Author: Jeremy Smerd

Unlike Indian outsourcing companies, domestic outsourcing firms, which use customer service agents who work from home, have found their business has picked up in recent months. “We’re finding the economy to be good to us,” says Rob Duncan, COO of Denver-based Alpine Access.

Angie Selden, chief executive of Miramar, Florida-based Arise, whose home-based agents work as independent contractors, says half of new potential clients are re-evaluating their commitment to India. Of 47 current clients, six have pulled back from outsourcing their call center work to India, most in the past year, Selden says.

Selden says rising unemployment in the U.S. has been a boon to her workforce. In 2007, 62,000 people made inquiries into working at home as call agents; in 2008, that number was 110,000.

“We’ve seen an unbelievable increase in the quality of talent—a significant uptick in sales acumen, professionalism and business knowledge,” Selden says.

One reason these companies are increasingly competitive, executives say, is that they have a workforce they can draw upon from anywhere in the country. The workers are motivated, well-educated and mostly female. Duncan says the economic downturn has meant an abundance of well-qualified workers—85 percent of whom have some college experience—to meet the needs of businesses more concerned than ever with customer satisfaction and increasingly sensitive to keeping jobs in the U.S.

“No executive wants to be seen as adding fuel to the fire of unemployment,” says Peter Allen, a partner with global sourcing consultants TPI. “If there is a domestic option, executives will take it.”

Maria Felton, a 42-year-old mother of three, works as a customer service agent from her home in Centerville, Maryland. To become an agent for Arise, she had to form her own business, pay a few hundred dollars for a background check and training, and spring for home-office supplies like a dedicated phone line, broadband Internet and a computer. She remembers some of her first calls.

“People would say, ‘Oh, thank God, you are not in another country,’ ” she says. “They were just happy that I didn’t have an accent and they knew they were calling the States.”

The job’s flexibility is one reason why home-based customer service agents have lower attrition rates, executives say. Felton has a master’s degree and is planning to keep her job while going to law school. She chooses to work early in the morning or late at night, when her children—and her barking dog—are asleep.

At-home call agents are paid less than their counterparts at call centers, but what they lose in pay they make up in savings on transportation, food and time, the agents say. The job appeals particularly to stay-at-home moms and older workers. Eighty-seven percent of Alpine Access’ agents are women whose average age is 41, the company says.

One Alpine Access agent is Lillian Crosby, 30, a mother of two children. Crosby used to work at a call center, but now she works from home in El Paso, Texas. The shifts in the economy have lifted Alpine’s business, but Crosby feels the pressure it’s putting on some of the people she talks to, especially if she is trying to collect on debts for a credit card company client.

In such cases, she finds that her work requires more than following the usual call center script.

“The last few months, because of the economy, I’m hearing a lot more personal stories,” she says. “My job is to listen to the customer and find out what’s happening, so we know what to do to help them out.”

Workforce Management, May 18, 2009, p. 33 — Subscribe Now!

For most patients with chronic illnesses, the decision to get their medicine delivered to them through the mail is a no-brainer.

Mail-order drugs generally cost less than orders filled at retail pharmacies, and, in addition to convenience, patients generally receive 90 days’ worth of medicine at a time rather than the usual 30 days’ supply.

Prescriptions, when doctors provide refills, are automatically filled and delivered so patients are less likely to run out of medicine.

Yet many employees at companies that offer mail-order pharmacy benefits never sign up for the service, even though they regularly need to take medicine, says Bob Nease, chief scientist for pharmacy benefits manager Express Scripts. As a result, he says, they are less likely to adhere to their drug regimen.

“We think part of that reason has to do with procrastination,” Nease says. “Patients have problems with adherence not because they forget to take pills, but when supply runs low they don’t get around to getting a refill.”

Now, Express Scripts is saving patients from their own bad decisions—including the decision to do nothing.

In March, the St. Louis company announced a program to automatically enroll patients in its mail-order pharmacy service. More than two dozen employers, including Mooresville, North Carolina-based home improvement retailer Lowe’s, are participating in the program, called Select Home Delivery.

Employees at these firms must now choose to opt out of the mail-order pharmacy if they want to get their drugs at a retail pharmacy instead. Since the program started, the number of Lowe’s employees enrolled in mail order has doubled, the company said.

Lowe’s embrace of this opt-out strategy is one of the latest examples of how employers are taking into account the way people actually behave—rather than how employers wished people acted—when designing benefit programs. These lessons from the field of behavioral economics, which looks at the psychological side of economic decisions, are helping to shape health benefits.

Unlike classical economists, behavioral economists believe that people often act in irrational but predictable ways. This predictability, if properly understood, can help executives better design health benefits and wellness programs.

“You would think people would want to take care of their health because it’s so important,” says Dan Ariely, a behavioral economist at Duke University and author of Predictably Irrational. “But businesses know people need an additional push.”

The Express Scripts program is one of the first to apply principles of behavioral economics to health benefit design and is based on the research into 401(k) plans by economist David Laibson, the Robert I. Goldman Professor of Economics at Harvard University.

In his research, Laibson concluded what seems obvious: People procrastinate. Put another way, people have trouble making a short-term sacrifice when the payoff is not immediate. Cases in point: investing in retirement or one’s long-term health.

Researchers call this tendency “hyperbolic discounting.” To get around people’s inclination to put off today what they can do tomorrow, Laibson wanted to make it easier for people to make the right decision. He created a so-called default option: Employees were automatically enrolled in their company’s 401(k) plan. As a result, plan participation increased to 90 percent from 40 percent, he says.

Such defaults turn a person’s laziness, ostensibly a bad quality, into something that helps them. By doing nothing, they invest in their retirement.

“We use defaults when we feel people might make a bad decision,” Laibson says, adding: “I think we are drastically under-using defaults in the health care domain.”

To apply these principles to health care, Express Scripts created the Center for Cost Effective Consumerism.

Many employers already apply ideas from behavioral economics, especially the use of defaults, to health benefits. For example, most employers automatically enroll employees in a health plan. Some companies schedule annual flu shots at their work sites.

Researchers say new applications could include automatically scheduling an employee’s annual physical or automatically scheduling prostate exams for men over 50.

Many companies also use financial incentives to get people to make smarter decisions about their health, though research in this area is less conclusive than with opt-out options.

Companies, on the whole, prefer financial incentives to financial penalties. But researchers say there is no evidence suggesting financial incentives work better than financial penalties. Some people respond more to losing money than gaining it—what people call loss aversion. Sometimes a company must pay a lot of money—$300 for a health risk assessment—to get people to make small changes that may have only a short-term benefit.

The prospect of losing something, like one’s good health, may in fact work more effectively to motivate diabetics to take their medicine, Nease says.

“We may want to talk about therapy adherence not in terms of improving people’s health,” Nease says, “but in terms of preventing disease.”

Ariely, who, like Laibson, is also on the advisory board of the Center for Cost Effective Consumerism, says people are particularly moved by the idea of “free,” or what he calls “the power of zero.”

“Zero is an emotional hot button,” he writes in his best-selling book, “a source of irrational excitement.”

When something is free, people forget the downside, which might explain why it’s hard to pass up free refills of soda. Companies have used this tendency in designing health benefits. Some employers, such as Giant Eagle supermarkets in Pittsburgh, provide diabetic employees with free maintenance drugs.

Whether incentives always work is a subject of debate. Some companies have reported that when they stop paying people an incentive—for instance, to get an annual physical—patients revert back to their old, unhealthy habits.

“Psychologists believe external payments are a bad idea because they kill internal motivation,” Laibson says. “Economists are more favorable to pay for performance.”

