By David Spear, EVP of Sales and Strategy
I’m a bit new to the healthcare industry, though as a consumer I am quite aware how the current dynamics in healthcare drive our behavior in all the wrong ways.
As a consumer, I can’t tell you how many times I’ve been told “don’t worry about the cost, insurance will pay for it,” or “I just covered my deductibles and now every procedure, doctor’s visit, and prescription is FREE for the rest of the year!”
We’ve all probably heard this at some point in our lives, and sadly, everything we’ve been told is wrong. For the self-funded health insurance Employer Group, nothing is free. Just the opposite, actually. Outside of the patient portion of any cost-sharing arrangement in the plan, it’s the employer that is stuck paying every single dollar spent on healthcare! Now, as if that’s not bad enough, let’s tack on some overspending—with what I like to call Extreme Price Variation Spending. This fiscally devastating phenomenon occurs when employees choose providers for a single procedure and unknowingly pay Extreme Prices. What’s worse, a low-cost, high-quality, in-network provider just down the street was offering the same procedure at a vastly lower negotiated discount with the health plan network.
Starting to get the picture? Self-funded employer groups are getting clobbered!
Now, I didn’t realize all this until recently. As I mentioned at the beginning, I’m new to the healthcare industry; my background is in consumer electronics manufacturing. It’s a fun Industry, with all those neat electronics we all use every day. And there’s one thing we’ve all come to understand and expect about consumer electronics: every year we get more features for less money.
That’s no accident, either.
As the head of engineering for a consumer electronics factory, we would bend over backwards to shave some pennies off the cost of a consumer product, or to put a Quality Team on a project just to raise the quality level from 99.90% to 99.91%.
That was my world! Pareto Analysis, Fishbone Charts for Root Cause Analysis, histograms, parts per million, and quality teams set up everywhere! All to find an extra penny or a fractional percentage of improvement in quality, because that’s what it takes. As the great quality guru Dr. Joseph Juran once said, “All improvement happens project by project, and in no other way.”
All of this is to say, we were obsessed with making products available at the absolute lowest prices with the absolute highest quality of the product! Why? Because we were competing for our lives in a free market where prices were not hidden!
Fast forward to healthcare, and the dilemma self-funded employer groups are in. Their costs and associated premiums just keep going up, and there seems to be no end in sight. Right?
All the quality tools that are used in consumer electronics manufacturing to make a top-of-the-line 55-inch 4K HDTV available for $449.99, down nearly 20% year-over-year, can and should be applied in healthcare! Employers need to think about their benefits the same way we used to think about manufacturing the highest-quality consumer electronics at the lowest possible cost.
Follow the Consumer Electronic Industry Model:
- Measure your medical overspend problem with a Claims Hindsight Analysis—immediately!
- Learn what a Pareto Chart is and identify the “vital few” to target.
- Create a Quality Team and identify corrective actions for those “vital few.”
- Implement corrective actions.
- Repeat steps 1 through 4.
- Repeat steps 1 through 4.
- Yes, Repeat steps 1 through 4! This is your Continuous Improvement Process!
You don’t need to be blind anymore! Open your eyes and start your own Quality Improvement Process to drive overspending out of your healthcare costs!
Want to learn more? Contact me directly to address your medical overspend.