Collaborating to Build Rural Health Networks: Technical Lessons from the Developing Rural Integrated Systems

by Luisa Buada, Steve Rosenberg, Jim Teevans, Sheldon Weisgrau

During the 1990s, health care reform emerged as a central public policy issue. Spurred by rapidly escalating costs, both public and private sectors sought ways to control expenditures while simultaneously extending coverage to the large number of uninsured Americans, particularly children. Despite the efforts of the Clinton Administration, the structural reforms proposed by the federal government never materialized, but many concepts championed by the reformers were to become the dominant strategies for change in the health care system. Specifically, managed care increasingly was seen as a mechanism to contain costs, and in the case of Medi-Cal and other government programs, a way to use the savings to expand health insurance coverage and benefits.

Both the number of managed care plans and the number of Americans enrolled in these plans have grown sharply over the past decade. This rapid growth, however, has taken place primarily in urban areas. Many rural providers are influenced only in oblique ways by managed care practices and continue to operate under fee-for-service and cost-based reimbursement systems. Yet throughout the 1990s there was a widespread belief that, as managed care plans came to saturate urban and suburban markets, they would seek to include more rural communities in their service areas. Government policy-as articulated especially in the Balanced Budget Act of 1997 (BBA) and the Balanced Budget Refinement Act of 1999 (BBRA)-also favored the development of managed care plans in rural areas and the enrollment of Medicare and Medi-Cal beneficiaries in these plans. As a result, rural providers and communities sought to engage these impending market changes in ways that would preserve local access to services, allow local control of health care decisions, and retain local health care dollars.

With these goals in mind, in 1997, the James Irvine Foundation launched the Developing Rural Integrated Systems (DRIS) Initiative, a four-year $6 million project designed to help rural California communities better understand managed care and spur the development of integrated community-based health systems. The DRIS Initiative has been implemented in four rural areas of California: Humboldt and Del Norte Counties, Imperial County, the Ridgecrest/Indian Wells Valley in Kern County, and the Lompoc Valley in Santa Barbara County.

The California Institute for Rural Health Management (CIRHM) shaped, implemented and facilitated the DRIS Initiative. The goal of the Initiative was to create, develop, and maintain viable, community-owned and operated health care businesses able to interface with managed care organizations.

DRIS began with the assumption that it was possible to build a community development model based on the following concepts:

If operated in unison, the interrelationship of diverse interests within a community could serve as a catalyst for change.
A process built upon the use of objective data on local health care and health systems issues would result in rational and viable business decisions.
It would be possible to build an entity to interface with managed care that is sustainable in a rural market and appropriate to its size.

DRIS is unique in that it provides a combination of facilitation and technical assistance that keeps the focus on each of these concepts concurrently. DRIS brings multiple voices to the table and creates a forum for employers, private providers, public health officials, social services providers, and civic leaders to join and build partnerships to strengthen local health care services and retain health care dollars in their communities. DRIS also helps to shape and fold managed care functions into viable business entities that focus on appropriate care management, such as health promotion and disease prevention activities, aiming to ensure that the term "managed care" means more than managing costs.

The principles upon which the DRIS Initiative is based, including local control of health care decisions and dollars and broad-based community involvement, have long been fundamental to rural health advocates. However the penetration of managed care, in which outside entities such as large urban-based managed care plans exert controlling influence upon provider and consumer behavior, represents a serious threat to these values. Within this context, the first three years of the DRIS Initiative have yielded a number of important lessons, lessons wholly applicable and particularly cogent to those policymakers and advocates concerned with the impact of public payers on rural areas, including the following:

the aggregate number of lives currently available in each rural California community studied, given the lack of publicly funded managed care penetration, was insufficient for the type of community-owned health care business that had been desired;
it was possible, however, to use grant funds as seed-capital to build community-owned business entities that interface with managed care; the scope and sustainability of such ventures has yet to be determined, and will depend in part on future public policy decisions;
a process based on the inclusion of diverse community members and interests constitutes an effective strategy for attracting outside funding to support community-based health promotion and disease prevention activities;
the process of inclusion, however, did not mitigate the overwhelming market power of providers and the limited number of health plans willing to do business in rural California.

These issues raise the following question: Within the managed care model, is there a way to increase access, enhance quality, and reduce costs, while at the same time maintaining the integrity of rural health services? The DRIS experience suggests the following possibilities in pursuing an answer to this question

Option 1:

Continue to support network development and assume that the formation of networks will somehow mitigate the overwhelming market power of providers and the resultant lack of price competition. The continued support of network development also assumes that networks can impact the increasing growth-rate of uninsured rural residents, as well as facilitate the definition of rural-appropriate quality care.

However, the DRIS Initiative experience with network development in a State with mature managed care markets does not bode well for this policy option.

Option 2:

Combine continued support for network development with research and developmental efforts that seek to balance the overwhelming market power of providers by leveraging the power of public payers and providing consumers a choice through a Federal Employee Health Benefits Plan (FEHBP)-type mechanism. The continued support for network development, tied to efforts of increasing consumer choice, also assumes that such network support is aimed at the more technical aspects of development, such as legal, actuarial, quality, and credentialing services, that promote the infrastructure for FEHBP-type contracting mechanisms.

Safeguarding and maintaining the integrity of local health systems under both of these options would remain a joint responsibility between Federal, State, and local jurisdictions, as well as health system owners.

In a larger context, the DRIS experience shows that rural communities face substantial obstacles in creating viable community-based organizations that can effectively deal with outside entities in a way that retains health care decision making and dollars. This situation suggests an opportunity to build even broader community coalitions of adequate size, perhaps across regional rural markets, to influence provider behavior and motivate quality improvement, among other changes. Until the large number of Medicare and Medi-Cal beneficiaries and the uninsured are able to exert consumer power through a choice of providers, however, rural communities may not have enough lives available to significantly influence practitioners. Government policy that targets rural areas and focuses on enhancing consumer power may be a necessary catalyst to produce change.

Adapted from the October 2000 monograph of the same title.

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