Ariely says irrational decision-making is particularly common when it comes to a person’s health. One experiment chronicled in his book showed that people believe more expensive drugs are more effective. Participants said they felt better taking a pain pill that costs $2.50 than one that cost 10 cents, even though the pill in both cases was simply Vitamin C. Tiered co-pays are one way to combat this proclivity toward more expensive medications when generic alternatives are available and cost less.

Peer pressure seems like a powerful tool to change people’s behavior, but—much like with incentives—researchers are less certain about its effectiveness.

Some companies have experimented with Weight Watchers programs, which use peer groups to help individuals develop better eating habits. Other companies have embraced health scorecards as a way to pressure people into improving their health. Know Your Number, a scorecard that rates a person’s health against an average, is one tool used by such companies as Abbott Laboratories, a pharmaceutical company in Abbott Park, Illinois.

The company that created Know Your Number, BioSignia of Durham, North Carolina, designed the scorecard believing that a simple visual comparison could pressure people to change their behavior. The scorecard also measures a person’s risk for disease and offers a baseline that can be used to evaluate a person’s health over time.

“Once you have your number score and you look at your peers, that becomes very powerful,” says Tim Smith, president of BioSignia.

But peer pressure can also anger employees.

“Unlike an 8-year-old, an adult is aware that peer pressure is being used,” Laibson says. “He may not view these peers as friends, and therefore they won’t have the ability to influence him.”

The weight of social norms can also have negative effects. Ariely says patients don’t ask doctors for second opinions nearly as much as they should. The reason is simple: Most believe getting a second opinion is an act of betrayal against their doctor, a person whom they trust and implicitly look up to.

“If we get people to care less about the physician or we get people to think of themselves as an outsider, people might make much better decisions,” Ariely says.

Knowing that people have a hard time asking for second opinions, employers including Boston-based EMC have turned to companies such as Best Doctors when patients face serious—and usually expensive—health care decisions. Based in Boston, Best Doctors supplies patients with second opinions by having experts in their specialties review patient medical data collected from doctors, labs, hospitals and pharmacies.

Though the use of incentives and peer pressure is quite common, researchers say not enough information exists outside the lab to confirm definitively whether peer pressure or incentives work. Researchers say they would like large companies to subject their plan designs to greater independent testing.

“Companies don’t tell us what they’re doing or how effective they are” at doing it, Ariely says. As a result, they are “not sure what works better and under what conditions.”

What researchers do know is that health and benefits education alone is often ineffective. That’s because, as behavioral economists are quick to point out, one of the great myths of human behavior is that knowledge alone can change people’s deep-rooted habits.

“I don’t want to suggest education is useless,” Laibson says. “If I’m a newly diagnosed diabetic, a nurse explaining the disease is going to be helpful. But our culture is full of information that being overweight is bad. It’s not a deficit of knowledge, it’s a deficit of self-control … or a decision not to value health and trade off a shorter life for more immediate pleasure.”

Tucked inside the recently signed economic stimulus package is a line item that is much smaller than the $19 billion slated to bring doctors into the information age. But the provision could go a long way toward helping employers spend their health care dollars more wisely.

The federal government has committed $1.1 billion to compare the effectiveness of different drugs, medical devices and surgeries to treat the same illness.

This “comparative effectiveness” research could eventually help employers identify the most cost-effective and beneficial health care treatments, and then steer patients toward them. Employers could save money and improve the health of patients by paying for procedures that are considered to be of great benefit while not covering treatments that have proved to be of little value.

Without comparative effectiveness research, decisions about what treatments to use often “depend on anecdotal evidence, conjecture and the experience and judgment of the individual physicians involved,” according to a policy paper published by the Congressional Budget Office in 2007.

For example: Which is the more cost-effective and better treatment for a patient suffering from acid reflux disease, one of the most common conditions affecting older Americans? Is it medicine or surgery? In 2005, the federal Agency for Healthcare Research and Quality, in its first comparative effectiveness review, said drugs can be as effective as surgery in preventing stomach acid from being regurgitated.

The agency continues to review the effectiveness of treatments for other diseases or conditions, such as the use of noninvasive procedures to detect breast cancer. In 2006, the agency reported that four types of tests—magnetic resonance imaging being one of them—were not accurate enough to replace biopsies.

“The research could lead to objective criteria that says these treatments work and these do not,” says Jim Winkler, a health care consultant with Hewitt Associates. The lack of comparative effectiveness research helps explain why the quality and cost of care varies drastically across the country, the CBO report said. Higher spending does not necessarily lead to improved patient health.

Differences in health care costs across the nation are based not on differences in quality, but in large part on a payment system that rewards doctors for using health care treatments, irrespective of whether they work or are appropriate, according to a report published in February by the Dartmouth Atlas, a health research organization affiliated with Dartmouth Medical School. Comparative effectiveness could lead to payment reforms that reward doctors for following national guidelines on the most effective treatment options.

The $1.1 billion for the research in the economic stimulus package represents a significant jump in funding. In 2006, the federal government appropriated $319 million for comparative effectiveness research. The increased funding has been lauded by those paying for health care: employer groups and health insurance companies.

“Currently, patients and their physicians have little, if any, independent, reliable information comparing the efficacy of various procedures, therapies or devices,” says Helen Darling, president of the National Business Group on Health, in a statement.

Conservatives—including the American Enterprise Institute, Rush Limbaugh and Betsy McCaughey, a former lieutenant governor of New York who galvanized opposition to the Clinton health plan in 1994—have opposed the research, saying it will insert the government into decisions made by doctors and their patients.

Biotechnology and medical device makers, which could stand to lose money if their technology is deemed less effective, have teamed up with the Alliance for Aging Research, Friends of Cancer Research and minority and women’s groups to form the Partnership to Improve Patient Care to ensure the legislation does not keep patients from getting the care they need.

National effectiveness guidelines could empower patients who use personal health records. Through software tied to their records, they could learn of best treatment options for their health needs, says Jay Sanders, a doctor and president and CEO of the Global Telemedicine Group in McLean, Virginia.

“A patient needs something more foolproof than what’s between their physician’s ears,” he says.

Workforce Management, April 6, 2009, p. 26 — Subscribe Now!

In 2006, emergency room doctor Elliot Justin gave a young patient a diagnosis that sent the patient’s mother into a rage.

“I told her, ‘Your child is fine,’ ” Justin said.

What enraged the mother was not the cut on the child’s face, which required only a little antibiotic ointment, but the effort it took to come to that simple conclusion. The mother had spent her day trying to get some face time with a doctor, shuttling from her pediatrician’s office to an urgent care facility to, finally, an emergency room in New Jersey. Along the way she was told incorrectly that her child’s cut required the expertise of a plastic surgeon.

“The mother got angry because she had gotten run around,” Justin recalls. “Why couldn’t the she have just sent a JPEG of the kid’s face?”

Doing so could have saved her from taking a day off and from the expense of an emergency room visit. Justin’s solution was to create SwiftMD, a health care service that allows patients to see a doctor using online video within one hour of requesting an appointment.

Based in Bozeman, Montana, where Justin now lives, the company is part of a growing field of telemedicine, which refers to any health care delivered to patients using information technology. Not all telemedicine services provide remote access to doctors like SwiftMD does. Some simply use software to help patients monitor their illnesses. What separates telemedicine from health information Web sites is software that provides personalized feedback on a patient’s health. The goal is to use technology to provide more personalized, cost-efficient health care.

In some cases this means connecting patients with health care providers remotely or, when a doctor is not needed, using software to provide continual feedback about a person’s health—for example, their daily blood pressure or blood sugar levels. That highly customized information helps patients manage their health so they, and the employers who pay for their care, don’t have to spend money and time visiting a doctor.

