Colorado’s new employer purchasing partnership will “fundamentally restructure” state’s health industry

Aiming to improve the value of health care for Colorado employees, the Colorado Purchasing Alliance (CPA), an affiliate of the Colorado Business Group on Health, is partnering with the national Purchaser Business Group for Health (PBGH) to negotiate health care contracts with select hospitals and providers in the state on behalf of employers.

Eleven state employers have so far signed letters of intent to participate in the initiative, including the State of Colorado and the City of Denver.



CPA President Robert Smith says the effort is the result of inconsistencies in state health care costs and the value of services provided. He says the overutilization of unnecessary or low-value services is a principal driver of health care costs in the state. This partnership’s central goal, he says, is to have Colorado providers compete for contracts based on the value of their care.

“We want the employers to be proactive purchasers, and not just passive payers.”

The initiative combines national and local efforts to increase the value and affordability of employee health care benefits.

“It’s a fundamental change in the relationship because in the marketplace, where there’s no reliable value proposition, where price is not related to cost of care, the price is not related to the quality or the outcomes … So we’re trying to create a functional marketplace.”

It has the support of Gov. Jared Polis, who issued the following statement last week:

“The arrangement between The Colorado Purchasing Alliance and the Purchaser Business Group on Health is an excellent opportunity for Colorado’s health care market to not only demonstrate its ability to perform at a national level, but, having done so, to gain business from national employers. My administration is proud to support this effort and it is another clear example of how we can work together to save people money on health care.”

Smith explained the evaluation process for rewarding contracts has three main steps. First, the two organizations will look at quantitative data — collected by Quantros — on risk-adjusted mortality rates, complication rates, and readmission rates of health facilities in the state. They will then use this data to give each facility a “reliability” score and rank them by percentile. Only the facilities in the top ten percent will be invited to participate.

In the second step, the organizations will examine qualitative measures like patient-reported outcomes, Leapfrog safety scores, and a facility’s willingness to negotiate alternative payment models.

In the final part of the evaluation process, a panel of experts from PBGH will conduct interviews with potential contract recipients. Panelists will question the candidate to see if they have a  “robust quality improvement process” in place and if they use appropriate care criteria for services, which aims to verify that the facility doesn’t perform unnecessary procedures on patients.

PBGH and CPA’s involvement will end once contracts are awarded — the organizations won’t administrate the plans. Smith also explained that while the two groups are collaborating to negotiate the contracts, they will execute them separately for their own members.

“The PBGH on behalf of its members and the CPA on behalf of its members will separately contract with that facility on the same terms.”