By KIM BELLARD
Last week General Electric announced it was breaking itself up. GE is an American icon, part of America’s industrial landscape for the last 129 years, but the 21st century has not been kind to it. The breakup didn’t come as a complete surprise. Then later in the week Johnson and Johnson, another longtime American icon, also announced it would split itself up, and I thought, well, that’s interesting. When on the same day Toshiba said it was splitting itself up, I thought, hmm, I may have to write about this.
Healthcare is still in the consolidation phase, but there may be some lessons here for it.
For most of its existence, GE was an acquirer, gobbling up companies with the belief that its vaunted management structure could provide value no matter what the industry. This was most famously true in the Jack Welch days, but since those days it has been gradually shrinking itself, spinning off some of its more problematic divisions, like appliances, locomotives, and much of its once-huge financial services business. It will spin off its healthcare business in early 2023 and its renewable energy and power business in early 2024; its aviation business will keep the GE name.
“A healthcare investor wants to invest in healthcare,” CEO Larry Culp explained. “We know we are under-owned in each of those three sectors, in part because of our structure.”
Health-contingent workplace wellness, the two-time darling of federal legislation codified in both the Health Insurance Portability and Affordability Act (HIPAA) and the Affordable Care Act (ACA), is now plagued by doubts about effectiveness and validity that are inexorably grinding away its legitimacy. This puts employers, particularly large employers who have committed to it so vocally and visibly, in an awkward spot. In the style of politicians nervously trying to change the terms of debate, wellness advocates are now walking back the assertions that have undergirded their entire construct for more than a decade. While some business leaders are apparently either unwilling or unable to back away from this self-inflicted wound, staying the present course is neither inevitable nor required. A course correction might actually prove quite liberating, especially for leaders of smaller and mid-sized businesses who must scratch their heads wondering how they’re supposed to reproduce a big-company style workplace wellness program or even why they should, given the dearth of data on effectiveness.
As a case in point, we offer GE, an iconic American multinational with 305,000 employees, $147BN in revenues, and $16.1BN in earnings worldwide in 2012. The company offers its employees a much-lauded wellness program, saluted by the National Business Group on Health (NBGH) in a fawning 2009 case study. GE’s wellness program has several things to recommend it:
- A top line focus on environmental change
- An emphasis on strong and consistent positive health messaging to employees
- The “Health By The Numbers” strategy that asks employees to commit to essential behavior changes (don’t smoke, eat more produce, walk more, and maintain a healthy body mass index [BMI]; there is wisdom in these choices, as they are the baseline activities for good health)
Beyond these obviously beneficial wellness program components, the GE wellness program veers off into a compendium of wellness convention, with encouragement for employees to take HRAs and get screenings, in particular, mammography, colonoscopy, cholesterol, and blood pressure. Some of the affection for diagnostics springs, of course, from GE’s corporate commitment to health care, which includes selling a broad variety of diagnostic devices to medical care providers who must, in turn, induce demand in order to pay for their contribution to GE Healthcare’s $18.2BN revenue stream.
As far as is discernible from publicly available documents, the wellness program targets GE worksites with over 100 employees, and GE claims in the NBGH case report that over 90% of employees worldwide participate. Beyond these data, however, it is remarkably difficult to understand what results GE gets and at what cost. The only publicly available insight on expense comes from GE wellness leader Rachel Becker in an essay published online by EHS Journal, in which she reports $100,000 per site as the wellness startup cost. Extrapolating this figure to GE’s more than 600 global worksites produces a wellness capitalization expense of about $60M, which presumably does not include annual wellness program operating costs. This might be why GE makes absolutely no mention of the cost or results of its wellness program in either its annual report or its 10K filing, although the NBGH quotes GE as saying the implementation was “inexpensive”. Even though $60M is equal to only 0.38% of GE’s 2012 earnings, it nonetheless might seem an untidy sum to skeptical shareholders.
What a week last week! First the disgraced cyclist confession and later the baffling college-football-player-and-his nonexistent-(dead)-girlfriend story, with the RAND report sandwiched somewhere in between. It’s positively a scandal-palooza.
What’s that? You don’t feel like the recent RAND report, which basically says that a 2005 RAND study financed by GE and Cerner was wildly optimistic in predicting about $81 billion in potential health care cost savings through widespread adoption of electronic health records, qualifies as a genuine hoax, controversy, scandal?
But it does neatly frame what is arguably a unique characteristic of the healthcare industry—a trait that extends to peripheral industries as well. Basically, healthcare is an interconnected environment. Call it the systems theory of healthcare, co-dependency … or just regular dependency. Call it what you want, but there is an interconnectedness in healthcare that we ignore at the expense of national wellness.
Witness key data points provided by the RAND report:
- Modern health IT systems are not interconnected and interoperable, functioning “less as ‘ATM cards,’ allowing a patient or provider to access needed health information anywhere at any time, than as ‘frequent flier cards’ intended to enforce brand loyalty…”
- Neither are they widely adopted, with an estimated 27 percent of hospitals utilizing a basic electronic record. Without broad adoption, interoperability is far less relevant.
- Improvements in quality of care / patient safety and reductions in healthcare costs (which have grown by $800 billion since 2005) are not manifesting with EHR adoption, in part because hospitals and clinics are rushing to adopt mediocre solutions and garner federal funds.
- The provision of care is the same as it ever was, even though EHRs are frequently promoted as the optimal tool for a different kind of care.
The reasons for these disappointing stats are readily apparent and unalterably interconnected.