The following article appeared in The Plain Dealer on Sunday, March 13, 2011.

More bang for health care buck

By Hugh Quill

There is strength in numbers. This is an inherent truth in battle, politics and, most importantly, in the marketplace. Volume brings leverage to bear on suppliers and vendors at every level so that margins are tightened through competition.

The next Ohio budget will undoubtedly give motivation to every public entity to seek solutions short of draconian cuts in curriculum and public services, and increases in income taxes, property taxes and tuition. Voters and taxpayers have not lost their patriotic spirit. They have lost their capacity to fund redundantly. It is vitally important that government at every level demonstrate and implement best practices that honor every tax dollar in their current custody.

How can taxpayers get the best bang for their buck? By buying together. Why do vendors sell products a la carte to each public entity? Because it’s profitable, and they can. And since we all instinctively default to and prefer local control, there are plenty of emotional and practical barriers to driving the proper margins for public purchases. But we all pay a huge premium for not acting together, driving down the price and crafting airtight requirements that will hold vendors accountable.

In my former post at the Ohio Department of Administrative Services, we reorganized purchasing with an emphasis on enterprise value and pricing. Many of the same obstacles existed and thrived in the state agency environment that local governments, school districts and colleges face. We found that it was critical to align contract terms and conditions, contract cycles and commodity standards before we could act as one big public family.

This purchasing power also applies to a major line item in any state or local government’s budget: health care benefits. In the most prosperous country in the world, with the very best health care quality, and inarguably the most inefficiently delivered services, let’s give public managers the tools to get the very best care for every public worker at a price that reflects our stature in the marketplace.

Yet, in the dust-up over the rights of public employees to collectively bargain, state unions have not received the credit due for their partnership in the redesign and restructuring of the state health plan. In the last contract cycle, they supported additional out-of-pocket support, backed a dependent eligibility audit and promoted better disease management and wellness initiatives — all saving the state tens of millions of dollars.

The labor-management dialogue and relationship was constructive and focused on holding the line on a budget item that continues to creep north of $500 million. Everyone around the table recognized that shared sacrifice was required to weather a withering recession and control highly volatile health care costs.

What is a very sophisticated process at the state of Ohio, however, is not replicated in every jurisdiction.

Notwithstanding the many examples of collective-bargaining success on health plan redesigns in individual communities, the compromise proposal on Ohio Senate Bill 5 that removes health care from the bargaining universe will give public entities important leverage in managing this volatile line item.

Think of the marketplace potential of a service contract that covers city, county, state, township, K-12, college and university employees. Add in the five public retirement systems, and the result would be maximum leverage to acquire the best plan for a rock-bottom price.

It’s time to carve health benefits out of bargaining, give all public managers and employees the same benefits with the same percentage of premium, and drive the hardest bargain with health care vendors that have, for too many years, been laughing all the way to the bank.

Simply put, the myriad bargaining agreements statewide, designed uniquely, pose a substantial barrier to effective aggregation. With the Ides of March looming and the unveiling of the state’s executive budget, one thing is a sure bet: When the state of Ohio catches cold, local governments and schools of every kind are sure to catch pneumonia. Cuts and dramatic shifts in service responsibility always roll downhill, and public entities need to respond like the 800-pound gorilla in the marketplace that, together, they can resolve to be.

Quill is the former director of the Ohio Department of Administrative Services and former Montgomery County treasurer. He currently serves as president and chief executive officer of Public Performance Partners, a nonprofit group that assists local governments, local school districts and colleges with collaborative efficiencies.