Scott MacStravic, PhD
It is common practice for hospitals that are increasingly investing in employee health management (EHM) for their own workforces to operate their own programs. On the other hand, it is often the case that it is both less expensive and more effective for them to outsource one or more elements of the EHM strategy, which include:
If they outsource any or all of these elements, however, hospitals and other healthcare organizations (HCOs) that invest in EHM must still be active and enthusiastic partners in the effort, rather than passive customers waiting for the results and economic gains to emerge. Moreover, for hospitals that have taken EHM one step further, by offering their own programs as a revenue-generating service line, will want their employer clients to be enthusiastic partners as well, since only enthusiastic partnerships will achieve and learn about the full economic benefits and ROI from EHM investments.
For example, unless the hospital (or the employer client in that application) cooperates fully in the assessment process, chances are that a far less complete and accurate analysis of the workforce health status, risk behaviors and conditions, chronic diseases, and impairment in productivity/performance related to these as well as other impairment factors will result. Usually an incentive, of at least $50 to $100 must be offered to all employees and paid to all participants in the assessment process in order to achieve even majority participation. And any employee who does not participate will be an “undiscovered land” when it comes to planning and targeting employees for participation in specific EHM interventions.
Moreover, any employees not included in the baseline assessment cannot be included meaningfully in the EHM evaluation, since there will be no baseline data available as the basis for determining results. And any who participate in the baseline assessment but not repetitions used for evaluation, will be absent from the results analysis. While “non-repeaters” may be assumed to achieve anywhere from no improvement to the same degree of improvement as those who take both baseline and repeat surveys, there is no way to validate either assumption, unless there are no or minimal non-repeaters.
Enrolling and retaining employees in EHM initiatives based on their assessments is an equally important partnership challenge. Employers normally invest in both promotional efforts and incentives for participation in order to achieve high levels thereof. Full and enthusiastic participation by employees may require significantly greater incentives than are adequate to get high participation in assessments, since the assessments take only minutes of employees’ time, while participation in initiatives can take many hours and even days of time for best results. Supporting EHM initiatives by offering healthy food in cafeteria and vending machines, or discounted/free gym memberships, classes and activities onsite is another way hospitals and other employers can be effective partners.
Many employers conduct “team contests” to stimulate peer support as well as competitive motivation among EHM participants, with rewards for best teams to add to incentives or even substitute for individual ones. Creating websites that team members can use, or web pages for individual participants, can help maintain motivation and participation, while “group support” websites or other “healthy community” support can also help. Contests for individuals are also effective, though may disappoint the “losers” and fail to have the best total economic impact, which includes employee retention effects.
Partnering in the measurement process is one of the most essential, yet least common practices among employers. For example, a recent report indicated that only 38% of employers surveyed even measured the ROI they achieved for their EHM investments, though this was up from only 23% in 2006. [“Wellness: Saving Lives and Money” 2007 Willis Survey (Willis Americas Employee Benefits – North America) (request: willisebsurvey@willis.com)] Only 55% even compared costs after vs. before their EHM strategy was implemented.
Measurement can be an expensive and risky business investment. It may require repeated contacts with employees that risks angering them, for example. Unless assessment surveys are used to estimate productivity/performance impairment, the costs of measuring these sources of the majority of EHM economic impact may threaten ROI therefrom. Moreover, basing “discriminatory” incentives on some elements evaluated may risk federal government or union displeasure and negative responses thereby.
For example, federal regulations effective in 2008 appear to prohibit paying smokers for quitting, unless employees who already do not smoke get similar incentives for their abstinence. Paying employees for weight loss may be deemed discriminating against employees who are “disabled” by their “eating disorder”. Even collecting and analyzing information about employee health may be deemed a violation of HIPAA rules. Hospitals will have to be extremely careful what they pay employees for, in addition to incurring the financial costs of paying incentives in the first place.
There is a way around both problems, of course. Since it has long been perfectly legal and an accepted business practice to pay employees more if they produce more and perform better, using an internal “pay-for-performance” (P4P) program can minimize both risks and costs. There should be no risk in paying more to employees whose improvement in their own health risks or impairment factors has yielded measured improvements in their output or other performance dimensions. Moreover, this could mean that no incentives need be paid for participation in EHM initiatives, since P4P bonuses or awards would only be paid to employees who succeed.