“We must require patients to be their own primary care provider,” says Jay Sanders, a doctor who has been practicing the ever-evolving field of telemedicine since the 1960s.

Some Medicaid and Medicare programs, a few health insurers and a small but growing number of employers are paying for various forms of telemedicine. With billions more dollars budgeted for telemedicine—the exact amount has not been detailed—as part of the recently passed $787 billion stimulus package, the field is poised for wider acceptance as a means to provide medical care that is thought to be timely, convenient and cost-effective.

The idea of telemedicine—the transmission of medical care and information electronically—has long been envisioned. In a recent lecture in New York, Sanders made this point by showing a cover of a British newsmagazine, Radio News, that announced in its headline “The Radio Doctor—Maybe.” The cover shows a child on the edge of his bed, staring at what looks like a television, and sticking out his tongue. In the television’s picture, a doctor makes his diagnoses. The set seems to print out what looks like a prescription. The magazine was published in 1924, four years before the first television sets were sold.

Envisioning telemedicine, however, has been easier than putting the technology into practice—and reimbursing doctors for providing care like online or e-mail consultations. But as it has become easier to access the Internet than a doctor, the field has developed to the point where both private and public health care payers are beginning to reimburse doctors for online care.

Medicare, the single largest health care payer in the U.S., covers telemedicine in limited circumstances, often to allow patients in rural areas to access specialty care without having to go farther afield than their local hospital or clinic. The Department of Veterans Affairs has also pioneered telemedicine programs to help veterans manage chronic illnesses.

Health insurers Cigna and Aetna reimburse doctors for care given online using software from RelayHealth, an Atlanta-based health technology company. The Web-based software is designed to interview patients and then use their answers to pinpoint a diagnosis. RelayHealth is available to any patient of a doctor who uses the service in his or her practice. At Cigna, that totals about 15,000 doctors out of some 500,000; at Aetna, it’s about 6,000.

“Telemedicine isn’t necessarily our strategy,” says Ken Tarkoff, a general manager at RelayHealth. “Our strategy is to provide better connectivity in health care.”

RelayHealth is intended to help doctors’ practices run more efficiently. Lab results automatically populate a person’s electronic health record. The software’s design helps doctors offer feedback to a patient based on their lab results while automating common requests such as setting up appointments, paying bills and making medication refill requests, services that are free for the patient. Questions from a patient are automatically forwarded first to a nurse at the doctor’s practice, who analyzes the question before deciding whether to forward it to a doctor.

RelayHealth says its 21,000 doctors represent several million patients. Of those patients, a million are actively managing their online health records. The most active patients are those with chronic illnesses, Tarkoff says.

Doctors are paid when they provide care for a patient. Aetna pays doctors $30 for a Web visit; Cigna pays $35, compared with about $70 for an in-office visit. Patients pay their standard co-pay or co-insurance.

SwiftMD offers a similar capability, but rather than connecting a person to their primary care doctor, the service connects patients with doctors trained in emergency medicine who can provide care at times when a person’s doctor is unavailable. Unlike RelayHealth, SwiftMD’s doctors use Internet video to assess patients.

The company, which went live in February, has signed up its first customer, the New York City locals of the International Union of Operating Engineers. The union’s 9,000 members have use of the service, at a cost to the union of $120 per member annually, Justin says. He says that so far, doctors’ response times have averaged 12 minutes.

The software SwiftMD uses prompts doctors to follow widely accepted guidelines for how specific ailments, injuries and illnesses are to be cared for, which Justin says is a recipe for improving the quality of patient care and avoiding unnecessary medical expenses. It’s not meant to replace emergency care, but to help patients avoid unnecessary ER and office visits for everyday issues.

Justin says he is working to provide evidence of cost savings for his new service. Researchers say little data exists yet to conclusively determine whether telemedicine saves money and under what conditions.

Steven Shea, a professor of medicine in biomedical informatics at Columbia University, says telemedicine will most effectively manage chronic illnesses when patients receive care from a doctor they know who has access to their medical records. Shea says employers might be better off compensating doctors for telephone and e-mail consults rather than outsourcing that care to a third party. “There’s no doubt that the cheapest and best way [to get care] is for a patient to call their own doctor, even when the doctor is reimbursed for it,” Shea says.

A recent analysis by Veterans Affairs, however, showed that its home telehealth program produced major cost savings. The program was particularly successful in giving veterans in rural areas access to doctors and for helping to teach veterans to better manage their chronic illnesses.

The VA’s telehealth program cares for 35,000 veterans and is the largest in the world. The study looked at the health outcomes of 17,025 telehealth patients and found a 25 percent reduction in the number of days in the hospital and a 19 percent reduction in hospitalizations.

Boston-based data storage company EMC has embraced telemedicine to help its employees better manage high blood pressure, a key indicator of other potential health problems. Two years ago, with help from the Center for Connected Health in Boston, the company set up a program to see how far it could enable patients to manage their hypertension without the help of a doctor.

Using special blood pressure cuffs developed by the Centers for Connected Health that plug into a computer, 400 EMC employees volunteered to take their blood pressure three times a week. The information automatically populated an online health record, tracking the changes in a person’s blood pressure over time. The center’s software provided continual feedback that showed each individual how their blood pressure changed in response to circumstances in their life: changes in diet, stress at work, a good night’s sleep.

The feedback helped people change their behavior to produce the blood pressure levels they sought. Doug McClure, corporate manager for operations and technology at the Center for Connected Health, says the key to getting people to change is to constantly measure what you are trying to change, like weight, blood sugar or blood pressure.

“Want to lose weight?” McClure says. “Take a measurement regularly. It creates a contract with yourself about change.”

What McClure calls a feedback loop is meant to keep people engaged. It’s normal for blood pressure to go up and down; the important thing is to understand why and then change the patient’s behavior to produce the desired result.

Delia Vetter, senior director of benefits for EMC, says the company finished the pilot program in December 2008 and, with the help of health data management company Ingenix, is analyzing the results to determine whether the efforts improved people’s health and reduced health care costs.

She says she expects the recoup $2 for every dollar spent, and that even without the official analysis complete, her company’s efforts have been worthwhile and will continue regardless. Vetter says technology is more effective than plan design in changing people’s behavior.

“If you are getting medicine for free, how is that teaching you how to be a better health care consumer, and how to live a healthier lifestyle?” she says. “When you are providing education, constant reinforcement and new, innovative ways to manage their health, you keep on the forefront of their minds how to live a healthy lifestyle.”

For nearly 17 years, Ari Kiev was the in-house psychiatrist for multibillion-dollar hedge fund SAC Capital. While Kiev’s work, including seven books along with one currently in progress, has focused on hedge fund management, his insights could easily be embraced by executives looking for ways to improve the performance of employees. Kiev spoke with Workforce Management staff writer Jeremy Smerd about the lessons he has learned.

    Workforce Management: When you started at SAC you held group sessions to discuss ways people could talk about the psychological challenges they faced in their own work. How did you get around that?

    Ari Kiev: You are in a forum where honesty and truth-telling is made into an asset. Admitting vulnerability—some people do, some people resist it. Some people are more open than others. Somebody starts getting open, you acknowledge that and you encourage that. And you set up a rule where nobody is there to comment on what anybody else says. We’re just here to hear about the human experience that we’ve all experienced.

    WM: So what do you tell an employee who is clearly not living up to his potential? How do you get him to change?

    Kiev: First, the trader has to identify the emotion and how it affects him. Keep notes on yourself. Observe your own level of anxiety.

