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Software // Enterprise Applications

No Quick Cure For Health-Care System

With health-care costs soaring, IT can play a role in fighting further increases.

General Motors Corp. last week unveiled a tentative agreement with the United Auto Workers to cut health-care coverage for retirees, saving it about $3 billion a year. Later in the week, IBM said it's giving 150,000 U.S. employees the option of creating online health records, one of the largest efforts by an employer to push the use of digital medical records.

What's the connection? Companies bludgeoned by soaring health-care costs are starting to take matters into their own hands. The job of containing those costs isn't going to just land on the IT executive's desk, since it's generally seen as human resources' problem. But IT can play an important role, so CIOs and other business-technology leaders must step up to the challenge. "That's the one area where I'm disappointed I haven't contributed more over my career," GM CIO Ralph Szygenda told InformationWeek in a June interview, "and now I'm going to spend some time on it." (GM declined to discuss specific initiatives.)

The problem is huge. Employers today pay 78% more and employees 64% more for health care than they did in 2000, according to HR consulting firm Towers Perrin. This year's expected 8% hike in health-care expenses marks the first time in years that growth wasn't in double digits, largely because of fierce cost fighting by companies.

Companies that use IT to contain costs are doing it in two main categories: tools to help employees live healthier and make better health-buying decisions, and others to better analyze companies' health-insurance costs to find places to squeeze. There's also a push by big businesses to pressure doctors and hospitals to more quickly adopt electronic medical records, E-prescriptions, and other IT systems in their practices to lower costs and improve care (see story, Putting The Pressure On Providers).

This isn't a discussion, however, that's being led by IT executives at most companies. At early-adopter companies, it's generally being championed by HR and benefits pros. But companies that aren't aggressively using these tools are missing an opportunity to strike at one of their most-stubborn costs. If IT leaders haven't considered their role in fighting health-care costs, the time has come.

Wal-Mart Stores Inc. is encouraging that idea. The retailer has a group called the CIO Summit made up of CIOs from more than 20 companies that supply products that Wal-Mart sells. It meets twice a year to discuss pressing technology issues. One topic scheduled for this fall's meeting: The head of Wal-Mart's risk/benefits department will talk with the CIOs about strategies to lower health-care costs. "This discussion is going to be about 'Is there a way we as a group of leading organizations can come together to do something about how health care is managed and how the tools are used in the United States?'" Wal-Mart CIO Linda Dillman said last month at the InformationWeek Fall Conference.

Pushing Lifestyle Changes
American Standard Cos., a diverse manufacturer best known for its faucets and toilets and its Trane air conditioners, is zeroing in on the issue, too. Last year, it spent $190 million on health care for its 20,000 U.S. workers. With costs climbing steeply, the company, which had revenue of almost $10 billion last year, is looking at health-care costs averaging $240 million a year over the next five years, a whopping $1.2 billion total during that period. It's hoping IT can play a significant role in containing those cost increases.


American Standard's employee portal is a natural platform for health tools, Hart says.

With 104 factories in 28 countries, American Standard's employee portal is "the center of our universe" for communicating with the company's 61,000 workers, says Jill Hart, director of Web communications. That provided a natural platform for its health-related tools for employees, which it has bolstered in the last couple years and most aggressively the last several months.

The push to help employees become healthier and reduce health-care costs came directly from American Standard chairman Fred Poses, as part of a larger effort to make the company a great place to work. American Standard workers can access online health-risk-assessment tools and information that can guide them to health-wellness and educational programs. Through the portal they can E-mail questions, such as whether symptoms might warrant a visit to a doctor, to "health coaches."

In the last several months, American Standard has expanded its use of health-risk assessment through an online application, now providing health scorecards that result in financial incentives to adopt healthier lifestyles. A scorecard test takes about 15 minutes to complete, and employees who get good scores are rewarded with discounts of up to $300 a year on their health-care costs. Nonsmokers, for instance, could receive $90 off what they pay toward benefits.

Few employers make online health assessments mandatory, but they're not being shy about charging higher health-care deductions for those who skip them.

"Managing health-care costs is about managing health, period," says Delia Vetter, director of benefits at storage vendor EMC Corp., which also provides online tools to its 18,000 employees to help them better manage their health and to give EMC a better handle on their needs.

EMC provides employees with WebMD Inc.'s health-care portal services, including a personal assessment in which employees can compare their risks with benchmarks of developing health problems based on family and personal medical history, lifestyle, and other factors. The assessments link to information geared to their needs, such as care for diabetes or heart problems. Tools also let them compare prescription drugs with alternatives, like generics. Portal content "arms them with questions to ask their providers" about treatments and alternatives, Vetter says. Through the WebMD service, employees also get an electronic health record that lists doctor visits, prescriptions, and out-of-pocket costs and "true costs" over the last three years.

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