Is benchmarking helping or hurting your company’s cost-containment strategy? Guest blogger Linda K. Riddell shows how relying on benchmarks can mean ignoring other cost-cutting measures. Share your thoughts in the comments. —KMB
Comparing one group’s health claims to another’s is touted as one way to zero in on cost-saving opportunities. The problem is that benchmarking hides more opportunities than it shows.
Let’s take XYZ Inc., an example based on a real company located in southwestern United States. Its group had 291 emergency room visits per 1,000 people covered; this compared very favorably to the state average of 363 per 1,000 people. Many benefits practitioners would look at this comparison, then move on to other cost-saving opportunities. After all, the group is doing better than the benchmark.
Yet, at $1.4 million per year, XYZ was making a huge investment in emergency care — even after its health plan raised its emergency room copay in an effort to discourage over-use.
Instead of giving up, XYZ’s leadership investigated why employees were going to the emergency room. A closer look showed that nearly one-third of the visits were for superficial injuries like insect bites, bruises and blisters. The higher copay was not a deterrent to these employees, as the majority earned more than $50,000 per year.
Since the company was part of a conglomerate, XYZ’s affiliates were covered by the same health plan. The new copay was effective at the other companies, whose employees earned markedly less. This also meant that they could not have different emergency room copay for just XYZ. Its solution then was to educate employees about when to go to the hospital for care and when to go to the freezer for an icepack.
The group also found lots of employees’ ER visits were due to injuries from weekend sports. This was another area where education went a long way — for example, finding out which sports were most popular and designing giveaways and awareness campaigns to match.
Another cost driver was ER visits for abdominal pain, chest pain and cardiovascular symptoms, such as irregular heartbeats. Since half of the group was age 40 or younger, young patients who arrived with chest pain were given an extensive battery of tests, since symptoms could be the sign of something very serious, thus driving up the cost per visit. However, the majority of these symptoms likely were due to stress and not an impending heart attack.
Indeed, employees had a logical reason for increased stress: XYZ Inc. had laid off almost a third of its workers in the prior year. Though the company could not reassure workers that the layoffs were over, it worked to address job security issues before the rumor mill ran amok. Studies show that job insecurity and uncertainty boosts health costs.
XYZ wouldn’t have taken any of these steps to improve employee if it had been satisfied with beating the benchmark. Smart health cost cutters strive to be the best they can be, not just better than the other guy.
Guest blogger Linda K. Riddell is a principal at Health Economy, LLC, where she works with clients on gaining practical tools to comply with health care reform, and to maximize the new opportunities that health reform offers. She can be contacted at LRiddell@HealthEconomy.net.
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