    Each person has his own idiosyncratic ways of making decisions in the face of stress.

    I talked to a guy the other day who lost a billion dollars. He had various explanations for it and so on, but his problem was he hired people who were less than the best because he couldn’t get the best people for his team because he wasn’t in London. So he was using a second-tier level of people and he had zero appetite for management. He’s wired to take risks, to analyze problems, to trade. He has little empathy, little patience for communicating and hand-holding. The conclusion is that he probably needs a partner who can manage everybody else. That’s not what you want to do even though you are trying to manage a fund. You are not that kind of leader. Now, that’s not an easy conversation to have because he doesn’t want to give up control.

    WM: What advice can you give to managers who are trying to get the best out of their employees?

    Kiev: There’s no single formula. You are really trying to listen to each individual in terms of their uniqueness and what it is that they are doing that is compatible with producing the kind of results you want.

    WM: What do you tell employees who aren’t adapting to the economy’s new and often unpleasant realities?

    Kiev: You have to be a team player. It’s a natural inclination of human beings to take more risk in situations that aren’t working than to take risk in situations that are working. So the inclination is to hold on to losers and not to add to winners.

    Being able to know when to cut, know when to fold—it’s hard to do. One of the toughest things. And one of the first thing people should learn.

    WM: How do you manage morale in a time like this?

    Kiev: One conversation is, let’s compare what’s going on now to the past. And to what extent can you frame [what’s going on now] in terms of being time-limited. So that you know you need to slow down, lower your expectations. Being able to sit on your hands is a virtue that takes many, many years to learn. But that may be what you have to do.

    It’s important to encourage people to be more philosophical, to be more patient.

    WM: What tools from psychotherapy do you use?

    Kiev: Listening; reflecting.

    WM: What do you say to a trader who loses $200 million?

    Kiev: I think they want the chance to talk to someone who is not emotional, who is supportive, who has a philosophical view that this too will pass. In talking about it, it neutralizes the sting. It’s not like I have an answer. My answer is more generic. This didn’t work. That’s the nature of the game. This is the life you’ve chosen. Things will get better, they usually do.

    WM: There have been hedge fund managers who have killed themselves. And a guy who lost his job and killed his family. What could employers have done to manage that crisis better?

    Kiev: You have to do a psychological post-mortem and determine what clues people missed. What are the warning signs? What processes can you put in place to recognize who’s hurting and crying for help early on. It’s possible that there are other factors in his life. A supervisor could have been more burdensome, problematic or critical than what was warranted given the psychological vulnerability of the person who ultimately killed himself.

    Generally, though, even people who are in treatment and on antidepressants kill themselves. It’s so difficult to predict who is going to do it. More people who lose billions of dollars don’t kill themselves.

    WM: What have you learned about managing people?

    Kiev: Patience; tolerance; a sense that it’s very hard to change people. You are better helping people become more familiar with their strengths than focusing on their weaknesses.

    The human condition is such that everyone’s trapped by their earliest experiences, by things they’ve learned about the way the world is. That narrows the way they see things. So they keep seeing the same thing over and over again. The process of growth and maturity is being able to step outside that fixed way of seeing the world. There may be a way of being in the world where you are much more present in the moment. That’s what’s exciting about sailing or skiing or trading. You need to take a lot of information as well as your own emotions and try to be as present in the moment as possible without being too distracted by your goal of achieving ‘X’ amount of dollars. While you want to set up a goal and design your portfolio with profit targets in mind, you don’t want to lose your flexibility. It’s kind of a Zen state.

    WM: You were at SAC for 17 years. How did the company change, other than growing to nearly 1,000 employees?

    Kiev: I changed the culture from being individualistic to being much more collaborative. People talk about feelings, talk about goals, talk about strategies. We have a whole management team now and a huge HR department focused on this. They’ve got more people who are life coaches. People are willing to share information, who are willing to bring other people into meetings. There’s less competition.

    HR has introduced performance measures—manager assessments, 360 assessments. There’s a lot of dialogue at the firm about personalities. It’s a much more communicative culture.

On a December day, as General Motors chief executive Rick Wagoner beseeched Congress for a bail­out, GM engineer Michelle Valentine stood in a doctor’s office in suburban Detroit, extolling the virtues of efficiency.

    Valentine was visiting the St. John Family Medical Center in St. Clair Shores, Michigan, not as a patient, but as part of an effort by auto industry engineers to show how the techniques that have helped automakers build better cars more efficiently can help reduce medical costs and improve the health of patients.

    Pointing to a homemade flowchart on the wall, Valentine demonstrated the wayward path of a lowly medical form. Half the time, forms are filled out incorrectly at the doctor’s office and sent back there by patients or employers.

    “That’s rework,” says a billing clerk, using the lingo of process improvement that had been imparted by Valentine.

    “Big time!” Valentine says.

    The ethos in car making is to get it right the first time. When it came to such basics as filling out a common medical form, this small medical practice seldom got it right.

    “This is why health care costs are so high in this country,” says Joseph Fortuna, a former medical director with parts maker Delphi. “It’s not because of errors; it’s because of this crap. This waste is what doctors are held responsible for, but have no idea how to fix.”

“Flow is the key to eliminating waste. Waste costs money.” —Michelle Valentine, GM engineer

    Multiplied across America’s hospitals and doctor’s offices, such inefficiency totals more than half of the $2.1 trillion spent on health care. Defensive medicine, inefficient health care administration and the cost of treating preventable conditions such as obesity account for $1.2 trillion annually, PricewaterhouseCoopers estimated in a study published in April 2008. Employers, which provide insurance to about 60 percent of Americans, absorb the bulk of that cost, which does not include the cost to worker productivity.

    The debilitating economic cost of health care waste is especially painful for struggling Detroit automakers GM, Ford and Chrysler.

    GM spent $5.6 billion on health care in 2006, which the automaker says added at least $1,500 to the sticker price of every automobile. Chrysler spent $2.3 billion on health care, an expense that added 7 percent to a vehicle’s cost. Looming in 2010, the Detroit Three will be expected to fund a multibillion-dollar health care trust that will be operated by the United Auto Workers.

    Concerns over health care costs have spurred a concerted effort by automakers, insurers and medical providers to send engineers like Valentine to volunteer in doctor’s offices, helping primary care physicians improve operational efficiency and the quality of care. At the same time, the effort may offer career opportunities to the engineers, who in some cases find their Detroit careers hanging by a thread.

    The thinking behind the health care process-improvement project is that despite the industry’s woes, automotive engineers are experienced in making companies more efficient and producing better products. They learned their streamlining lessons by using the quality- and cost-improvement techniques that came to prominence in the U.S. with the rise of Japanese automakers in the 1980s. These techniques—known variously as kaizen, lean manufacturing, Six Sigma and total quality management—have become commonplace among businesses across many industries, including health care, where some hospitals and health systems have already embraced them.

“As we downsize our industry, we have a resource, a human resource, that we can use in other verticals.” —J. Scot Sharland, executive director, Automobile Industry Action Group

    The Detroit project, called Improving Performance in Practice, is sponsored by the Automotive Industry Action Group and the Michigan Primary Care Consortium. The Automotive Industry Action Group is a nonprofit formed by the Detroit Three to improve business practices within the automotive industry and its supply chain. The consortium is a membership organization of employers—including GM, Ford and Chrysler—as well as insurers and medical providers.

    The idea grew out of research among health system experts who found that physicians need to operate more efficiently to meet the needs of chronically ill patients, as well as demands from employers that the care they pay for meet evidence-based standards. While some hospitals and health systems have embraced manufacturing’s process-improvement techniques in piecemeal fashion, new attention is being focused on primary care practices.

