Collective Perspective

CEOs Must Become Smarter Consumers of Healthcare… And They Can

A perspective from Jeff Immelt, the former Chairman and CEO of GE and a member of Collective Health’s Board of Directors, originally posted on LinkedIn.

Whatever line of business you’re in, it’s a healthcare business

Three of the most respected CEOs in the world recently teamed up to announce a bold plan: fix the “hungry tapeworm” of American healthcare to provide a healthier return on our massive annual investment. They nominated themselves and their blockbuster companies—Amazon, Berkshire Hathaway, and JP Morgan—for the task.

This announcement, and the implication that business leaders can fix national healthcare problems, was a wake up call for many in the healthcare industry and in the media. It was also a shot across the bow of other CEOs in America.

Whatever line of business you’re in, you should think of it as a healthcare business.

Because if you’re an employer who offers your workers health benefits, you may be unwittingly contributing to the waste and inefficiency that Warren Buffett, Jeff Bezos, and Jamie Dimon aim to fix. A considerable amount of the money you spend on employee health programs is essentially thrown into an abyss. CEOs, unfortunately, are among our country’s least savvy consumers of healthcare.

The tools are being developed to fix this problem, and fixing it is what employers should be doing. Healthcare is a massive investment for most companies, which means whatever line of business you’re in, you should think of it as a healthcare business.

What a CEO Can Do

In 2009, when I was serving as the CEO of General Electric, I had an epiphany about employee healthcare. That year, in the peak of the global financial crisis, GE’s employee healthcare bill hit $3 billion. That’s right: $3 billion. To put that in context, the company was spending as much on employee healthcare in one year than our massive healthcare unit was earning, and more than we spent on steel. Of course, we were not alone—according to the Centers for Medicare & Medicaid Services, national healthcare expenditure grew by at least 5% every year from 2000-to-2009. This was shocking, and unsustainable.

In 2009, GE’s employee healthcare bill hit $3 billion—more than we spent on steel.

The day I had that realization was the day that employee healthcare became my problem, and solving it became my mission. I made a deliberate decision to master our healthcare investment and choices like I did every other critical area in our business. When I looked under the hood to figure out how we got to our $3 billion annual spend, I saw massive opportunity to maximize both the value of our investment, and the value that investment created for employees. In the absence of an industry-standard benchmark against which we could evaluate ourselves, we created clear metrics for success, a direct line to the team managing healthcare spend, and rigor around the selection and evaluation of healthcare suppliers. The result? A large fiscal line item that had been a virtual black box, as it is for far too many company leaders, became a resounding success.

Where else but healthcare do companies and their leaders spend so much and not demand transparency?

Here are the steps I took to get a much better handle on GE’s massive healthcare spend:

  1. Reframed the metrics and set clear goals: Our benefits program went from being a mess of irrelevant metrics to having a simple formula for success—dollars spent per employee vs. employee absenteeism.
  2. Created a new program based three clear principles: Wellness, Consumerism/Net Promoter Scores, and Progressive Buying. These clarified our broader team’s direction and priorities.
  3. Made employee healthcare an executive team mandate: I made sure my executive team and I discussed our progress on the healthcare spend quarterly, changing it from an annual conversation to an ongoing and dynamic one.
  4. Invested in Education: To ensure my executive team was plugged in, I had us all to visit the incredible Cleveland Clinic and dive into the details of healthcare delivery. In fact, I got to know the details so well I was able to write two of our new health plan designs myself.
  5. Tied funding to performance: We launched our HealthAhead program and let every GM know that they had to make progress on our core healthcare metrics to get funding for their site and/or projects.

It was a huge undertaking, but in the end we cleared a lot of dead wood. Our healthcare costs were reduced by more than 20%.

The Lesson for Every CEO

Of course, I understand few companies have the resources or the staffing to tackle their inefficient healthcare spend the way a company like GE can do. But any employer can—and should—take responsibility for demanding and implementing a better system. Company leaders should lean directly into the daunting, difficult problems that matter, and make it their mission to solve them. The buck stops with you.

But today, most CEOs and CFOs aren’t even talking about their healthcare spending problem more than once a year. Many don’t even know the name of the person responsible for most decisions driving this critical and costly area of their business, which is often second to payroll.

It’s time we had a software stack for employer healthcare.

The good news is that today, for the first time, the tools exist for most businesses to fix it. You don’t need the teams and resources of a Fortune 50 company to get more transparency and more value from your healthcare spend, because new technologies have made it possible for businesses of all sizes to accomplish this.

Just as software has stepped in to help us solve nearly every challenge in our enterprises, it’s time we had a software stack for employer healthcare. With access to critical data and new technology, companies can adopt innovative care solutions, use data to make more informed decisions, track the performance of their investment, and ultimately challenge the status quo of mediocrity in employee healthcare.

I have decided to spend the next phase of my career working on important reform in healthcare, working closely with disruptors and entrepreneurs. This includes companies like Collective Health, a software driven Workforce Health Management System, that have given strategic employers a new weapon in managing the cost and outcome balance in employee healthcare. I was so taken with their approach and success I joined as a Board member, and am looking forward to seeing many of my peers in the Fortune 100 adopt the company and drive change in the system.

Too often, the C-Suite is unknowingly protecting mediocrity and insufficient ROI in employee benefits programs. By applying the same rigor and focus to this area that you do on other areas of your business, your people and your bottom line will reap the rewards.

And if Jeff Bezos, Warren Buffett, and Jamie Dimon have made one thing clear, it’s that CEOs can tackle the thorny issue of healthcare. New technologies have enabled this, and it’s time for employers to accept the challenge.

Because, if you employ a workforce and offer benefits, your business IS a healthcare business.

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eBay
Zendesk Counsyl
Trace3 DataSafe
eBay Red Bull Activision Blizzard Zendesk Counsyl Trace3 DataSafe