Health Care's Upward Spiral
Concerns over health-care costs have mounted rapidly in recent years inside the corporate world, and that concern is based on numbers, big ones. For example, $660 billion will be spent in the U.S. this year on health care, with corporations picking up a sizable chunk of that tab for their employees.That comes out to $2,600 for every man, woman and child in the country. And, despite the promise of a number of cost-containment mechanisms put in place in recent years, the upward spiral in health-care costs is gettingworse. After single-digit increases from 1985 to 1987, health-care inflation has again rocketed into the stratosphere.Benefits consultant Foster Higgins predicts that health-care costs will increase an average of 16.5 percent this year.
All the while, published comparisons of health-care costs reveal wide geographicvariations (see developmentside health- care feature elsewhere in this issue). Yet only a scant 13 percent of survey respondents say their corporations are able to accurately measure health-care costs when considering various locations for a facility. "I’m absolutely amazed that people aren’t looking at health- care costs [when considering various locations]," says Wayne Mills, vice president, corporate facilities and service division for The Travelers Cos. "If you asked 50 CEOs what their top five concerns are, I think at least 90 percent would put health care in there.""Maybe my response has something to do with my working for a health-care provider," Mills adds. "[But] healthcare costs impact directly on both the employee cost of living and the cost of doing business."
The Travelers is one firm able to accurately measure health- care costs among different locations, says Mills.
"It (health care) is a tie-breaker for us in some location decisions." Mills says information on what insurance
companies call "usual and customary" reimbursed charges "are readily accessible. You can easily get information on the customary charges for things like a day in the hospital, a bone graft, etc."John Dues, director, corporate real estate for Mead Corp., says his firm can also accurately measure health-care costs as part of the site-selection process.
And he, too, says much data needed to fashion those cost comparisons are readily accessible: "If you look at Dayton or New York, for example," says Dues, "you can ascertain what the acceptable reimbursement level for an insurance provider in that area is. We can then accurately measure our costs, because our medical insurance is set up to reimburse at that level. We delegate that to our HR (human resources) department, and
they do the benefits analysis."
Those companies which say they are able to accurately gauge health-care costs in their location decisions are also successfully constructing geographically specific cost comparisons. For example, 75 percent of the companies which say they can accurately measure health-care costs are able to focus those comparisons down to the percentage of operating costs for each metro area under consideration. The other 25 percent of those companies are able to construct cost comparisons down to the individual county level. "If you get [health-care cost] comparisons that are as [geographically] broad as the state or regional level," responded one executive, "they really don’t help you that much."