    Organizers in Michigan hope that an effort that started last year with more than 50 engineers from auto manufacturers, suppliers and the United Auto Workers working in 14 primary care practices in Michigan will spread across the country. In September, Fortuna, along with the medical directors of Ford and Toyota, pitched their idea to executives at the American Medical Association.

    The hope was that the AMA, along with other health care organizations and the American Society for Quality, would endorse what they are describing as a Marshall Plan for health care: the placement of some of the 100,000 quality engineers in the U.S. in doctor practices with the goal of improving the quality and efficiency of medical care nationwide.

    “We’re not saying we’re experts in health care,” says Ford Brewer, medical director for Toyota Motor North America, explaining his pitch to the health care industry. “We’re saying, ‘We’re experts in logistics, and you’ve got a ton of logistics you’re managing, and you’re managing them poorly. Let us help you with that and you go deal with the health care.’ “

‘Flow is the key’
    A handful of states have launched projects to improve the efficiency of the primary care system, teaching process-improvement methods to health care professionals. But by having auto industry engineers as volunteers in doctor’s offices, Michigan is taking a different tack, one that might provide new career opportunities for laid-off auto engineers.

    “Our culture in the auto industry, even though it’s in a state of chaos, [is that] a lot of people have a lot of good experience in improving efficiency and improving quality,” says Lou Ann Lathrop, a GM engineer and volunteer. “That just didn’t happen by taking a one-day seminar. It’s years of training and applying the principles.”

“We’re not saying we’re experts in health care. We’re saying, ‘We’re experts in logistics, and you’ve got a ton of logistics you’re managing, and you’re managing them poorly. Let us help you with that and you go deal with the health care.’ “ —Ford Brewer, medical director for Toyota Motor North America

    The specter of bankruptcy for U.S. automakers has provided further incentive to automotive engineers to bring their skills to health care.

    “As we downsize our industry, we have a resource, a human resource, that we can use in other verticals, namely health care,” says J. Scot Sharland, executive director of the Automobile Industry Action Group. “We don’t have time to train doctors and nurses in quality improvement when they are desperately needed to treat people.”

    While most practices are set up to react to people’s problems, treat them and send them on their way, they are not organized to manage chronic illnesses, which require ongoing care and greater planning. Making the change requires special skills, says Ed Wagner, director of the MacColl Institute at the Group Health Center for Health Studies in Seattle.

    “What is particularly helpful is having someone—we call them a practice coach—who comes in, understands the changes that need to be made and helps the practice make the changes,” Wagner says.

    Valentine, the GM engineer, helped the managers at St. John Family Medical Center see that the office’s quality varied. It had no way to ensure that medical forms were filled out correctly. She acted as a guide as the practice discovered its shortcomings. The exercise led to changes that will help save the practice $90,000 a year.

    “Flow is the key to eliminating waste,” Valentine says. “Waste costs money.”

    Thirty miles from the Family Medical Center, a similar experiment is unfolding in Pontiac, Michigan. Every day, primary care Dr. Khurrum T. Pirzada confronts the costly diabetes epidemic. More than half of the patients who come to the Baldwin Avenue practice, owned by the not-for-profit POH Regional Medical Center, are insured through Medicare or Medicaid, are elderly, poor or both.

    Because the government has not increased significantly in recent years how much it reimburses primary care doctors, Pirzada’s practice has increased the number of patients it sees each day to remain profitable, he says.

    “If we’re not getting reimbursed more, we need to see more people,” Pirzada says. “But if you see 40 people a day and spend five minutes with them, what kind of quality can you provide? If the patient isn’t getting the time they need and is getting sicker, then we need to look at the quality of care.”

    Pirzada’s predicament is typical. Many doctors know the standards of care for treating diabetics, but they don’t have the time or skills to implement them uniformly in their practice.

    Kush Shah, however, does. A product quality engineer with GM’s powertrain division, Shah has visited the practice several times with a colleague.

    “For a long time, automakers worried, ‘How many cars can you produce?’ ” he says. “But it’s not that simple. You have to focus on quality. It’s the same thing here. We can’t just focus on wait times. We have to focus on quality of care.”

“If we’re not getting reimbursed more, we need to see more people. But if you see 40 people a day and spend five minutes with them, what kind of quality can you provide?” —Dr. Khurrum T. Pirzada, POH Regional Medical Center Baldwin Avenue practice

Managing disease
    Doctors want to cure what ails patients, but only now, with so-called pay-for-performance incentives, are they beginning to get paid specifically for doing so. The assistance of auto engineers is intended to make it easier for doctors to meet the standards that they are increasingly being expected to meet.

    Shah is designing a standard for how to best organize a primary care practice to manage diabetes. Once he completes it, he will move on to asthma and heart disease. He sets forth the guidelines, which also are the tenets of lean manufacturing: Increase standardization, reduce complexity and simplify variation.

    With those principles in mind, the POH Regional Medical Center staff made a few changes and decided it would set aside an hour each morning and afternoon to see only diabetic patients. The practice is establishing a checklist of items that need to be accomplished during every diabetic’s visit: Check the feet, check vision and check sugar levels.

    Shah has developed a questionnaire of commonly asked questions of diabetics. The questionnaire is a classic example of reducing non-value-added work. Doctors are least cost-effective when doing something someone less qualified can do, Shah says. That includes asking routine questions of patients.

    The practice also reasoned that teaching diabetic patients to eat right or to take their insulin was not the best use of a doctor’s time. A better idea would be to hire a medical educator, something the office staff felt would be cost-effective now that a group of diabetics would be visiting the office at a set time.

    One problem arose, however: Doctors are not reimbursed for educating patients, making it impossible for a doctor to recoup the investment. The office decided to accept an offer by Great Lakes Medical Supply, a supplier of diabetes medical devices, to provide a medical educator. Pirzada says he isn’t concerned that a medical supplier might put sales ahead of a patient’s health.

    The more Pirzada talked about improving the way his practice operates, the less he sounded like a typical doctor.

    “We want the focus to be on the patient, customer service and communication,” he says. “This is a service industry, and customer service is important.”

Potential seen
    Shah and other engineers volunteering at practices say with confidence that simple changes could produce big economic savings, given the level of inefficiency they see.

    “When you wait in line at a doctor’s office, you ask: ‘Why don’t they have a better scheduling system? Why don’t they contact me by e-mail? Why do I have to wait 30 minutes to get a 30-second answer from my doctor? Why do I have to fill out the same information every time I go to the doctor?’ ” says Lathrop, the GM engineer and volunteer. “In your day job, you are constantly drilled to take out waste in the system.”

    It is still too early to show savings, says Shah, who has worked at the Baldwin Avenue practice since late fall. But other projects have shown that the tools of manufacturing can reduce costs. An ophthalmology practice in Lansing, Michigan, reduced wait times for patients receiving eye exams. Changes made with the help of engineers allowed the practice to hire fewer people when it brought on two new doctors.

    The ophthalmology project has helped sell others on the idea. The goal of the other pilot programs is to develop a track record of cost savings and quality improvement in the care of chronically ill patients.

    The biggest cost is the engineers’ time, estimated to have totaled $20,000 for the Lansing practice. Currently, the engineers volunteer, with many taking paid community service hours offered by their automotive employers. But given the crisis in the auto industry, companies may decide to withdraw their support, as Chrysler did earlier this decade with a similar health care cost-management project.

    If these initial experiments show success, a new primary care model may emerge that holds the promise of improving care and reducing costs. Auto engineers may find practices willing to pay for their skills.

