• WisBusiness

Wednesday, December 8, 2010

The company that solved health care

By John Torinus
Here’s what real health care reform looks like:

Quad/Graphics' health care costs run one-third below the national average because it stresses primary care for its employees.

ThedaCare in Appleton uses the lean disciplines that transformed manufacturing to lower its costs and deliver prices at 30 percent below the Milwaukee averages.

Numerous Wisconsin companies and a few public bodies have deployed plans that include health savings accounts and see costs drop by one-quarter.

Those are huge reductions in the bloated health costs that plague the budgets of most corporations and government at all levels. Put those Wisconsin grass roots reforms together and you have a recipe for a health care delivery system that is more affordable and therefore more accessible.

My just-published book, "The Company That Solved Health Care," tells the story of how Serigraph Inc. in West Bend applied those three innovative platforms – primacy of primary care, value-based care and consumer-driven principles -- and successfully tamed the beast of hyperinflation in health care costs.

The co-workers in Serigraph’s self-insured plan have become engaged managers of their health and their health care costs, and therein lies the solution to the nation’s woes on the economic side of medicine. Engagement of individual citizens has to be at the heart of any effective system. Without heads in the game, without individual responsibility, no system works and costs spin out of control.

The rewards to the Serigraph co-workers are many. Example: they enter 2011 with no premium increases for health care, a stark contrast to the double-digit increases in many health care plans. Small Wisconsin businesses are reporting recent premium increases of 15 percent to 50 percent.

That is the fifth time in eight years that Serigraph co-workers have seen zero increases.

Even with a horrendous year for the company in 2007 because of accidents and cancer cases, total costs for employer and employees have averaged less than 3% per year since 2003.

That was the year I decided to get serious about managing the run-away costs of health care. Our total charges at the time were about $5.5 million, and we were looking at a 15 percent increase in 2004. We simply couldn’t afford an increase of $800,000.

Serigraph is a manufacturer and we often have to meet “the China price” or lose contracts. We live in a world of deflation, where prices in contracts go down in the out-years. It is plain obvious that if your prices are going down, your costs can’t spiral upwards.

Our first big initiative was to become an early mover into what is called a consumer-driven health plan (CDHP). Humana, a big health insurer, had made the move in 2003 to test out the CDHP concept and was getting stunning results. It was holding its annual increases to less than 5 percent.

We decided to follow suit. We made it voluntary, so our people could stay with a conventional plan. But we installed big incentives for taking on a high deductible and 30 percent co-insurance. Today, those incentives add up to about $5,000 for a family plan in the form of lower premiums and health account in the employee’s name.

We made a business bet that people’s behaviors would change enough to offset the cost of the incentives. It worked immediately. Over-utilization disappeared, with overall utilization dropping 17 percent. That pattern has held in the seven years since.

Our experience has been confirmed by two huge studies of consumer-driven plans by Mercer, the big consulting company, and Cigna, the big insurer. Both reported that costs drop by about a quarter. They also reported that people take better care of themselves when they become consumers. They become more active users of prevention and wellness tools.

When people have their own money in play, they act like intelligent adults. When I was in the Marine Corps, martinis were 10 cents at Friday night happy hours. I was occasionally over-served. That’s what happens when any product or service is cheap or free, as it is in standard health plans.

Large corporations have figured it out. More than half now offer a CDHP plan. And 11 percent of covered workers are now enrolled in them, up two points from 2009.

Large corporations are also figuring out what QuadMed figured out 20 years ago, that on-site primary care dramatically improves health and reduces costs. Of the top 1000 corporations in the country, 100 now offer primary care on-site. One projection is for 250 by the end of 2011.

Every health care expert knows that 20 percent of the people with chronic disease conditions cause 80 percent of health costs. On-site primary care doctors and their teams go after those chronic situations and they keep people out of expensive hospitals.

Further, a company’s own doctors become the gatekeepers into the health care system. They order only needed tests, and they refer to specialists only when necessary.

QuadMed is now working its magic with contract clinics at Briggs & Stratton, Northwestern Mutual Life, MillerCoors and others. It employs more than 40 doctors.

Serigraph, with 440 employees, isn’t big enough for a fulltime on-site clinic, but we have contracted for a part-time primary care doctor, nurse practitioner, nurse coach, dietician and chiropractor. Our goal is to help every person with a chronic condition to get it under control.

Such attention to health has helped us drop our average cholesterol count from 209 to 193. We as a group, including spouses, have reduced our systolic blood pressure by three points.

It’s hard to put a dollar value on such prevention and wellness. But it should be totally obvious to any manager that health and health costs go together.

In addition to CDHP gains and primary care, our third major platform for reform at Serigraph is what we call Centers of Value. Prices and quality vary widely in health care, though such variations are hard to see. Medical providers obscure their prices. The sharpest consumers can’t figure out what they are being charged.

Serigraph cut through the fog with a transparency model that shows prices and quality for the most common procedures. Once the curtain is lifted, Centers of Value surface.

We take advantage of the best values by offering rewards to co-workers who buy intelligently. Jerry Minnessale got a check for $2,000 for getting his knee replacement done at a Center of Value, saving the company as much as $10,000. Then he got his other one done and received another $2000.

We reward $500 for colonoscopies at the right place or make them free at the best value centers. In this case, we’re not worried about over-utilization.

Often, we find that providers that have adopted lean philosophies offer the best value. There is no correlation between high prices and quality. Indeed, a reverse correlation appears to be true. As in manufacturing, lean disciplines, low costs, high quality and good prices usually run together.

ThedaCare has been a national leader in the movement toward lean practices. It has eliminated thousands of defects in its practices, millions of dollars of waste and infections in some operating rooms. Gundersen Health also takes lean seriously, and we send people there, too.

Dan Gehres, a screen press operator, needed a discectomy. We offered him a free procedure if he would travel three hours to Gundersen in La Crosse. We were offered a bundled price of $12,500, including the three-day stay for him and his wife. That was about $6,000 below the average in the Milwaukee market. Gehres reported an excellent result and great service.

These major innovations and huge savings found in Wisconsin offer major lessons for reformers of health care at the state and national levels. They constitute major reform from the bottom up, the best kind of reform.

These grassroots reforms work. They are proven models. They’re sweeping across the private sector, and they could still be injected into the top-down access and insurance reform that has yet to be implemented from Washington D.C.

-- Torinus is the chairman of Serigraph, Inc. and author of the book "The Company That Solved Healthcare." Learn more about the book: http://www.thecompanythatsolvedhealthcare.com.


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