human Services. (State of Minnesota, Governor's Health Care Cabinet, Presentation: Minnesota's Smart Buy Health Care Purchaser Alliance, State Coverage Initiatives National Meeting, February 5, 2005).

[2] Alliance members are currently pursuing a request for proposal process to develop the Smart Card technology.

For More Information: Visit the State of Minnesota Governor's Health Cabinet site,
Contact: Brian Osberg, Assistant Commissioner, Minnesota Department of Human Services, (651)284-4388, [email protected].

Cal Ludeman, Minnesota Commissioner of Employee Relations, (651)296-3095, [email protected].

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