    “Right now, a lot of the doctors don’t think they need any help,” Lathrop says. “And that’s the same way the auto industry was 25 years ago. … We hope we show doctors something that gets them excited and makes them want more, because in the long run we can’t do this as volunteers.

    “We’re trying to create a market for quality professionals and other engineers.”

Workforce Management, February 16, 2009, p. 1, 18-26 — Subscribe Now!

For at least a decade, other industries including health care have embraced the ethos of high quality and super-efficiency pioneered by Toyota, now the world’s largest automaker by sales volume.

    But it took the initiative of a medical director at Toyota before the company applied its own Toyota Production System principles to its health care providers in the U.S. in the same way it did its suppliers of auto parts.

    “We got elbow-deep into the activities of our radio manufacturer, but we were totally hands off with all of our health care suppliers,” says Ford Brewer, medical director for Toyota Motor North America, which is based in Lexington, Kentucky. “I felt, ‘Dang, there aren’t a few things we can apply to health care; there are tons of things we can apply, an unending number of applications.’ “

    About five years ago, with pressure mounting to shift rapidly rising health care costs to employees, Brewer began tackling the problem of reducing those costs by using the Toyota Production System. Toyota’s competitors in Detroit had already begun sending employees to improve the efficiency of local hospitals.

    Toyota looked at inefficiencies in its benefit design. Among other changes, it established an on-site pharmacy to reduce time and movement and to avoid higher-priced retail outlets. Then the company looked at its on-site health clinics.

    The engineers who once worked with radio makers were soon standing in doctor’s offices with clipboards, noting each step in the process of visiting the doctor. The engineers eliminated obvious forms of waste, known as muda in Japanese.

    “When we took out what was obvious muda, we realized we didn’t need 3.5 of the nine people working in the clinic,” he says.

    Other examples of muda were quite simple. The laptops used by doctors in the clinics needed their batteries changed several times a day. The engineers moved the batteries from the back of the clinic to the front, making them more readily available to the doctors. It was a classic redesign to reduce unnecessary effort and wasted movement.

    Because of Toyota’s policy against laying people off, other health care workers were reassigned—for example, to treat only those patients who come into the clinic without an appointment. Employees afraid that improved efficiency will cost them their job are unlikely to support any waste-reducing changes the company is trying to make, Brewer says. Reassigning employees rather than firing them is a good way to ensure employees are supportive of these kinds of quality- and cost-improvement efforts.

    In 2007, the Toyota Production System faced a big test when the company looked at the quality and cost of a local hospital’s emergency room that was used by employees.

    “Anytime you try to introduce TPS you hear, ‘Look, you don’t understand, this is not an assembly line; we’re not making cars, we’re seeing patients,’ ” Brewer says.

    Toyota asked for patience, and the hospital cooperated. Soon, engineers discovered that two nurses averaged three minutes to do triage on a patient, while most others took 15 minutes.

    “Anytime you have that kind of variation, a TPS engineer will perk his ears up,” Brewer says.

    The wide variation was a sign that engineers would likely find big savings by introducing standardization in the triage process. Changes introduced by Toyota reduced emergency room wait times from 53 minutes to less than 20 minutes with the same amount of staff. Volume increased by 25 percent. The company, however, did not look at the quality of care provided, just its efficiency.

    Brewer credits the improvements to the fact that the engineers came to health care with a fresh perspective.

    “That’s probably the biggest difference between having TPS people go into a hospital versus having hospital people run their process improvement,” he says.

Workforce Management, February 16, 2009, p. 23 — Subscribe Now!

A decade ago, Chrysler decided it would send process- and quality-improvement specialists into hospitals and doctor’s offices in hopes that helping hospitals reduce costs would benefit the automaker as well. The project came from the company’s former senior vice president for HR, who had had a personal run-in with bad medicine.

    The company brought in four process-improve­ment specialists to go into various hospitals that Chrysler contracted with nationwide. Roger Valen­tine was among the specialists assigned to the project. (He is not related to GM engineer Michelle Valentine, who is featured in related stories in this report.)

    “The first thing we noticed is, there is no standardized practice,” Valentine says. “It just blew us away. Doctors talk a lot about it but they don’t do it.”

    Dave Lalain, a former engineer at PPG Industries who is director of life sciences at the Automotive Industry Action Group, a nonprofit formed by the Detroit Three to improve business practices within the automotive industry and its supply chain, says it brings to mind a popular saying in health care: “If you’ve seen one medical practice, you’ve seen one medical practice.”

    Chrysler also noticed that its costs varied wildly among locations. Though workers in Detroit were older, and New York is known for its pricey health care, the company’s costs were higher at sites in Indianapolis and Kenosha, Wisconsin. The automaker concluded that variation in care led to higher costs that were passed on to the company.

    “Every time a hospital had a cost overrun, they’d jack up their rates,” Valentine says. “You can’t do that in other businesses.”

    Developing a set of best practices, the group was able to save its hospitals millions of dollars. But the savings, for various reasons, never made it back to Chrysler. Some hospitals cooperated only to appease Chrysler, not because they believed in the process, Valentine says. After several management changes, Chrysler pulled the plug on the effort.

    Last year, Valentine was approached by the Automotive Industry Action Group to work in a local doctor’s practice. Chrysler, running low on cash and facing a rapidly deteriorating economy, denied his request. When the company took him off his last in-house health care project, it gave him the option of being reassigned to HR. Valentine took a buyout instead.

    He wanted to parlay his 24 years in the auto industry into what he believes could be the job of the future for professionals like him. In November, Kaiser Permanente health system hired Valentine and nine other people, including another automotive industry veteran, skilled in cost- and quality-improvement techniques to work with doctors and hospitals.

    “The health care industry needs some outside eyes,” he says. “We in health care are where the auto industry was 20 years ago.”

Workforce Management, February 16, 2009, p. 26 — Subscribe Now!

Sens. Barack Obama and John McCain face a paradox in their presidential campaigns: How do you simultaneously increase the number of people who receive health insurance while lowering the health care costs that threaten to bankrupt Medicare, send jobs overseas and upend the economy?

    Using decidedly different means that reflect the ideological leanings of their political parties, Republican hopeful McCain and Democratic nominee Obama believe their health care policy proposals will strengthen the employer-based system by reducing the number of uninsured Americans. While the candidates’ plans share common goals, each has policies that could make it more costly for employers to provide health insurance.

    McCain says he will focus on refundable tax credits to make health insurance more affordable, reducing the number of uninsured Americans. Obama, meanwhile, wants to reduce the number of uninsured Americans, which will cut wasteful and unnecessary spending, thereby lowering costs.

    Yet both plans could siphon healthy employees away from employer plans, leaving companies with a higher percentage of sicker, costlier enrollees who would drive up costs.

    Whether in the long run either candidate’s plan would sustain an employer-based system is “questionable,” says Steven Wojcik, vice president for public policy at the National Business Group on Health in Washington.

    Employers, who tend to be more reactive than proactive, are hoping that whatever the outcome in the November presidential election, a new national health care policy will end the uncertainty they seem to feel every election cycle.

    “We don’t want to be going through this again four years from now,” says Andy Rosa, director of health and welfare benefits at Comcast in Philadelphia.

Employers and the McCain plan
    If elected president, McCain says he would tax the value of an employee’s health care plan while offering tax credits—$2,500 for individuals and $5,000 for families—to offset the tax increase. The rationale, says McCain health policy advisor Jay Khosla, is to provide a tax incentive for people without employer-sponsored health insurance to purchase it on their own. The McCain campaign estimates the tax credit will help 20 million to 30 million uninsured people purchase insurance. The Tax Policy Center of the Urban Institute and the Brookings Institution says that the number of uninsured would drop by 1 million in 2009 and by 5 million by 2013.

