Doctors, employers band together to get leverage against HMOs.

Might local businesses ever reach the point where they bypass Health Maintenance Organizations entirely by negotiating directly with physicians?

Not in California, mostly because of the state's diverse business base. But that hasn't stopped the state's physicians and employers from banding together in an effort to gain more leverage in negotiations with HMOs.

Supporters of the movement say that the evolving employer-physician alliances will keep HMOs in check.

The alliances come at a time when HMOs have been under increased criticism for the growing influence they yield in providing health care. Yet, there is the recognition that they have established themselves in the health care infrastructure.

Faced with the realities of HMOs, the question becomes how to deal with them. The answer, it appears, is for employers to negotiate prices and services.

The oldest of those efforts began in 1989, when executives at two cut-throat competitors - Bank of America and Wells Fargo Bank - brought together 10 Bay Area corporations to swap price and member-satisfaction data on health care plans.

Now in its seventh year, the Pacific Business Group on Health has 33 member companies across the state, including Southern California Edison, Pacific Enterprises, Atlantic Richfield Co. and Hughes Aircraft.

Together, the companies represent about 340,000 employees.

Last year, 18 of the companies further banded together to negotiate standardized premium rates from more than a dozen California HMOs.

Besides lower premiums - about 14 percent below normal rates - the group won quality guarantees from the HMOs. Monitoring everything from pre-natal care to how quickly HMOs answer their telephones, the alliance fines - through discounted premium payments - HMOs that fail to meet agreed-upon levels of service.

Catherine Brown, director of Pacific Business Group's negotiating alliance, said the coalition approach eliminates research redundancy among members while acknowledging that, to an extent, HMOs are the only game in town.

"Our coalition has had tremendous success with group purchasing," Brown said. "Each year our alliance has grown, and this year we'll grow again."

A second, similar effort in California began in 1994 for companies with between three and 50 employees. Called the Health Insurance Plan of California, the group offers employees of member companies coverage from more than 20 health plans, at prices generally 8 to 15 percent below standard rates.

Created by the California Legislature, the HIPC is run by the private Employers Health Insurance, which collects a $2.50 annual fee from each employee covered. In addition to those fees, employers pay a premium to the particular health plan. HIPC now has roughly 6,500 member companies, representing 115,000 employees, according to HIPC Executive Director Patricia Steinbarth. That's up, she said, from 40,000 employees two years ago.

While the HIPC is a statewide group, the state Legislature about three months ago passed a bill that sanctions the creation of similar groups at the local level. Though Steinbarth said she knows of no such purchasing groups that have yet been formed in California, "It's a trend nationwide."

A third effort in California has come from physicians themselves. Working on the notion that too much power has shifted from the hands of doctors to HMOs, the California Medical Association founded its own managed care company last year, the preferred provider organization California Advantage Inc.

Owned and operated by CMA physicians, the company aims to provide a model for doctor groups wishing to offer employers an alternative to HMOs, company officials said.

The effort has found a receptive audience, according to California Advantage President John Gray. "Employers know all the (HMOs) are making money" off of them, Gray said, "and they're starting to ask, 'Why do we need the (HMO) in the fast place?'"

By working with third-party insurers, California Advantage offers essentially the same services as a small HMO, but with an emphasis on the physician-patient relationship, Gray said.

California Advantage began accepting members in July and so far has taken on more than 5,000 enrollees,.

The entrenchment of California HMOs leading to the recent backlash is in part due to the industry's history in the state which spawned it.

Southern California in particular has become a hub of HMOs, with such names as Health Systems International, PacifiCare and FHP International based here.

Thirteen million Californians receive their health care through HMOs, and if two recently proposed mergers go through, 70 percent of members will belong to one of three mega-plans.

The California efforts to keep HMOs in check are milder than steps taken in certain other states. Maryland's single-payer insurance system has virtually eliminated HMOs from the medical process.

But HMOs enjoy a special dominance in Southern California, where they help connect diverse employers. So far, says Jim Barber, president of the Health Care Association of Southern California, a trade group for private hospitals, HMOs have met the challenge.

"We can go to school in how some of these regions (outside the state) operate," Barber noted, "but change in California is going to be incremental."