Making The Case

PreventingChronicDiseaseWithHealthyCommunitiesImageAugust2014

“We are the architects of the future, not its victims.”

– R. Buckminster Fuller

Chief Financial Officers (CFOs), Human Resources (HR), and operations and brand leaders must manage the daily functions in your portfolio of professional responsibilities, and also the full gamut of organizational risks, especially your actual employee and family healthcare costs in an age of “talk” of reforms in healthcare industry practices, and that these costs to you and your employees (and their families and (y)our communities) are material risks to your core value drivers as an organization, including to your stakeholders.

Many people, subconsciously or overtly, choose not to care for their (or their family’s) health effectively, physically, emotionally, and financially.  This is too often regardless of their biologically-influenced intelligence.

Over 50% of U.S. healthcare costs come from employee dependent family medical expenses, according to the Silicon Valley Business Journal.  Andreessen Horowitz, one of Silicon Valley’s most prominent venture capital firms, reports that the total cost of healthcare expenditures is an average of $10,000 per year for a person in the United States, heading beyond 20 percent of GDP (or 20 to 25 cents of every dollar spent nationally).

These substantial, escalating cost numbers are estimated to double in cost into the 2020s, which from both a national competitiveness and even basic services perspective is literally unsustainable (By contrast, in 1970, the cost of healthcare accounted for 7% of U.S. GDP).

Regarding these serious costs, 75% include diabetes and often related chronic disease complications such as heart disease, stroke, vision loss, and kidney failure.  More than 26 million adults and children in the U.S. now have type two diabetes, the most common form of the chronic disease which is growing at an alarming rate due to ingredients in the food being consumed and other lifestyle factors.  Before 2025, many who have pre-diabetes now, many of whom who are unaware or in denial of this, will develop diabetes with high probability.

Diabetes patients can cost up to $20,700 per year each to treat, or more than $245 Billion per year in the U.S. alone (Globally, there are more than 380 million people affected by diabetes, slightly larger than the population of the entire United States).  Pharmaceutical interventions are too often “prioritized” by “busy” healthcare industry professionals, with potential further health and financial consequences, especially when the National Institutes of Health (NIH) has stated that dropping as little as five to seven percent of body weight (10 to 14 pounds for a 200 pound person) can delay, or even altogether prevent, diabetes through an increased balance of healthier foods, and more comprehensive physical and other lifestyle activities.

Integrating potentially helpful “apps,” and other online components, are not effective if they stand alone.

According to a Towers Watson people and benefits management survey, fewer employees (year-over-year 59%, down from 65%, and by direct inference, their families, and with aggregate impacts, communities) have taken action to improve their health, which is a financially and additionally concerning surprise given the rise in chronic conditions.

27% state that they will not participate in wellness efforts without incentives.

The painful healthcare impacts of depression are also escalating.  The World Health Organization says that by the end of the 2010s, not too far away, depression as a real illness will increase in the volume of people effected to become second only to heart disease in health risks and costs.  These costs will be serious for those paying the bills in one or more ways, including employers, organizations, communities, families, and of course, the individuals impacted personally.

Healthcare for family dependents often drives higher costs than for the employees themselves. 

The correct, most valuable risk that has to be taken may be “hidden in plain view.”

For example, from the mid-1990s into the 2000s, CFOs tended to either be deal makers or in silos of assembling numbers.  Today, CFOs have to be especially focused in alliance and alignment with HR and operational leaders and teams — and focused on performance management through tangible strategy and innovation.

Yet only one-in-seven organizations with more than $1 billion in annual revenue practices what IBM has described as core components of good governance, according to the magazine CFO.

Those organizations that included common data definitions, a standard Chart of Accounts, common information-gathering processes, and company-mandated (not voluntary) standards (what IBM has called Integrated Finance Organizations) have enjoyed revenue rates nearly double (2X) those of industry competitors.

CFOs and HR need to catalyze with board members, the audit committee, and other senior managers a comprehensive evaluation of employee, dependent, and community healthcare risks that should provide crucial insight into ways that organizations can improve their financial and further performance.  Those who take control of their healthcare risk management comprehensively in a purposeful and focused way are also more likely to identify risk events faster, respond to them more quickly, and achieve overall better preparation.

Risk management operations too widely distributed in various operational units or geographic locations will result in duplication, contradictions, and incoherent ineffectiveness, and therefore financial and other risks to you and your organization.