In addition, the amount paid can be made to precisely match the degree of improvement achieved by each individual EHM participant, rather than the same large amount for all participants, or all who “succeed” in enrolling, actively participating, or completing the EHM initiative. It would substitute for incentives that pay for changes in behavior, or even for improvements in health status, since both are problematic. Moreover, P4P systems in general have been shown to stimulate increases in productivity and other performance measures, by themselves.
Hospitals have the added interests in devising and adopting P4P systems because of the various systems that are being used to determine their revenue. Once such systems are in place, they will enjoy far greater potential for accurately and reliably measuring the improvements achieved through EHM investments. This will also tend to prevent employee “enthusiasm” or “over-optimism” in reporting their upfront impairment or degree of improvement when incentives are offered for such improvement.
In any case, the more hospitals behave as enthusiastic and effective partners in EHM efforts, as clients of EHM suppliers – or get their employer clients to do so when the hospital is the supplier – the greater is the likelihood for achieving and accurately/reliably measuring the total economic impact of EHM investments. And the more accurately and reliably such impact is measured, the more likely it is that hospitals and their clients will continue to invest in EHM, and enjoy continuing and usually increasing benefit therefrom over time.
Dan DeLaySenior Vice President, Supply Chain Analytics, VHA Inc.Although I stared at my cards intensely for several seconds, I couldn't seem to change the 6 of clubs into the ace of hearts. So I rolled the dice--well, not literally, since I was playing blackjack--and stayed on 16. Dealer busted and I doubled my $10 bet. Ok, so I'm not a high roller, but does the casino know that? Short answer, yes.
What happens in Vegas does indeed stay in Vegas--for a lot longer than most people realize. An article in the Washington Post caught my eye; it provided insight into the operations behind the scenes of the world's most prestigious casinos. The eye in the sky is always at work, with experts behind closed doors analyzing information about players and employees. In fact, not only do they share data with other casinos (even using facial recognition software), but they track players' wagers as well as wins and losses, so they know who is a high roller and should get special treatment.
Should the approach to health care be different? Except instead of applying analytics to tracking people/players, it's using technology, data and expertise to track products/supplies. The goal is to learn as much about the product as possible to ensure that it is correctly utilized throughout the supply chain. From evaluation to purchase to receiving to utilization–-it’s important to keep tabs on your operational efficiency because it has a tremendous impact to your bottom line.
Once you have this practice in place, you can determine important information such as if your purchases are on contract and if you qualify for the right tier. Or if purchases are being influenced by factors outside of the materials department. Bottom line, the more information you have about your supply chain, the more you take the gambling out of making strategic business decisions. Insight into your supply chain is important as ever and thanks to technology, data and expertise, it is more possible today, than ever before. So don't roll the dice when it comes to making decisions about the health care supply chain, because using an analytical approach to understanding how it operates is as good as betting on a sure thing.
When I began my career in health care marketing thirty-five years ago, almost no hospital, physician practice, or other healthcare provider was doing anything that could be called marketing. Advertising had been condemned by the American Medical Association, and was not covered as a “legitimate” expense by Medicare. And many providers operated in as non-marketing a fashion as can be imagined.
The hospital associated with the university where I was teaching at the time, for example, offered two appointment times for its outpatient services – one at 8:00 AM, the other at 1:00 PM. Everyone needing care got one or the other, meaning that the lucky and savvy patients who arrived an hour or more before their appointments might have to wait as little as an hour for care, while those who didn’t understand the “system” waited for as long as four hours.
My first marketing consulting engagement involved a hospital-sponsored primary care practice which had opened in a beautiful and technologically superior facility in a small community about fifteen miles out of the city. Despite its highly qualified staff (with privileges at the academic medical center hospital) and a location on a main highway with convenient parking, it was seeing only a small number of patients. As any first-year marketing student could probably have done, I made a few modest recommendations, which were followed, and the practice became a virtually immediate success, and the first of a series of successful practices throughout the hospital’s market area.
For example, the physician who staffed the practice was supposed to show up at noon every day, so appointments were set beginning at that time. But he actually showed up at closer to 1:30 PM, meaning that patients had to wait at least an hour and a half if they had a noon appointment. And the staff all parked around the back of the facility, leaving the spaces in front for patients, but making it look as if the facility was closed to any passers by unless there happened to be a patient parked in the front.
