Message from the President

October 2, 2007

Employers’ Perspective on Healthcare

While governors and presidential aspirants launch healthcare initiatives in a seemingly never-ending campaign for voter and media attention, the real champions of healthcare reform have been and continue to be private sector employers.

America’s business leaders recognized and began confronting rising healthcare costs long before the current political show horses entered the arena. The major differences are the approach to problem solving and the absence of a need for self-promotion.

Business leaders recognize costs as management issues and seek solutions. They are private sector innovators who innovate, pursue efficiencies, measure results, embrace change, invest in technology, are not afraid to apply market forces and understand long-term undertakings require continual improvement.

Where improving our nation’s health care issues are concerned, there is no quick fix, no silver bullet, no free lunch and no Santa Claus. The solutions require dedication, hard work, long-term investments and a willingness to take risks and make tough decisions. While in pursuit of cost reductions some successful action steps pioneered in the private sector have emerged that should be pursued and implemented to help everyone.

One component can best be characterized as management tools. Employers are implementing top-down tasks at varying paces across the country. Employers’ rising expectations for cost effective healthcare delivery and better patient outcomes are being applied to influence the health care provider community to change the way they do business.

In August 2006, Health and Human Services Secretary Michael Leavitt helped focus attention on value-driven health initiatives by committing the federal government’s employees health programs to embrace the “Four Cornerstones of Value-Driven Healthcare. Secretary Leavitt champions pursuit of these goals by enlisting the support of private sector employers. The obvious objective is to establish a critical mass of influence coming from healthcare services purchasers to speed fundamental change on the part of the provider community.

Employers expect information about performance and quality of care from healthcare providers participating in company plans. Providing employees with information will help them make wiser choices.
Employers expect price and cost information from providers so employees can compare price and quality before making healthcare decisions.
Employers expect providers in company plans to adopt health information technology products and use common standards. Performance and cost reporting cannot occur without investment in technology and interoperability of data exchange.
Employers must provide incentives for employees to use the information and for providers to implement these measures to help achieve high-value healthcare.

The second component is applying market force economics to healthcare. Employers and unions learned long ago that where wages and benefits were concerned the extraordinary rise in the cost of healthcare was limiting choices for discretionary spending of profits. Something had to give and it turned out to be increasing employee co-payments.

Although an employee may not appreciate becoming a direct contributor to the financial equation, removal of the “free lunch” mentality long associated with employer-provided health care is significant. Many employee co-pays remain minimal and so don’t exert the degree of influence market economists might recommend for stimulating behavior change. Still, employee knowledge that healthcare is not free and that their wise use of quality and pricing information can influence the market may prove key to the future of American medicine.

The single most important factor that can influence health care costs is behavior change. A primary motivator for behavior change is economics. Making employees’ healthcare costs more transparent to them and increasing their financial obligation is an important first step toward other more significant improvement undertakings. It is important that the individual recognize that he or she is neither an inconsequential nor a passive actor in affecting these industries that now account for over 16% of the nation’s gross domestic product. On the contrary, it is incumbent upon the individual to undertake an active role in addressing and managing their situation.

While still very new and not commonly understood, health savings accounts have great potential for younger or health-conscious employees by offering financial rewards for sustained good health practices. Like Individual Retirement Accounts, the significance of HSAs will become more apparent over time.

The third component is personal responsibility. Lifestyle choices have an overwhelming influence on healthcare costs. The most significant change that must occur is consumer focus on wellness, disease prevention and disease management.

Progressive employers are investing in employees’ health. Establishing a culture of wellness and prevention returns dividends not only in reducing healthcare expenses, but also as investment in important human resource management measures such as morale, job satisfaction, absenteeism, productivity, and safety, all known to improve resulting from these initiatives.

Management goals are shifting from reducing costs to reducing the need for healthcare services. Thoughtful employers redefine what healthcare means to the company and its employees. Thought leaders no longer consider health benefits a mere recruitment or retention feature; they embrace consumer focused health plans as an overall business strategy. Healthy people cost less and are more productive, making them competitive assets.

While this approach may be a brand differentiator, it is not an inexpensive undertaking and requires long-term commitment, just as continuous improvement efforts that guide many production facilities.

First, there must be a commitment to provide information and education tools for individuals to take more responsibility for their health and life styles. Employees need to start with the diagnostic tests that provide base line health risk assessments. This data doesn’t disappear into HR files; it is the basis for employees’ improved health literacy and progress tracking with personal electronic medical records. Other employer investments include on-site exercise facilities, subsidized health club memberships, wellness coaches, and online tutorials and health information.

Diagnostic tests can detect life threatening conditions that if left undetected and untreated could lead to expensive treatments that easily exceed the tests’ costs. Preventive medicine works and is cost effective.

While it is illegal to take punitive action against employees who choose not to participate, there are opportunities to provide financial incentives, rewards, and other motivations to help employees see tangible benefits from engaging in self-directed health and wellness programs. Employees gain personally; companies can document cost-reducing behavior changes. Savings derived from wiser employee decisions such as fewer emergency room visits, shorter hospital stays, fewer workers’ compensation claims, increased choice of generic and mail-order drugs and successful preventive medical interventions may return to employees as higher wages, reduced premiums or lower co-pays. When successful, these change management initiatives clearly benefit employers and employees.

Employers need to step up and pay more attention to practices like those of Rochester, NY, where 70 employers with 25,000 employees have collaborated to improve quality of care, reduce costs, and improve health. We all need to wake up: most Americans are too sedentary, not making the best diet and lifestyle choices, and not being smart, active healthcare consumers.

The fourth component is the role of government. Because this is such a complex, multi-layered component including issues such as publicly funded programs, regulations, and proposed solutions from current office-holders and candidates, I will address it in a “part 2” on this topic in an upcoming President’s Message.

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