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Stop The Healthcare Insanity

Nan Andrews Amish, MBA, CLU

For the past 25 years business leaders, CEOs, CFOs have become increasingly concerned with the impact of the price of healthcare on their often non-healthcare related businesses. While business executives have been able to improve their quality with six sigma programs, increase their personnel effectiveness with teaming and decrease costs with outsourcing, new processes and a variety of other tactics, the cost effective healthcare benefits remain elusive. CEO surveys by Fortune Magazine, Business Week, the Wall Street Journal and others have all found health benefit costs to be a concern keeping CEOs awake at night.

Meanwhile top talent, which can recreate win after win, has been said to be the ONLY sustainable competitive advantage in a global economy. Anything that can be taught can be exported to the workforce with the lowest cost of labor.

Talent as primary competitive advantage ... talk about a time when it pays to walk your talk! Top talent is savvy about benefits. They have seen benefits erode in recent years and new grads have seen their parents cope with un-reimbursed medical expenses. They expect comprehensive coverage. They do not expect to have to shoulder this risk.

As CEOs, CFOs and HR executives we have tried to balance this equation of top benefits for top talent without breaking the bank. We have met with pretty mediocre success. Most of us have created special plans for execs and the rest have just had to cope.

We provided incentives for managed care, but the relief was temporary. Now managed plans including PPOs and HMOs are increasing in cost as fast as other alternatives. We have shifted costs to our employees which top talent does not tolerate well. We've offered Health Savings Accounts. We have disease management programs. But our costs continue to rise. With almost no control it is our worst nightmare wild card.

Meanwhile, our employees' contributions to their healthcare benefits have outpaced their raises, with the exception of those on the fast track. And while they have appreciated us sharing our concerns about staying competitive prior to shifting the cost increases to them, they are not being wallflowers about sharing their discontent. We've lost top talent to firms with better benefits. This trend will continue, as top talent has more choices.

Our executives have not tolerated this cost shifting and the cost of extra coverage for top executives is a largely unfunded liability. Recruiting top talent is tricky, as more and more candidates are demanding solid benefits to leave existing employers. It turns out even healthy execs and up and comers have kids with asthma or spouses with chronic disease.

If there was a way to get your arms around this, and have a 20-30% permanent decrease in your benefit costs, while improving both talent attraction and retention, would that be of interest?

For the courageous, the contrarians, those who have complete confidence in their own leadership abilities, there is indeed an option, with big rewards. Check it out…

* * *

If the definition of insanity is: Doing the same thing over and over and expecting a new or different result...

then, we, as a society, have been guilty of healthcare insanity, and insanity treatment is not covered by our insurance! We cannot afford the cost of continued insanity. The Rx for this insanity is to do something different.

Top 6 Signs of Healthcare -- and Health Insurance Benefit -- Insanity

Check these signs out to see how many signs of insanity your benefits are paying for!

  1. Healthcare needed to cut costs so they hired hundreds of thousands of case managers and technology professionals to "manage" the care and make records efficient. The insurance industry institutionalized this insanity with pricing promoting the managed care plans.

    Healthcare is the ONLY industry which has added middle management jobs in the past two decades. The administrative cost burden contributed heavily to double-digit increases in costs and premiums, in spite of increased co-pays and deductibles and decreased services. Fewer benefits for more dollars makes CEOs and CFOs anxious.

    If your goal was cost reduction and you added hundreds of new headcount to your firm, while your stock was taking a beating and the analysts were watching your every move, would you still have your job? Most of us would be looking for a job.

  2. Insurance plans tend to cover illnesses only after they become severe. We cover heart attacks, but not cardiovascular exercise or a dietician until AFTER an attack. We pay for back surgery, while often limiting chiropractic or physical therapy that could make surgery unnecessary or more successful.

    Meanwhile we have downsized and rightsized our organizations sufficiently, that most of our employees are working longer hours and surveys from different organizations suggest just under 70% say that work stress is significant. Stress is a documented risk factor for a number of illnesses, not to mention mistakes which can cause accidents. And we wonder why our costs keep going up?

    This is short-term thinking at its most costly. It has long-term cost side effects.

    Perhaps this is one you can understand. The stock market is short term, performance appraisals too. But there are consequences to be sure.

