THE BLOG
01/06/2015 03:55 pm ET Updated Dec 06, 2017

Using Health Care to Fuel Your Company's Growth

As entrepreneurs, we have the power to fundamentally redesign health care within our companies -- and turn what's traditionally been an expensive burden into a tool to generate stronger growth and healthier, happier employees. But to get there, we have to rethink our approach.

That's exactly what David Berg has done. An Arizona-based physician, Berg was fed up with 20-percent-plus annual increases in his insurance costs that he was forced to pass on to his team. By focusing on the waste and inefficiency in health care, he designed a way to lower his company's costs immediately by 20 percent. Today he pays less than half of what other companies pay for the same benefits and has used the savings to help expand his business, Arrowhead Health Centers, from one center to 11. He's also able to offer free health care to staff with no premiums, deductibles, or co-pays -- a benefit that helps Arrowhead attract top talent.

Inspired by his success at Arrowhead, Berg co-founded Redirect Health to bring creative health care solutions to other small and medium-sized businesses.

Here's his take on the state of health care today and how entrepreneurs can fix it in their own companies.

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Two fundamental problems

Berg believes the myriad of health care issues that business owners face stem from two fundamental problems:

1. Huge price differentials in the existing system prevent us from being informed health care consumers. Most of us don't realize that there are huge price differentials between various health care offerings. A common cholesterol lowering medication that costs, say, $14 at one pharmacy might cost more than double that amount at a drug store just a few blocks away. And the brand name version might cost over $260 in the same pharmacy. MRIs that cost $2,500 at one hospital might cost $400 outside the hospital just down the street. "How can anyone be an informed and wise health care consumer if we don't know these types of differentials even exist in the first place?" asks Berg.

The lack of transparency is just how the traditional system likes it. Say you buy insurance from a traditional payer and your employee makes an uninformed decision by going to the hospital that charges $2,500 for an MRI instead of $400. After the deductible is paid, the insurance company will pay for the remainder of that procedure -- but then turn around and hike your premiums next year.

2. The existing system refuses to benefit health care buyers and users, even if they do find their way to lower costs. Companies that pay for employees' health insurance, as well as the employees themselves, are not rewarded by the health care industry for making smart, economical choices about their care.

Take the employee needing the MRI. But this time, she goes to the center that charges $400. As a result, the insurance company will end up paying less for that procedure. But will you, the employer, benefit? Will your employee benefit? Of course not. The insurance company will simply pocket the difference and book a higher profit for the year. The system ensures that the insurance company wins.

Take the reins

Solution #1: Design a health care system that rewards you and your team for working together. The health care status quo pits employers against employees. Insurance companies tell employers not to trust employees because they over-use health care or don't take care of themselves. Meanwhile, doctors ask their patients (your employees) to give them their trust. After all, it's the bosses' fault for their high-priced insurance.

But Berg points out that employers and employees want the exact same thing: coverage that keeps the people and the business healthy, happy and productive. Much power and control is created when employers and employees work together as a team.

For example, you can help employees understand where the best prices are for various procedures and medications, and incentivize them to choose those options. An app such as GoodRx allows employees to comparison shop for the best prices on medications. Armed with that knowledge, employees can seek out the best deal -- knowing that the cost savings the company realizes as a result of their actions can go to things like raises, bonuses and other benefits to employees.

Solution #2: Apply the Pareto Principal to health care spending. The Pareto Principal tells us that 80 percent of revenues come from just 20 percent of customers. Berg applies that same dynamic to companies' health care at Redirect Health. He uses data analytics to proactively identify the 10 percent of the employees in a company that will likely account for about 90 percent of its health care claims spending -- those with conditions like asthma, diabetes and depression. Then he creates strategies to help manage their illnesses efficiently and effectively. The key is to inform the employees of the best prices before they act.

"It's about understanding where the money is being wasted, and where it would be beneficial to redeploy it -- like what we all do in our businesses already, just directed at health care," says Berg. "If you can take those 10 percent of the people and lower their cost by a third or a half, which is what we're experiencing, that frees up a lot of cash."

Berg cites an example of an employee with a child suffering from asthma. "I'd rather make sure that the family always has the child's inhalers everywhere she might be, so she never ends up in an emergency room. That might cost $200 to 300 in a year but it's likely to prevent a costly emergency room visit that might cost $5,000 or more. It really is about investing the preventive dollars so that a great ROI is essentially certain while also having a system designed to reward the employer and employee when the savings happens."

It's up to us

Underlying both of these strategies is one of Berg's core beliefs: Entrepreneurs and their teams need to start thinking differently about health care and the choices we make. "We must stop letting the experts make our health care decisions for us. They will never be fully aligned with us and our needs as entrepreneurs or the needs of our people because operate in a system designed to get money out of employers' and employees' pockets. If you want to have a health care system for your company that keeps your money on the bottom line, you should probably design it that way on purpose."

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