The magazine CFO, referencing Deloitte Consulting, estimates that a more focused, less siloed risk management program, even beyond healthcare and human capital, can save organizations up to 30 percent in costs in terms of managing market risks, reputational (brand) and information technology (IT) risks, supply chain disruptions, episodic, catastrophic risks (including environmental and terrorism crises), and more traditional finance functions of compliance, fraud, credit, and liquidity.

“Raising a dollar in new capital by issuing new debt is worth one dollar…but if earnings can be raised one dollar through improved operations, and marketing and branding, that translates into $10 to $15 in value.”

– Nelson Peltz, activist investor and shareholder in Tiffany, duPont, Heinz, Kraft, Wendy’s/Arby’s Group, Snapple, PepsiCo, etc.

Are frantic activities being confused with the achievement of meaningful change? You literally cannot afford activities that under-value time, context, and trust. Burnout of staff, and maybe even you burning out, personally, are further related and serious costs to you and your organization.

These failures not only perpetuate financial and other suffering today. Failures ripple through time, artificially constraining consumer choices, and financial margins and prosperity, for generations to come.

“General Electric attempted to manage volatility through (silos of) layers and reviewers. Like many companies, we were guilty of countering complexity with complexity. The outcome was a higher cost structure, an artificial sense of risk-management, and we were insulating our people from the heat of the market. We have decided to change course.”

– Jeffrey Immelt, Chairman of the Board and CEO, General Electric (GE), quoted in Economist magazine in Fighting The Flab: Corporate Headquarters Have Put On Weight, And Need To Slim Down Again

Not adhering to all spending being justified each year from first principles of the organization, what is also called zero-based budgeting, can and does prompt intrusive-towards-you activist investors and media who zoom in on same line(s) of business, but different costs as percentage(s) of total sales versus organizations competing against you.

A related, very costly example is that while cost-shifting has recently reduced, or more likely, deferred, employee healthcare costs for some employers, the overall approach used by too many organizations is financially unsustainable.

Workers’ compensation costs and lost productivity also erode bottom line results.

Ineffectively, the “pharm” answer is being placed before the farm solution, so to speak.

While your benefits and other staff(s) continuously look to improve within the current fiscal quarter and operating paradigm, you need to be consciously looking for supportive, parallel, positive disruption solutions, including potentially co-creating a co-branded and / or network-advantaged lab for Wellness Co-Ownership (as you deem best for your organization) — with a separate mandate and funding — like a protected “skunk works” group for beyond the next quarter or year.

You need to focus on “the experience” of the customer(s). They are seeking unique, local, one-of-a-kind experiences, the opposite of the standardized products created by the concept of mass production that became popular in the last century. Technology, notwithstanding the media hype, is not the triumph per se. The triumph is increasing wellness through business. Success comes from how people use what tools they are given, and knowing why.

Therefore, what does reaching your employee’s, their dependent’s and families’, and (y)our communities’ daily wellness needs and goals, as perceived by them look like?  Too often, these needs are not the same as their potential intentions, their visions of what they “could” be.

Why the constant disconnects with what they “should” be?

How to connect with them much more prosperously?

Design and research — and keep moving forward S.M.A.R.T.-ly.

When S.M.A.R.T. (Specific, Measurable, Assignable, Realistic, and Time-related) goals are “owned,” they are much more likely to actually be, in whole or part, achieved.  When more people feel fulfilled achieving more comprehensive, S.M.A.R.T.-er goals in their lives, the costs of healthcare, including and beyond money, not only stop producing anxiety and further illness for them , but those people can also (counter intuitively) take a “good risk,” and change in ways that can significantly grow the U.S. economy and tangibly improve many American lives and communities (and beyond).

This shared journey is from more “transactional” healthcare processes and procedures to more comprehensive and integrated wellness ownership — by more dynamic, proactive wellness owners also functioning as “the business of you”customers — rather than patients who merely wait and wait for bad things to happen to their health, which costs us all much more for much longer in very corrosive “zombie effects.”

New technologies can enable individuals to experience the future effects of present-day behavior choices. Although building prototypes is exciting, and even possibly launching a spin-off technology and/or entity can be a “buzz,” transforming an organization, your organization, is something else again.

Does churning out “initiatives” address the symptoms, but not the lasting root causes, of serious challenges like executive and organizational employee healthcare impacts? The human costs of “churn” are high, and approaches that under-value time, context, and trust are wasteful and unsustainable.

As an enhanced catalyst, your organization’s lab could be custom-targeted and relationships leveraged with respected institutions that can further catalyze foresight, insight, and action.

Foresight represents your serious exploration and scans of what the future looks like. Insight represents your realizations of what does the future mean to you.   Action represents tangible engagement with next steps forward.

 

 

 

Advertisements