    But in the eyes of many experts, McCain’s plan could provide an economic incentive for the young and healthy to leave employer coverage for the individual market, where they could reduce their tax liability by finding cheaper health insurance. This “adverse selection” could leave employers to cover sicker, older and more expensive workers.

    Speaking to health benefits managers from McDonald’s, Com¬cast, Kraft, DuPont and others at an event for employers in Chicago this summer, Khosla summarized the philosophy behind the Arizona senator’s health policy.

    “I think Sen. McCain’s vision for health care can be described as three small phrases,” he said. “It’s your life, it’s your health, it’s your decision.”

    Khosla described McCain’s emphasis on the consumer.

    “Insurance should follow you, not follow your job,” Khosla told employers. He said the tax credit would create an incentive for individuals and families to buy health insurance on their own rather than through their employer.

    Employers would not see their taxes rise, but employees would. The McCain campaign says the tax credit would completely offset the increase in taxes. It would also encourage the use of health savings accounts.

    “You can only keep the change if you add an HSA account,” says campaign spokesman Taylor Griffin.

    For example, the average cost of a family plan, according to the Kaiser Family Foundation, was $12,106 in 2007. Taxed at the highest tax rate of 35 percent, a family could expect to pay $4,237 in extra taxes. The tax refund of $5,000 would offset that amount. The remaining $763 would go into a health savings account.

    Health care policy experts say, however, that these tax credits for individuals and families could encourage the young and healthy to find bare-minimum catastrophic plans with an HSA and forgo employer-sponsored coverage. Experts say this worries employers, who fear that young and healthy employees will leave their health plans if they think they can get cheaper, more appropriate insurance elsewhere.

    “What employers would be left with would be people who use the most health care,” says James P. Gelfand, senior manager for health policy at the U.S. Chamber of Commerce. “And their premiums would go up quite a bit and their health plan would be more expensive.”

    Another option would be for employers to offer plans that covered less, thereby reducing the tax liability of the premium. Still, the McCain tax plan could be “the beginning of the end of employment-based coverage as we know it,” says Paul Fronstin, director of the health research and education program of the Employee Benefit Research Institute in Washington.

    The tax credit may also heighten concerns among fiscal conservatives. The federal exclusion from income and payroll taxes for investments in employer-sponsored health care cost the Treasury

    $200 billion in lost revenue in 2007, according to the Congressional Budget Office.

    McCain, whose tax cuts would further reduce that revenue, says he would pay for the tax cuts by reducing spending elsewhere. McCain would balance the federal budget by 2013 and “freeze spending on all nonmilitary discretionary spending for one year,” Griffin says, while also reducing or eliminating subsidies for agribusiness and oil companies.

Employers and the Obama plan
    By contrast to McCain’s approach, Obama would create a national health plan and a health insurance exchange in which private plans would be available only to people who have no access to group coverage. Employers who do not offer “meaningful” coverage or make a “meaningful” contribution to the cost of their plan would be required to pay a percentage based on their payroll to help fund national health care.

    Speaking to employers in July, Obama health care advisor Michael Millenson said the Illinois senator would “guarantee health coverage for all Americans” by building on the existing system.

    Many health care economists believe Obama’s plan would do more to cover the uninsured. The Obama campaign says his plan will eventually cover all but 2 percent of the uninsured, or about 46 million people. The Tax Policy Center of the Urban Institute and the Brookings Institution says the number of uninsured would drop by 18 million in 2009 and 34 million by 2018. Millenson said Obama would save employers money because they would no longer have to “cross-subsidize” the cost of caring for those without health insurance. Millenson said Obama’s public plan would have the following features: No one would be turned away for having a pre-existing condition; premiums, co-pays and deductibles would be “affordable”; insurance would be independent of one’s employer; and benefits would be similar to those offered to members of Congress.

    The plan would be available to Americans who do not have employer coverage and are not eligible for Medicaid, the health insurance for the poor and disabled, or for the State Children’s Health Insurance Program.

    Some observers worry that individuals will leave employer plans for cheaper public plans, which would make employers look as if they were not doing enough to provide affordable and comprehensive health benefits to employees.

    And what constitutes a “meaningful contribution” to “meaningful coverage” has not yet been determined. The Obama campaign also hasn’t specified what size companies would be forced to pay or play.

    “The devil is in the details, and there just isn’t enough detail,” Fronstin says. Still, he believes that a law requiring employers to provide health care or pay into a health care system won’t keep employers from offering health coverage.

    How much such an expansion in government would cost and whether it would produce anticipated savings remains to be seen. Obama advisors say that by insuring all Americans, each family would save $2,500 a year. They estimate the program’s cost to be $50 billion to $60 billion a year, paid for by letting President Bush’s tax cuts expire in 2010 for people making more than $250,000 a year.

    The centerpiece of Obama’s plan is what he calls the National Health Insurance Exchange. The exchange would set standards defining what constitutes “meaningful coverage” and would be the place where people could enroll in the national plan or purchase a vetted private plan offered by health insurance companies. The exchange would make “the differences among the plans, including cost of ser¬vices, transparent,” according to the campaign’s published platform. In theory, the private plans would have to be competitive with the public plan in order to attract members.

    The looming threat to employers in an Obama-style health plan is a phenomenon that health care analysts call “crowd out.” This unintended consequence occurs when laws create incentives for employers to drop coverage. This can happen when government expands the eligibility for public health programs to the point at which people choose to leave private insurance for cheaper public programs. Crowd out is also a risk when a fine that employers would have to pay for not providing coverage is so low that employers would rather pay it than offer coverage.

    “We believe crowd out is a gateway to increased taxes and an employer mandate,” says Gelfand, of the U.S. Chamber of Commerce. “When employees are not covered by their employer, the government believes the employer is not spending enough on employees and seeks to alleviate that.”

    In a worst-case scenario, crowd out could lead to the same problem that critics see in McCain’s plan: employers unable or unwilling to provide health care to a limited number of sicker employees.

    The Obama plan has a clear precedent in a current system in Massachusetts. In 2006, the state passed a universal health care law requiring individuals to purchase health insurance. A new public plan was created to subsidize the coverage for lower-income workers. Employers that do not offer a plan and contribute to the cost of insurance for employees are required to pay $295 a year per employee into the public plan.

    Researchers have concluded that the Massachusetts program has enjoyed the support of employers, with few signs of crowd out among small employers, the group least likely to offer health insurance.

    In a February article in the journal Health Affairs, the authors wrote, “Small Massachusetts firms are no more likely than firms nationally to consider dropping coverage or restricting eligibility in the next year, and the percentage of firms planning to do so is very small [3 percent and 5 percent, respectively].”

Common Ground
    Despite the differences, both campaigns acknowledge common policy ground. Both candidates highlight the need for price and quality transparency as a way to make health care spending more efficient. The campaigns also say they want to pay doctors based on their effectiveness as caregivers, rather than simply for the services they provide regardless of whether they are appropriate or improve a person’s health.

    Both candidates say they will invest in wellness and prevention. McCain would likely focus on expanding coverage of preventive care with high-deductible plans, health care experts predict. Both McCain and Obama have said they would attempt to increase reimbursement for doctors who successfully implement disease management programs. Both would invest in creating a health information technology infrastructure, though only Obama has said specifically that he would invest $50 billion in health IT over five years.

    Both talk about reforming medical malpractice laws, a traditionally Republican cause that has been highly polarizing in past elections.