By changing the hours when a physician was present to begin at 8:00 AM, and having the physician present at that time, plus having one or two employees always park their cars in front every day, and a modest amount of advertising, we managed to bring in enough new and repeat patients to ensure the practice’s success. After all, patients could drive down to the city, be seen by a physician there, and get back home in less time than they had been waiting for care before the changes, so by merely making the practice competitive with that option, success could be achieved.
Since that time, things have improved a lot, though often more in the extent of advertising use than in the adoption of truly “customer-centered” service philosophy and behaviors. I was struck by how far we have come, based on a personal experience I recently had with an urgent care center. The medical quality was fine, as far as I could tell, for a simple challenge of removing a number of stitches put in a week before during minor surgery. But the personal service was truly outstanding, from my experience, at least.
A week later, rather than drive the long distance and take a ferry ride to the where I had the surgery, I went to the Madrona Hill Urgent Care Center in Port Townsend, Washington for that minor procedure. I had earlier phoned the practice where I had the surgery to make sure that was okay, and after leaving my message and phone number with them, got a call back giving me approval to get the stitches out a day early since that way I could avoid a special trip to the urgent care center, twenty miles away, as I was going to be in the area anyway.
Having been to the center before, check-in was prompt, and I was in the treatment room in five minutes. The RN, Alice, a customer service gem, explained that she had to get an okay from the practice where I had the surgery, and would call to get it immediately. She came back a few minutes later to explain that they had not yet sent the fax okay, and apologized for the wait. She returned again a few more minutes later, saying that she still had not received the fax. She asked me if the woman she noticed in the waiting room was my wife, and getting a confirmation of that fact, went out to her to explain to her why there had been such a long (15 minute) wait.
She soon returned, and efficiently/painlessly removed the stitches, putting on a couple of butterfly bandages to ensure the incision continued healing, and applying a larger bandage to cover it. She had been smiling and pleasant throughout, and I cannot even imagine a better customer experience in terms of the elements she could control. Only the inability of the surgery practice to get a fax sent in less than twenty minutes extended my service experience, and I brought a book to that one as well.
It is impossible to generalize from this experience whether service quality in medical care has improved in general, nor even if everyone who goes to the Madrona Hill Urgent Care Center gets such superior service. But it makes me happy that I played a role in, or at least was able to observe the dramatic improvements that I know have happened over the past 35 years in health care.
Paul FrankenbergPresident, CEO, and Principal, Kraft Search Associates
Effective, laser-focused executive recruiting is vital in any organization. Every CEO will agree that hiring and retaining high-quality executive leadership is crucial to achieving their strategic business goals. However, very few CEO’s have accurate data to openly discuss the true cost of a bad hiring decision. Yet, when it does happen, it’s too personal and too painful to study under a financial microscope. But it’s not a question of guilt or blame. The real question is, “How could it have been avoided and how can we reduce making mis-hires in the future?”
First, let’s quantify the problem. Author Bradford D. Smart, PhD, concludes in his book Topgrading: How Leading Companies Win by Hiring, Coaching and Keeping the Best People, “With an average base salary of $114,000, the average total cost associated with a ‘typical’ mis-hire is $2,709,000 - greater than 24 times the person’s base compensation.” And this dollar amount increases or decreases as salary levels (and responsibilities) increase or decrease.
Using the formula provided by Dr. Smart, a bad hiring decision involving a $60,000 per year employee would cost the organization only $1.4 million, whereas a bad hiring decision involving a senior level $350,000 per year executive would cost the organization a staggering $8 million.
If you’re trying to rationalize these amounts, think about the long-term opportunity costs that can result from sub-standard service, inadequate research, missed deadlines, failed marketing campaigns, missed sales targets, flawed accounting or investment strategies, and so much more. Once you dig in and begin to analyze the possibilities, it all starts to make perfect sense. In addition, you recruited the employee at considerable expense, you invested in their orientation and training, you put up with sub-standard performance and results for some period of time, and, adding insult to injury, you may have had to pay a severance amount to get the employee to leave. And finally, you incur all of the “hard” executive recruiting costs for the replacement employee, and you absorb various additional costs during the ramp-up of the new employee to their target productivity level.
It’s clear that executive recruiting can become a form of high-stakes poker. But, what if you’re a bit of a skeptic and you’re thinking these costs are overstated?
