At a recent UBA (United Benefit Advisors) conference, keynote speaker John Torinus Jr. and author of “The Company That Solved Health Care,” shared his 50 years of experience studying and practicing business management and the five steps to control healthcare costs.

According to John Torinus Jr., organizations can take immediate steps to manage costs and improve the health of their workforce.  Below are the basic steps that companies can take to address the hyperinflation of healthcare costs and premiums:

1. Adopt a consumer-driven health plan (CDHP). That means setting up personal health accounts for employees – either an HSA or HRA – as an offset to higher deductibles and co-insurance. Behavior immediately changes, since plan members are spending their own money. Over-utilization disappears. Consumerism appears. Employees start shopping for price, service and quality. Lifestyles improve. CDHP premiums are typically 20%-40% below those of standard plans.

2. Make prices and quality transparent. Various web sites in different regions of the country display prices from providers, and some show quality ratings. Find the one that works best in your market and make it user-friendly for your employees. Prices vary by a factor of three-to-one in most markets for medical procedures, so huge savings are available with sharp consumer information.

3. Identify Centers of Value (COV). Not all providers are created equal. Some have far better quality metrics than their peers. They are often the hospitals and clinics that have adopted lean management disciplines. Some lean hospitals have, for instance, eliminated infections in their operating rooms. That’s where you want to be for a procedure. Prices often track with quality. In other words, better quality and lower prices go together. COV prices are often 30%-40% less than standard, and some offer a comprehensible all-in bill. Publish a list of the Centers of Value in your market.

4. Emphasize primary care. Intimate primary care keeps people out of hospitals, which are dangerous and expensive places. One night in a hospital can cost $5,000. Preferably, bring a clinic on-site at your organization, even if it is staffed by a nurse practitioner instead of a doctor. If that’s not possible, find a nearby clinic that will offer convenient primary care. Costs drop by about one-third when your own primary care doctors and their staffs become the front end of the medical system.

5. Get serious about chronic disease. The experts agree that the 80-20 rule applies in health care, that 80% of the costs are incurred by 20% of the people, those with chronic disease conditions. An effective primary care team can provide a medical home where chronic conditions, like diabetes, asthma, hypertension and depression, can be treated in a systematic, proactive manner. These conditions can be managed so they don’t become catastrophic and horribly expensive. You owe it to your employees to create a support system to help them avoid poor health and the hospital.

John Torinus Jr. has studied and practiced management for fifty years as well as has chaired one task force on health care reform and served on several other health care policy groups.

(Photo credited to money.cnn.com)

DISCLAIMER: Because of the generality of this update, and based on particular situations, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice, financial advice and/or the advice of a licensed insurance or certified human resource professional.

© Connelly, Carlisle, Fields & Nichols 2012