  3. Employee benefit plans discourage innovation and penalize superior performance. We encourage mediocrity with the structure of plan reimbursements. This is the opposite of what is done in every other industry!

    We act as if cost is the only relevant metric and enroll the least costly physicians in our plans (those with less expertise, higher malpractice claims or simply more recent grads). Top doctors reject our reimbursement levels. This is akin to only offering Wal-Mart pricing. No Macys. No Nordstroms. Or everyone being pushed to buy a stripped down Chevy truck. No SUVs. No BMWs.

    Meanwhile precious time is lost with complicated cases. Patients get misdiagnosed and sometimes mistreated before being referred to the top talent for the job. Employees lose time from work, their families have emotional stress, and the costs of extra treatment and lawsuits are passed to company plans in higher premiums.

    Choosing plans with these philosophies may temporarily cut benefit costs, but are not aligned with company objectives to recruit the best and the brightest. It is also not aligned with valuing talent which may be your only sustainable competitive advantage.

  4. "The MD/Rx Halo Effect" pressures plans to cover drug and surgical therapies that are known to only manage symptoms rather than cure, guaranteeing a lifetime of claims. Employees expect us to have coverage for the popular treatments. We pay for poor effectiveness and side effects that would not be tolerated by customers in any other industry.

    The industry disparages treatments that address causes, if they are "not invented here" (not the MD/Rx norm) -- including alternative and holistic approaches. Employees and their families consume lots of "healthcare", without regaining their health, creating poor employer plan satisfaction. They usually pay out of pocket for alternative and holistic treatments.

    While many industries have struggled with this, in other industries, the companies who did not see the future and insisted on in-house solutions usually ended up at a competitive disadvantage and died a slow, painful death. Meanwhile innovative firms embraced new paradigms, partnered with companies who had better approaches, and prospered.

  5. Healthcare and insurance pricing is "insanely" complex. Diagnostic and treatment codes require expertise to interpret. Tiers of pricing more complex than airline seating have as much as a 4 times difference between "list" price and "lowest" prices. Not that we all do not like differential pricing, but in an Internet age, pricing is more transparent.

    In healthcare, patients rarely know what insured services cost, until they have already been consumed. Yet we promote the potential for high deductible, consumer-driven health plans helping consumers make cost effective decisions.

    That is like asking an alien from another planet to drop in from outer space and choose between macaroni and cheese or caviar, and asking them to make a price conscious decision, without telling them the price of the different options. The alien might prefer the caviar, or they might be vegetarian and choose the mac and cheese, but they need information to attempt to attain your goals.

  6. Healthcare providers pretend that malpractice claims are a systemic healthcare problem when in fact the majority of claims tend to impact a small, predictable percentage of doctors and facilities (estimated 8% of doctors have 80% of the claims). In business we would call these doctors a performance problem and we would document their lack of performance, then show them the door.

    As CEOs and CFOs, we can empathize with insurance cost issues, but at the same time expect insurers to underwrite and manage malpractice risk the way they do for other risk based insurance and stop acting like a fraternity. Higher individual risks need to pay more. Docs with high claims need to mend their ways, or pay the price. As business executives we can empathize, but we do not want to pay for that empathy with the competitive advantage of our own company,

So to review, the 6 top signs of healthcare / health insurance and benefit insanity are:

  • Our benefits premiums paid for thousands of new middle managers when our goal was to cut benefit costs and at the same time as we were cutting headcount to stay competitive.

  • Our plans don't pay for care when conditions are easily treatable, and end up saddled with higher costs of care as conditions worsen.

  • Our benefit plans expect top doctors to accept average pay even as executive compensation is rising. And we encourage our employees to use mediocre doctors even if we encourage them to live in the best neighborhoods, drive the hottest cars and put their kids in the best schools.

  • Our plans pay for therapies we know do not cure and guarantee that our employees become lifelong chronic benefits recipients. Most costly, our plans discredit anything "not invented here" including solid, lower cost, holistic approaches for chronic disease.

  • Plans don't tell people what healthcare treatments cost, then expect them to make cost effective decisions.

  • We accept plans' claims that our costs are rising because of malpractice claims, yet we ask for no accountability with regards to the high-risk doctors' performance.