First of all, I should mention that I have over twelve years of experience in the executive recruiting industry, and I believe these numbers are close to the mark. And I have personal knowledge of captains of industry in Fortune 100 companies who likewise support these findings. But go ahead. Cut these costs in half. Change 24 times salary to 12 times salary. Or if you’re really a skeptic, go ahead and cut them in half again. You can’t escape it. Even at a mere 25% of the researched amount, you’re still looking at a $2 million dollar cost for a bad hiring decision involving a $350,000 per year executive!
Over the years, I’ve had the opportunity to work with venture capital and private-equity backed healthcare companies as well as with multi-national Fortune 25 organizations to assist in the recruitment, selection and retention of key organizational leaders. And along the way, it’s been clear that most organizations simply don’t attempt to measure the real cost of a mis-hire, although the company’s leaders conceptually acknowledge the cost is significant. In fact, I’ve found that many corporations avoid the calculation by simply not agreeing on an appropriate formula, despite the fact imperfect information exists in all of their other decision making processes. It’s too easily dismissed as just another “cost of doing business.” But I’m convinced this cost could be materially reduced.
Across industries, it’s reported that internal corporate executives consistently recruit and retain the “right” manager or executive for twelve months or longer less than 55% of the time. This seems rather low and you’d reasonably expect professional executive recruiting firms to provide significantly higher results. However, industry experts tell us the average executive recruiting firm gets it right only approximately 65% of the time. And, it’s this knowledge that drives us to consistently deliver thorough and measurable search quality outcomes for our own clients.
3 Ways to Improve Your Executive Recruiting Outcomes: 1. Using a retained executive recruiting firm is not always the correct answer to finding the key executive for your business or organization. Retained executive recruiting firms are excellent resources at the right time. However, internal candidates, board members and industry colleagues can be valuable resources in your executive recruiting efforts. These individuals may be candidates individually, they may be able to open their rolodex, they may provide comments about desired candidate characteristics, and they may recommend retained executive recruiting firms for you to talk with. If you use a retained executive recruiting firm, do your homework by interviewing the firm to understand who will work on the search, ask for specific examples of recent searches, ensure competency in thoroughly and accurately completing your search and inquire about the firm’s quality outcomes, or metrics, to understand the true alignment between your company and their process.
2. Plan a thoughtful and well-prepared interview process. Each interviewer in your company’s process must have a clear understanding of his or her role in the process in assessing the candidate’s skill set, experience, motivation and cultural fit. The absence of interview structure will be recognized by the candidate and, more importantly, will lead you directly down the path to a costly mis-hire.
3. Ensuring that the new executive is successful requires consistent and regular communication between the hiring executive, the successful candidate and specific, internal colleagues. Managing the individual’s integration into your company for the first 90 days will provide an excellent basis for long-term retention. Following the first 90 days, monthly and quarterly communication further develops relationships, provides clear strategic direction and reinforces cross-functional interaction and discussion.
At an average cost of $2,709,000 per mis-hire, I encourage all business leaders to take a closer look at their executive recruiting processes, determine where and how these processes lead to false economies and added costs, and then take reasonable steps to better manage these processes. A bad hiring decision can be a significant drain on the bottom line. But, here’s the good news, it can be reduced.
Barbara Straub Williams, Esq.Principal, Powers Pyles Sutter & Verville, PC, Washington, D.C.The January 2008 hfm article “Regulating Long-Term Care Hospitals: Is There a Roadmap from Ad Hoc Limitations to Clarity in Certification and Coverage?” dealt with Medicare regulations that have attempted to control the expansion of LTCHs by restricting certification, patient access, and payment. After this article was sent to press, Congress passed the Medicare, Medicaid and SCHIP Extension Act of 2007 that significantly modified the payment provisions discussed in the article, and President Bush signed it into law on Dec. 29, 2007.
Highlights of Section 114 of the legislation are:
Extended Business Office Perot Systems Extended Business Office solutions can help you achieve a high-performing revenue cycle through strategic collaboration with your team. 800-659-8883 revenue cycle solutions www.perotsystems.com/revenuecycle
Perot Systems Extended Business Office solutions can help you achieve a high-performing revenue cycle through strategic collaboration with your team.
800-659-8883
revenue cycle solutions
www.perotsystems.com/revenuecycle
