Tuesday, April 22, 2008

Employer-Based Health Care Cost Control: Lessons from Safeway

The opening session of Tuesday’s World Health Care Congress hosted Steven Burd, CEO of Safeway. In 2005, this company launched a 4-pronged, in-house health management program for its employees consisting of 1) financially incented behavior change, 2) cost transparency with increased out of pocket costs beyond reasonable charges, 3) a special emphasis on prevention and 4) not being shy about increased ‘personal responsibility.’ They’ve reduced their health care costs from $1 billion to just over $800 million despite a countervailing 10% inflation rate. He credits the success to application a Willie Sutton rule: focus on 4 chronic conditions by focusing on the circumscribed principles of behavior change (estimated to about a third of the savings) and transparency (about a half of the savings).


While there is a societal good to the notion of pooled risk, Safeway is embracing the automobile-insurance’ish model: want a flashy car or have a lot of accidents, be prepared to pay a higher premium. It reminds the Disease Management Care Blog of an old adage: help the wounded, shoot the laggards.

'Shooting' may sound harsh, but Safeway is a high volume, low volume business with little room for escalating health care costs. Insurers and government aren’t moving fast enough for the Safeways of this world.

Given the stakes involved, U.S. CEOs are fast becoming de-facto health care executives with a depth of knowledge rivaling the best of the best in the traditional health insurance industry.

The mainstream principles of successful population-based behavior change seem far removed from traditional clinical medicine. That gap is remarkable and getting wider.

The tinkering continues and the program is continuing to evolve. Mr. Burd admitted that he surfs Google Health monthly looking for good ideas. This is very much a moving target. The DMCB wonders about the merits of companies moving their parking lots back from the workplace and limiting-slowing up the elevators/escalators.

Worried about employer-based health police? Maybe, but Mr. Burd said he and his HR department can’t access individual data and they’ve stopped short of firing obese smokers.

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