How boards can engage in taming health care costs.

Author:Torinus, John, Jr.
Position:DUTIES OF DIRECTORS - Reprint

Directors are demanding improvements in controlling this expense. Here is what a model of board intervention can look like.

Two imperatives are driving corporate executives and their boards of directors toward what could be called "Value Health Care."

The first is the inexorable escalation of health costs, often the second or third biggest spend for a corporation

The second is the new realities behind the CEO cliche that invariably says, "Our people are our most important asset." In an era of tightening labor supply, amidst projections of even thinner labor pools over the next decade, attraction and retention of employees have emerged as the paramount challenges for corporate stewards.

In short, health cost inflation degrades corporate profits, and labor shortages can constrain growth.

Fortunately, proactive executives in private companies have led the way to an innovative and disruptive new model for the delivery of health care for their people. They have made aggressive management of health costs and workforce health a strategic priority, so much so that it merits the attention of board members.

At my company, Serigraph Inc., progress on the strategic game plan for Value Health Care is regularly on the board agenda. The directors know that our total health costs, including drugs and dental, are running about $13,000 per employee per year, at least 30% below national averages for companies. That's on par with other cutting-edge employers.

Serigraph's gross health costs (employer and employee combined) are running at $7 million per year. They would be $10 million without the new model.

Our directors know that our average cholesterol and blood pressure levels are dropping, but smoking and obesity metrics have been stuck at dangerous and expensive levels.

The C-suite and board are demanding improvements in costs and workforce biometrics, as they should if they want to walk the talk on their concern for the company's best asset.

So, what does the Value Health Care model look like? For openers, it is a major contrast to the busted delivery model that has driven the national health care bill to some $3 trillion, or 18% of the GDP. No other country comes close to that nosebleed level.

Prior to the current revolt in the private sector, the U.S. medical industry had these unfortunate characteristics:

* Reactive to symptoms versus proactive--sick care versus health care.

* Short-term focus, impersonal and transactional --office visits with primary care doctors are six to eight minutes.

* Expensive because most care is delivered by specialists, while other countries deliver most care through general practitioners.

* Payment systems based on thousands of coded procedures, resulting in medical bills that are heavy on procedures and...

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