MINNEAPOLIS, Minn. -- In corporate suites high above the frozen Mississippi River, medical history is being made.
Here some of the nation's leading innovators in health care battle for control of its most sophisticated market, a metropolitan area with nearly 2.5 million residents - many of whom pay less and get more for their health-care dollars than the rest of us.
It's not the weather, often measured with a minus sign this time of year. And it's not the Scandinavian influence, or the proximity to Garrison Keillor's fabled Lake Wobegon.
Call it ingenuity:
The health-maintenance organizations spawned here two decades ago are giving way to huge managed-care corporations - systems that cut costs and standardize treatments, usually by working with a selected network of doctors and hospitals who agree to fixed per-capita payments or reduced fees.
Doctors and hospitals are combining primary, acute and specialty services into soup-to-nuts care networks.
Employers are pooling resources and sharing risks to increase their clout in the ever-changing marketplace.
The state Legislature returns next week, to a reform proposal combining competition and price controls.
By most accounts, Minnesota, led by the Twin Cities area, is the best model for the health-care reform effort being undertaken by President Clinton and Congress.
There's just one problem: Few here are satisfied.
"No one else in the country is where we are," says George Halvorson, CEO of HealthPartners, a managed-care behemoth with nearly 600,000 clients. "If you compare to the national average, we are doing wonderfully. If you compare to what people want to pay, we are doing awfully."
Minnesota's mixed message:
Medical costs in Minneapolis-St. Paul run about 18% below the national average - cheapest among the nation's 15 largest metro areas. But premium increases continue to outpace inflation.
Big health systems are improving quality by matching treatments to outcomes and favoring prevention. But their close supervision threatens the traditional doctor-patient relationship: Doctors lose some independence; patients can lose their doctors.
Despite years of initiatives aimed at children's health care and Medicaid recipients, the state still has up to 380,000 uninsured residents - 10% of its non-elderly population, compared to 17.4% nationwide.
"Minnesota has been vastly oversold," says Kip Sullivan, a consumer activist with the Health Care Campaign of Minnesota, a coalition of 33 groups that favors a government-run system. "Clinton and the Minnesota Legislature have no business signing off on managed competition, given the state of the evidence."
Minnesota's claim to fame as a cauldron of health-care innovation dates back to the turn of the century, when the Mayo Clinic was established amid the cornfields in Rochester. The nation's first HMO - providing a wide range of health services to a group at a fixed, periodic prepayment - was created in Minnesota in the 1940s. Those groups expanded greatly in the 1970s by offering fixed payments, limited copayments and group practices.
But what began as innovation has turned into rampant consolidation: Now doctors are joining huge networks, hospitals are forming coalitions, and managed care companies are contracting with both.
"It's a revolution . . . that's taking place on its own," says John Kingrey, a senior vice president of the Minnesota Hospital Association.
Spurring the daily market changes in the Twin Cities metropolis is the latest layer of "managed competition" - employer purchasing pools whose price and quality demands reverberate through suburban corporate boardrooms.
The most powerful is the Business Health Care Action Group, a coalition of 21 companies with $ 500 million in annual health-care costs that have agreed to a common benefits package in exchange for quality improvements. Its contract with HealthPartners includes service at the Mayo Clinic and has spawned creation of a $ 7 million research institute.
Already, there have been results. Scales put in the homes of high-risk patients to monitor daily weight fluctuations have helped cut the admission rate for congestive heart failure. By identifying and assisting high-risk women, the premature-birth rate is being reduced.
"We're re-energizing the way primary care is delivered, condition by condition," says Steve Wetzell, the group's executive director.
Now other employer purchasing pools are springing up. Some 400 smaller firms have signed up with Prudential, the state employees' group insurance plan has cut its premium increase from 42% in 1989 to 6% last year, and several companies downriver in Red Wing have formed their own risk pool and are contracting with health-care providers.
"When we first started, there were sort of some smirks and chuckles in the industry," recalls Ron Schiemann, an insurance company owner who started the purchasing pool in Red Wing, population 15,134. "When we got up and running, companies came to us."
The discipline imposed on the system through competition has had dramatic effects: In the past decade, the Minneapolis-St. Paul area has shut down the equivalent of 10 400-bed hospitals, specialists' fees have fallen, and the focus has shifted from costly treatments to inexpensive primary care.
"If quality is less use of high-technology medicine and more pre-natal visits, then we're increasing quality," says state Health Commissioner Mary Jo O'Brien.
The next layer of managed care will be provided by the legislature, which convenes next week to face the task of implementing its landmark health-reform program by July. The mission: Carve the state into 10 regions, in which newly formed "integrated service networks" will act as super-HMO's, offering care for all residents for a predetermined fee. The goal: Cut the medical inflation rate 10% annually for five years.
But many in Minnesota fear that with only 10 HMOs left in the state - and the Big Three dominating - today's competition could lead to tomorrow's collusion and a return to the shadow-pricing practices of the past. Already, the operative word is "oligopoly."
"This consolidation, concentration of power, is really quite frightening," says Sen. Paul Wellstone, D-Minn., a proponent of a Canadian-style, government-run system. His fear: "If the bottom line becomes the only line."
That could leave out the people most in need. None of the private or government action so far has done anything for those without health insurance.
If Clinton's combination of market competition and government regulation is the cure, all eyes will be on Minnesota this year to see if it's a miracle or a misdiagnosis.
"This is all evolutionary," says Sen. Dave Durenberger, R-Minn., who wants to use market forces to fix the system. "But if you can do it here, you can do it anyplace."
The state of Minnesota health care
Only California and Massachusetts had higher rates of HMO participation than
Minnesota in 1991:
USA 16.1%
Minnesota 29.7%
Minneapolis-St. Paul 46.0%
Only Connecticut and Hawaii had lower percentage of uninsured non-elderly
population:
USA 17.0%
Minnesota 10.0%
Minneapolis-St. Paul 10.7%
Average annual increase in medical-care costs:
U.S. city average Minneapolis-St. Paul
1992 7.6% 4.6%
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Other states offering own reform plans
Like Minnesota, other states aren't waiting for national health-care reform. Some key examples:
Florida: Going the way of Minnesota, but without state regulations. Employers and managed-care plans are urged to provide affordable coverage to all on a voluntary basis; purchasing alliances are being set up to offer plans to employers. If that doesn't work, a mandatory program could be implemented.
Hawaii: The only state with a mandate that employers provide health insurance for those working more than 20