    And both candidates talk about investing more money in reimporting drugs from cheaper markets and in reinsurance programs that would cover the most catastrophic health care cases, ultimately defraying the cost of health insurance for small employers and individuals with pre-existing conditions.

Election is only the beginning of reform
    Changing the American health care system—the most expensive per capita in the world and one that leaves as many as 46 million uninsured—will take more than platforms and campaign promises. Just because Obama has pledged to insure all Americans by the end of his first term doesn’t mean that will happen. Just ask President Clinton, who, in 1992, made a similar pledge only to find his mandate for change gutted by the backlash to what critics dubbed “HillaryCare” in 1993 and 1994.

    Republican voters, meanwhile, are half as likely as Democrats to identify health care as a top election issue, according to a Kaiser Family Foundation poll in June. This could mean McCain’s plan to create tax credits for people who purchase coverage may never make the jump from proposal to policy, especially if Democrats widen their control of Congress.

    While health care is among the top domestic causes for many Americans, according to multiple polls, such priorities change. In June 2007, health care was the top domestic issue for voters and was second overall after the Iraq war, according to the Kaiser Family Foundation. In the poll a year later, with gas at $4 a gallon and the economy slumping, health care ranked fourth behind the economy, Iraq and gas prices.

    One of the best things the campaigns communicated with employers during the Chicago forum in June was their recognition that employers, as providers of health coverage for 160 million Americans, have a role to play in the health care debate and its policies.

    “There are forward-thinking but realistic people in the business community who want to be involved,” says Wayne Lednar, chief medical officer for DuPont.

    Employers, though, should recognize that the election is only the beginning of a health care reform effort. Any candidate, or president, whose plan “goes through Congress and has cost controls that take away money from any interest group will find Congress has plans of its own,” says Obama health care advisor Millenson.

    Josef Reum, associate professor in the Department of Health Policy and the Department of Health Services Management and Leadership at George Washington University, calculates that there are nine lobbyists for every member of Congress and 50 people employed by lobbyists for every member of Congress.

    “If there’s any candidate that gets up and says, ‘This will fix it,’ well,” Reum says, “they’re lying to you.”

Workforce Management, September 8, 2008, p. 28-35 — Subscribe Now!

No sooner had Jeff Shovlin become vice president of benefits at Harrah’s Entertainment in Las Vegas four years ago than he began receiving a regular stream of questions from employees about one topic: Why was the company refusing to pay for weight-loss surgery?

Shovlin made some inquiries. Gastric bypass costs on average $25,000 and gastric banding totals around $17,000, according to the American Society for Metabolic and Bariatric Surgery, an industry group based in Gainesville, Florida. He found the price tag for bariatric surgery prohibitive, especially since the surgery’s cost was often compounded by medical complications.

“The more research we did, the more we felt the jury was still out in terms of the value proposition of the surgery,” Shovlin says.

In 2006, though, the company acquired Caesars Entertainment, and Shovlin changed his mind. Caesars already had a successful program to cover bariatric surgery, which required patients to follow strict guidelines. Shovlin says employees avoided complications and returned to work transformed. That’s when he decided to expand coverage of weight-loss surgery to all of the company’s 40,000 employees and 40,000 dependents.

“We looked at our claims cost and we looked at the overall health of our workforce,” Shovlin says. “Most of the health risk factors we saw were either directly or indirectly caused by obesity or people [who] were flat-out overweight.”

With six in 10 American adults overweight or obese, benefit managers are desperately looking for ways to save money on the long-term costs associated with obesity-related diseases such as heart failure, high blood pressure and diabetes.

Once considered too experimental to cover, weight-loss surgery is cautiously being embraced by employers who believe that paying for the surgery may be worth its high initial cost. New data showing dramatic health benefits for people who successfully undergo weight-loss surgery, as well as protocols designed to reduce complications, may make it a worthwhile investment, experts say.

In one dramatic example, a study of weight-loss surgery published this year in The Journal of the American Medical Association showed that 73 percent of people with Type 2 diabetes had complete remission of the disease after weight-loss surgery, compared with the 13 percent of patients who only tried conventional medicines, changing their diet and exercising.

Shovlin says he has noticed an appreciable difference in the health of the 100 or so employees who have undergone the surgery since the policy to cover it was put into place in 2007.

“Almost immediately, after the surgery, if someone was diabetic or pre-diabetic, that risk factor was reduced or went away completely,” he says.

Whether the surgery will be cost-effective, though, depends largely on whether the patient experiences complications, says Steve Nyce, a senior research associate at Watson Wyatt Worldwide.

Nyce, who will soon publish a study on the cost-effectiveness of the surgery, says problems that can accompany such procedures may be avoided by requiring patients to undergo the surgery at a center of excellence, a requirement established by the Centers for Medicaid and Medicare when it began covering the surgery for qualifying patients in 2006.

Centers of excellence are surgery centers in hospitals that perform the most common weight-loss surgeries at least 125 times a year. Surgeons must have performed at least 125 surgeries overall and at least 50 surgeries a year.

In the U.S., 339 hospitals with 589 surgeons have been designated as centers of excellence. More than 400 hospitals and 700 surgeons are in the application process, according to the American Society for Metabolic and Bariatric Surgery.

The Centers for Medicare and Medicaid Services covers the surgery for people with a body mass index of greater than 35 and at least one other health condition. (A person with a body mass index of greater than 25 is considered overweight; someone with greater than 30 is considered obese.)

Before they agree to cover such surgeries, health plans are increasingly requiring patients to go to centers of excellence as well as first enrolling in a weight-loss program, says Debra Draper, associate director at the Center for Studying Health System Change.

“There is concern that there is overutilization,” Draper says. “The surgery is seen as a last resort.”

At Harrah’s, for example, an employee must follow a weight-loss program, lose weight and change his diet before getting the surgery. Afterward, the patient must attend post-surgical counseling to keep the weight off and remain healthy. Shovlin says none of his employees has experienced any major complications.

Based on preliminary data from his analysis of 40 employers that cover bariatric surgeries, Nyce says he has discovered two conflicting scenarios.

The first is the good news: Median health care costs of patients who underwent bariatric surgery dropped 30 percent per member per month after surgery, to $350 a month from $500.

The bad news: Those savings, on average, were negated because of a small handful of complications from surgery.

“There are going to be a number [of people who get the surgery] that benefit greatly. There’s a certain percentage that will cost quite a bundle,” Nyce says. “All said, it ends up not being cost-effective on the average, because you have a few cases that are quite high-cost.”

Most weight-loss surgeries reduce the size of the stomach to generate a sense of fullness after eating a small amount of food. The most common complications are feelings of nausea, vomiting and cold sweats that result from digesting too much food or eating too quickly. More serious complications can include ulcers that form when the intestine is reattached to the stomach, a complication that can sometimes be attributable to the skill level of a surgeon.

Nyce says 18 percent of the patients whose surgeries he studied experienced complications during the initial hospital stay, according to his preliminary data. In the 12 months after discharge, complications rose to 48 percent. He says those who had complications were more likely to have had other health problems before the surgery.

“When you have more health issues, more things can go wrong,” Nyce says.

He has not yet been able to study the cost-effectiveness of the surgery on health care five or even 10 years down the road. Such data could help employers decide whether covering the surgery leads to dramatic long-term cost savings.

Still, Nyce believes that as complication rates decrease, more employers will cover bariatric surgery at centers of excellence for qualified patients who meet weight guidelines and make an effort to change their diet and to exercise.

“My recommendation,” he says, “is to certainly realize, if you are going to cover it, that these restrictions are important.”