Healthcare is worth fighting for…
A tidal wave is coming—and nobody is paying attention to it. It’s time to sound the alarm now before it’s too late. I’m talking about the cost of healthcare.
If you haven’t noticed, our current pandemic is wreaking financial havoc on our hospitals and emergency centers—even as they lead the charge in treating victims of the virus. Otherwise healthy people are avoiding their doctor whenever they can, postponing or cancelling checkups or elective surgeries, which is causing hospitals to hemorrhage massive amounts of money. Our hospital system in Missouri, for instance, lost $57 million in one month.
Even when we get the pandemic under control, the bill for those losses will come due. The question is, how will we collectively pay for it?
A Journey of Discovery
Years ago, long before we faced our current pandemic, businesses all over the country were trying to adapt to getting sucker-punched by the cost of paying for our healthcare.
This was at the start of the consolidation of the healthcare industry where independent physicians were being snapped up by the big hospital systems to create that I began to call the “Holy Trinity” of hospitals, physicians, and specialists all effectively working under the same roof.
Over the span of just a few years we then saw our healthcare costs grow on a compound basis 20% to 40% per year. All of a sudden, a line item that was easy to overlook was now threatening to torpedo our business. It went from a blip on our radar to a blimp. We thought our insurance policy was designed to protect us, now it threatened to eat us. We wondered why we were being punished because we paid our bills on time.
We weren’t alone. In fact, we helped form coalition of a couple dozen businesses in our county to work together to understand why healthcare costs were going through the roof. We wanted to pool our purchasing power. The healthcare system couldn’t ignore us if we worked together. We wanted to start a revolution. The media started listening to us—and the hospital system was grudgingly forced to listen as well.
Once they realized we weren’t going away, the hospital even named several business leaders like myself to their board. The idea was to bring the entrepreneurial ideas of the marketplace into the hospital. But it may also have been about, as the old saying goes, about keeping your friends close but keeping your enemies even closer.
For our part, joining the board was all about gaining inside knowledge about how we could do everything in our power to control these rising costs and protect our people and our company. It was an opportunity to ask hard questions and get answers in return. After all, we were paying the bill. We wanted an explanation of why costs kept increasingly and what we could do about it.
Over the next 18 years, I was involved in numerous healthy debates with administrators and doctors. I’ll never forget one such debate with a physician who flat out told me that if we wanted to keep our healthcare costs under control, we should understand that it was within our control; not theirs. In other words, if we wanted to have lower healthcare expenses—we had to stay healthy. That blew me away.
What that doctor was telling me was that the real secret to controlling healthcare costs was taking personal responsibility. We needed to take responsibility for our impact on the costs.
Businesses as Teachers
While there are a lot of people who talk about bringing socialized medicine to the United States, the question of how to pay for that kind of coverage remains. The mistake many people make these days is thinking that other countries practice healthcare better than we do—or that they spend less than we do. That’s a failure to accurately benchmark our system against the other players. It’s not that people in other countries pay less in healthcare costs than we do; they just pay it through their taxes—just like we do with Medicare. I remember meeting someone from Sweden who told me that 17% of their taxes went towards paying for healthcare. But everyone believes Sweden doesn’t pay anything for their healthcare.
We need to play the role of teachers to our associates when it comes to explaining what drives healthcare costs. We can do that by creating a sense of ownership among your people. We can bring the marketplace to our people and allow them to be active participants rather than just standing still and paying the bills. For example, we have been able to keep the costs to our associates under control for more than a decade by bringing knowledge to the people in our organization of how healthcare services operate. While the average annual healthcare expense is about $28,000 for a family of four, our company averages less than $12,000. As a self-insured business, we benefit from some of the lowest costs in the country—40 percent below the national average.
Learning on the Job
While other companies try to keep their costs in check through managed care programs, we have been able to keep our healthcare costs under control by using our weekly huddles—where our associates gather in person or virtually to review our organization’s financial health—to learn about what drives up healthcare costs. Since we pay every invoice, we know the actual allocation per associate, per company (though we don’t disclose any individual information). Our people own that line on the income statement rather than looking at it as just an entitlement. The less we pay out in healthcare costs, the more we can reinvest in them through higher wages, bonuses, or investing in the growth of the company they own.
One teaching example we have used, for instance, is when associates don’t have a primary care physician and go to the emergency room instead. That increases the cost to the company threefold or fourfold. We focus on education and total transparency by sending out a monthly “critical number” scorecard to all of our associates letting them know how much our company spends on healthcare and drug costs each month. We keep this scoreboard as a way to track our progress and make improvements. After all, how can you improve something you don’t track (all while keeping the individual information confidential)?
Taking Ownership and Responsibility
The silver lining with the pandemic is that if people maintain these safe practices, like washing their hands, wearing masks, and staying home when they’re sick, we will save billions of dollars by having healthier employees. It’s preventative maintenance that has nothing to do with the pandemic and its things we should have started doing long ago.
If you take this transparent approach and encourage your people to think things through and take well-informed action—to take ownership and responsibility—we can get this tidal wave under control before it overwhelms us. Now imagine what kind of ripple effect it could have on society if every organization out there taught its people how they could better control their healthcare costs—and live healthier lives as a result? It would be profound.
Jack Stack is president and CEO of SRC Holdings Corporation and author of The Great Game of Business and A Stake in the Outcome. Inc. Magazine called him the “smartest strategist in America.” His new book with co-author Darren Dahl is, Change the Game: Saving the American Dream by Closing the Gap between the Haves and the Have-Nots (Advantage Media Group, Jan. 1, 2020). Learn more at greatgame.com.
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