October 6, 2009 | Brett Chase , Portfolio.com
Fed up with rising health costs, CEO Lewis Dickey of radio-station owner Cumulus Media has used software from WellNet Healthcare to identify $4.1 million in potential savings. Chief executive Lewis Dickey is taking an unusual step toward tackling health care costs: He's taking charge of the matter himself.
The head of Atlanta-based radio-station owner Cumulus Media Inc. scours data to learn what drives cost increases. Fed up with his human resources department's inability to halt runaway costs, he personally took over analyzing health care trends for his 3,500 employees.
Most CEOs delegate such tasks. But technology is allowing top managers such as Dickey to get more involved. He uses a software system from WellNet Healthcare in Bethesda, Maryland, that tracks pharmacy claims on a daily basis, helping him size up and manage health care costs. WellNet helped him identify $4.1 million in potential savings for Cumulus. One way to save: using nurses to counsel employees at high risk for health problems in the hopes of reducing hospital visits. WellNet also saved the company $400,000 by negotiating prescription-drug pricing and is identifying ways to save more money by switching employees from branded medicines to cheaper alternatives.
"The more time I spend with it, the amount of inefficiencies become very apparent," Dickey says. "Most of this does not make its way to the C-level. It's handled at human resources. I think that's a big mistake today."
Surging health insurance costs are a challenge for companies big and small. The average family premium for all employer-based health plans is $13,375, up 34 percent from five years ago and up 131 percent from 10 years earlier, according to Kaiser Family Foundation. Another group, Business Roundtable, predicts premiums will rise to almost $30,000 a year a decade from now unless health reform is passed.
As high as health care costs are today, they would be even steeper if companies weren't using data to help develop programs to combat costs, says one industry expert.
"It would be unimaginable to not have this analytic capability," says Helen Darling, president of the National Business Group on Health. "It would be a little like not having financial statements."
Despite the increasing frequency of upward premiums, there are companies that buck the trend. Some even hold their health insurance costs in check, says Michael Miele, president of the Princeton, New Jersey-based Healthcare Analytics division of insurance broker Arthur J. Gallagher & Co.
"Almost every one of them will tell you that they started with a deep base of analytics," Miele says.
Miele's group looks for clues to rising costs by studying hospital admissions, prescription patterns, and medical management cases. Miele tries to save companies money by challenging a company's health care vendors when a problem is detected.
Some companies are turning to vendors like WellNet, which creates programs aimed at simplifying information so even CEOs who can't maintain a full-time focus on the health care problem can quickly understand what's driving higher costs.
Michael McBride, CEO of nursing-home operator HMR Advantage Health Systems of Easley, South Carolina, says in years past he relied on data provided by insurance brokers that was cumbersome and not as easy to understand.
"They were just basically a messenger for the carriers with no efforts made toward claims management," McBride says. "I just knew we couldn't sustain 18 to 19 percent increases a year when the revenue stream was going up 3 percent a year."
Like Dickey, McBride turned to WellNet.
Using pharmacy-claim data, WellNet identified 379 of 1,900 HMR employees as high- or moderate-risk for health problems. A high number were identified as having high blood pressure and other health issues. With their permission, WellNet's nurses reached out to 132 of those employees and found some were not taking prescribed medicines or following up with doctors about medical issues.
WellNet lowered McBride's company health costs by $1.8 million from the year prior by changing employee health practices through counseling. The savings came from fewer visits to the hospital, especially the emergency room.
WellNet found a way to save money on employees' prescription-drug costs too. It studied HMR's drug spending and found the cholesterol drug Lipitor was costing the company on average $466 per employee each year. So WellNet suggested that HMR try switching employees over to an older, cheaper drug by offering to pay for that medication for three months. Twenty of the 48 Lipitor users ultimately converted to the cheaper medicine, which will save HMR around $5,000 a year. WellNet says there are at least 30 other drugs HMR employees are taking that can be replaced with cheaper or generic alternatives.
"We're self-funded. The only way you can control costs is through reduced claims or manage the claims you have," McBride says. "Our attempts are to drive people to more healthy lifestyle with some coaching and managing."
WellNet President Keith Lemer says top managers should get involved with health care oversight. Chief executives and chief financial officers understand the economics of ordering paper better than they understand major expenses like health care costs.
"If they want to control it, they have to take control," Lemer says.
Dickey concurs. "I could immerse myself in office supplies, and in 15 minutes I could have a knowledge about that," Dickey says. "It's a simple thing to jump into. But understanding health insurance is different."
