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Health co-ops’ fans like cost and care

WASHINGTON – A collection of little-known insurance cooperatives around the country is winning attention as being key to a possible health reform compromise in Washington, but while some of their practices have cut costs and serve as models for change, big questions remain about their ability to transform American health care.

Specialists, including advocates for cooperatives, said in interviews that their patient-controlled structure and nonprofit status are not what will ultimately prove most useful. Rather, it is the way they pay doctors and care for patients that holds the most potential for savings.

The possibility of cooperatives taking a central role in the health care overhaul being written by Congress gained strength over the weekend, when the Obama administration signaled its willingness to compromise and drop a public health plan from the equation. Instead, under a plan favored by some moderate Democrats and Republicans in the Senate, cooperatives would be formed to compete with big insurance companies and hold down costs.

There are only a few large health cooperatives in the country. They typically combine a health insurance plan with networks of doctors and hospitals. Unlike most private insurance plans or HMOs, they are mutual plans, owned and overseen by patients through a board of trustees. They maintain slim margins, using leftover funds to expand treatment or lower premiums.

Dr. Barbara Detering, a family physician at Seattle’s Group Health insurance cooperative, perhaps the best-known cooperative in the country with 580,000 patients, said her organization’s governing structure is only one part of its success. A major reason for its achievements is that Group Health’s doctors rely on a holistic, more conservative approach to medicine, she said.

They work closely with patients to explore alternatives before rushing into costly tests and surgery.

“It is not as much about an insurance co-op as it is about the integrated nature of the care and the strong emphasis on primary care,’’ said Detering.

Another key feature: Detering and other Group Health doctors are paid salaries instead of getting compensated for every service or procedure they provide. That eliminates the financial incentive – common throughout US health care – to provide lots of expensive care.

“My incentives are to try to meet the [patient’s] medical needs in the most efficient way possible, because I’m not going to make more or less money depending on how many tests I order, or how many procedures I do,’’ Detering said.

When Detering meets with patients, she will discuss options before ordering expensive tests or surgeries, but she stressed that such procedures are approved when necessary and done at a rate comparable to other organizations. For example, she said she might suggest that a person with a sprained knee wait before having an MRI, and she might discuss options other than surgery for certain conditions.

“I really never say no – it is more ‘Let’s talk about this,’ ’’ she said, adding, “If you are a gung ho orthopedic surgeon and want to make $2 million, this is not the place for you.’’

That integrated approach, combined with a heavy use of electronic records and follow-up communication, has led to big savings, according to Group Health’s executives.

Group Health has been a key factor in helping Washington state maintain some of nation’s lowest insurance rates. Massachusetts insurance rates are among the nation’s highest.

While Group Health is widely viewed as a success, it is not clear whether other co-ops could emulate it. There are only a handful of health co-ops across the country, with a number having gone out of business over the years, making them only a tiny player in a field dominated by huge insurance companies.

Even advocates said it would be difficult for new co-ops to be established and acquire the necessary 500,000 or so members to create financial leverage. As a result, proponents in Congress have suggested providing billions of dollars of government support to start up new co-ops, a process that could take years.

While Massachusetts does not have a similar co-op, almost all of its hospitals are nonprofit. It has a variety of integrated care systems, and one-fifth of the state’s physicians are salaried, according to Dr. Mario Motta, the president of the Massachusetts Medical Society.

A state commission has suggested that health insurance organizations move in the direction of integrated care, similar to that practiced by Group Health.

Motta said he agrees with Group Health’s approach to integrated care and said that the emphasis on the co-op structure is a distraction. In any case, he doubted whether there would be enough people to join co-ops in order to create groups large enough to put pressure on insurance companies.

“If you have a tightly controlled system where effective care is given, that is where cost savings will be,’’ Motta said. “It is not so much that the co-ops are panaceas. You’ve got to attack the underlying problems.’’

Jonathan Gruber, an MIT professor of economics who specializes in health issues and helped Massachusetts write its landmark health overhaul in 2006, said there is no evidence that it matters whether there is a public option or co-op plan. The real question is whether government uses its regulatory power to mandate lower rates and whether there are changes in how care is administered, he said.

“Both sides have latched onto this theoretical symbolic power as opposed to real relevance,’’ Gruber said of the debate about the public option versus the co-op plans. “It would be an enormous crime if health care didn’t happen because of a fight over a public option.’’

That fight, however, appears to be continuing.

Obama said on Saturday the public option was only a “sliver’’ of his health care proposal, feeding the perception that he is backing off his prior commitment that such a plan must be part of the package. Senator Kent Conrad, the North Dakota Democrat who is playing a key role in health care legislation, said on Sunday the public option is dead and that Obama instead should embrace a proposal for health co-ops.

Conrad has cited the Group Health co-op in Seattle as a model. He said his proposal could gain bipartisan support because, unlike the public option plan, co-ops would not be government-run.

But many liberal Democrats are skeptical of the co-op model, questioning whether they would have enough leverage to compete against private insurance companies.

The office of Senator Edward M. Kennedy, the Massachusetts Democrat who chairs one of the committees writing health legislation, said in a statement to the Globe that he still backs the public option plan, calling it “an important tool for reducing health costs and keeping insurance companies honest.’’ Yesterday, the White House said Obama still prefers the public option.

Michael Kranish can be reached at