Companies latch onto 'managed care' as a means of trimming expenses
Health-care costs pose a difficult internal issue for companies. Don't control them and costs rise astronomically. Control them and employees start complaining about cutbacks."The only thing worse than no managed care is bad managed care," says Michael Cadger, a principal with A. Foster Higgins & Co. In 1989, health-care cutbacks were a major issue in 78 percent of all strike activity - four times higher than the proportion in 1986, according to the Service Employees International Union. Several companies have moved to put a lid on rising costs through "managed care." Under this scheme, employers create a network of hospitals and doctors that discounts prices in return for a steady stream of patients. Often an insurance company sets up the network and monitors the costs. Caterpillar Inc., Allied-Signal Inc., Southwestern Bell, and First Interstate Bancorp have all instituted such programs. After failing to cut health-care benefits at the bargaining table, AT&T created a union-inspired managed care program. One of the most aggressive cost-cutters is Southern California Edison Company, which restructured its health-care program in 1989. It negotiated lower prices with 7,500 physicians and 85 hospitals. It pays 90 percent of the medical bill for employees who use the network, and only 70 percent for those who don't. (The company used to pay all the costs.) It reviews the procedures doctors perform on their employees, paying only what it deems are the actual costs. It also rewards workers who participate in "wellness" programs. The company also runs its own pharmacy, clinics, and first-aid stations. "Large corporations in America need to take responsibility for managing their health-care costs versus administering their health-care benefits," says Jacque Sokolov, the utility's vice president and medical director. Still, individual company actions can't substitute for national reform, Dr. Sokolov says. "It's akin to year after year building better and better sandbags to protect your house. The reality is that you need to have fundamental flood control."