Current proposals to shift costs and provide electronic records do not slow total healthcare cost increases or address these top causes of healthcare insanity.

In short, we condone poor healthcare BUSINESS practices, practices which if we used them in our businesses would get us fired. We do not hold these healthcare benefits vendors to the same level of accountability we hold our own employees or other vendors. And their poor business decision-making is decreasing OUR COMPETITIVE ADVANTAGE.

Professional empathy is great. But not at the cost of our own profits.

New Rx for HC/Insurance Benefit Sanity

For Insurance Executives:

Healthcare insanity provides huge opportunity for courageous, maverick, contrarian insurance executives. Your executive colleagues are crying for innovation and new ideas to cut healthcare benefit costs, while still having competitive benefit packages for attracting and retaining top talent.

New benefit paradigms are required. Contrarian, new-product development which prioritizes incentives for all stakeholders to do the right thing wins. New paradigms might include:

  • Paying higher benefits or incentives for Rx/treatments that cure disease causes, rather than just treat symptoms.
  • Paying for less invasive, less expensive, natural options first (as opposed to last) where they exist.
  • Encouraging holistic treatment such as homeopathy when ever there is a potential cost advantage over conventional treatment that has been perhaps less than successful, for example in many chronic conditions.
  • Promote innovation and pay more for superior practitioners.
  • Zero tolerance for high-error rates and high side effects.

Companies who create powerful plan options like these experience growth and long-term profitability as well as creating satisfied loyal customer experiences. Your competitive advantage becomes your clients' talent recruitment advantage. A win-win paradigm.

CEOs, CFOs HR VPs and Benefits Experts

Instead of agonizing over increased costs, look at the big picture. Tactics such as disease management which guarantee drug compliance and lifetime of claims are not transformational. Be strategic and align your benefits with what your top talent values! Demand accountability from your plan vendors. Do not accept their paradigms, simply because they are the healthcare norm.

This is not for the faint of heart. This is for the courageous, the contrarian risk takers, the bold. Bucking healthcare norms and trends is not popular and many will question YOUR sanity. But then, innovators should be used to that, and innovation is what is required here. Transformational change. We've done incremental change. It simply is not enough.

Most benefit plans pay for all 6 elements of healthcare insanity. This is a blatant waste of your organization's resources. Supporting the status quo may be politically the norm, but when it comes at expense of your own profits, and competitive advantage it is a symptom of your insanity, too. What CEO or board of directors would not be at least curious about the potential to really get this issue under control?

These six signs of healthcare and benefit insanity represent as much as 20-30% of your total healthcare benefit cost! Perhaps as much as 50% of your total profits. If you fix even two or three of these symptoms, your healthcare costs could decrease 15%, and your overall profits could be up permanently.

Savvy CEOs, CFOs and benefit experts take calculated risks and challenge the current benefit paradigm. They are seeking cost-effective, improved employee health and an advantage in talent recruitment and retention. Savvy CFOs and HR VPs are collaborating and demanding accountability from insurers or creating their own innovative plans which provide improved incentives for recapturing the 20-30% waste.

What is the Rx for lower cost healthcare benefits?

Promote sanity. Expect accountability, innovation, best-in-class business practices from your healthcare benefit vendors. Experiment with new benefit paradigms.

Take a risk, be a hero. Do something different!

(2331 words)        Copyright © 2005-2008 Nan Andrews Amish. All rights reserved.

Permission to reprint this article is granted, provided original author is given credit, and contact information and mini bio are provided as follows:

Author: Nan Andrews Amish, MBA, CLU
Big Picture Healthcare

 

Nan Andrews Amish is a management consultant, facilitator and speaker with expertise in healthcare economics and market research. Nan Andrews Amish and Big Picture Healthcare offer facilitation, member surveys, management assessments, tools, workshops and keynote addresses to help associations, leaders and teams increase their effectiveness by seeing the Big Picture Perspective.

The Big Woman with the Big Picture Perspective.
phone: 650 560-9800 toll-free 800 858-1750
www.bigpicturehealthcare.com
 

 


Contact us at Nan@BigPictureHealthcare.com or 800 858-1750.