Want to build a more competitive business model by lowering labor costs? “Why then are you leaving management of healthcare benefit costs to outside health benefits administrators?” John Torinus, Jr. might ask. Torinus, chairman of Wisconsin-based Serigraph Inc. and former business editor at the Milwaukee Journal Sentinel, views health insurers as “middlemen with a busted business model.” With “a foot in both the provider and payer camps,” health insurers fail to extract best value from provider care networks that insurers need to win business.
Torinus understands the value of proactive management, which may explain why the printing, in mold labeling and custom industrial graphics company he purchased in 1987 has grown more than three-fold to 1000 employees, with plants in the US, Mexico, India and China. By reinventing his company’s approach to healthcare, he’s avoided the dramatic increases in employer and employee benefit costs that most other companies offering health benefits have encountered.
Torinus’ 2010 book, The Company That Solved Health Care: How Serigraph Dramatically Reduced Skyrocketing Costs While Providing Better Care, and How Every Company Can Do the Same, overflows with specific changes Serigraph made (and their rationale) to achieve total employer and employee cost increases of under 3% per year compared to the US average (2003-9) of 7%. Serigraph redesigned its benefit plan to diminish root causes of escalating healthcare costs, including:
- Providers driving demand for services because they are often incentivized to do more and patients defer to their expertise
- Closed and uncompetitive markets for health insurance and clinical care
- Employees shielded from healthcare costs after reaching their out-of-pocket ceilings
- A lack of incentives for employees to be smart healthcare consumers
- Unhealthy life choices
- Lack of transparent information on provider prices and quality
Much as Dorothy did with the Wizard of Oz, Torinus pulls the curtain aside to expose his readers to the truth about insurance plan discount rates. Providers have managed to keep their payments high by jacking up retail prices then offering alluring discounts. Employers should instead focus on the overall value of care, with price level (not discounts) as one component alongside quality outcomes and service levels. Torinus reinforces the findings of healthcare economists when he states, “There is absolutely no relationship between quality and price.” Procedure case costs, for example, can range from $10,000 to $25,000 without clinical outcome differences for knee arthroscopy, according to Torinus. Furthermore, prices rarely include all the procedures associated with an episode of care in most benefit plans.
Serigraph, which is self-insured, implemented changes in three areas to drive higher value. First, employees have skin in the game and tools to reduce healthcare spending without compromising health. Skin in the game can take many forms. Rather than merely cost shift to employees, Serigraph designed its benefit policy to change employee behavior to get more value from healthcare spending. Like other proactive companies, Serigraph employees have high deductible plans as well as health savings accounts. In addition, price and quality information about providers is readily available and employees earn cash rewards if they select the highest value providers, thereby lowering family net out-of-pocket costs.
Second, by contracting with BridgeHealth Medical, Serigraph employees have access to centers of value – a world-class provider network for specific surgical procedures offering the highest value. These providers offer inclusive fixed prices, with Serigraph picking up all travel costs for patient and companion. Torinus has found that best-in-class providers pursue lean approaches that eliminate delays and reduce mistakes that drive up the price of care.
Finally, primary care clinicians play central roles, reducing avoidable higher cost specialty care. Serigraph employees have access to free company-located primary care clinics that preserve patient privacy. Benefit plans include free prevention-wellness programs and free medications for managing selected chronic illnesses.
Torinus wisely did not expect an insurance administrator or company employee to lead the change. He personally modeled getting healthy, benchmarked aggressively and led an action-oriented approach to ratcheting down healthcare costs. Workers and management alike know that getting a handle on these costs makes Serigraph more competitive, profit sharing more generous and jobs more secure. Local healthcare providers are waking up – many lowering their prices after losing Serigraph’s business.
Unlike Torinus, many healthcare providers, insurers, state governments and private payers are awaiting the outcome of the next Presidential election and the Supreme Court challenge to Obama’s healthcare reform as an excuse for inaction. You’re foolish, out-of-business newspaper publishers might tell these leaders.
When a revolution is underway, as it is in healthcare, you must surf the wave lest it come crashing down upon you.
When you shift attention from purchasing healthcare to getting more value from your spending, new ways of working with providers, insurers and employees become obvious, as they did to Torinus. Obama care or not, Serigraph’s healthcare approaches are the future. Providers, insurers, medical product companies and payers will better understand the waves of change coming their way by reading Torinus’s timely book.