Meeting the Challenge

Local businesses may have the key to both improving employee health and reducing health care costs

April, 2006

Last October, Hawaii Business reported that Times Supermarket was ready to go it alone with a disease-state management program, which was designed to both help employees get healthier and add to Times’ bottom line. The company was readying for a January 2006 launch of the program, modeled after the Asheville Project, which utilizes pharmacists to counsel employees about managing diabetes.

Ten Cities works with participating organizations to create teams of employers, employees, pharmacists, physicians and diabetes educators to focus on patient self-management of diabetes and workplace cost savings. Through the program, specially trained pharmacists (Times’ pharmacists are in the Hawaii pilot) coach eligible employees in diabetes management and help them to set goals, use medications properly and track their condition with monthly counseling sessions, using indicators such as cholesterol tests, blood pressure, foot exams, eye exams. Participating employers provide benefits such as co-payments for diabetes medications and supplies. Employees must volunteer for the program, however, their employers are not told who has diabetes, just the number of employees. One huge employee incentive to participate is the estimated annual savings of $500 to $700 in co-payments for diabetes supplies, which is now paid by the employer.Since then, Times’ project has mushroomed into a three-company pilot project under the auspices of the Hawaii Business Health Council (HBHC). Punahou School and Outrigger Hotels and Resorts have joined in, boosting the projected $93,000 in gross savings for Times to a total gross savings of $391,000 in savings for all three companies in the project’s first year. The HBHC is participating in the Diabetes Ten Cities Challenge, which is sponsored by the American Pharmacists Association (AphA) Foundation, and modeled on the same Asheville Project that Times sought to emulate.

According to the AphA Foundation, results from organizations that have implemented the Asheville Project include:

  • Employer savings of $918 per participant, the first year, in total healthcare costs (overall annual medical costs per patient decreased $1,622 to $3,356 each year in Asheville)
  • Absenteeism went down by 50 percent and workers’ compensation claims were reduced or eliminated
  • High employee satisfaction: 95 percent were satisfied with pharmacist care
  • Patients saved an average of $400 to $600 a year with incentives such as waived co-payments
  • Employers indicated a Return on Investment (ROI) of at least 4:1 beginning in the second year
  • In Asheville, after eight years, employers paid less to insure program participants than people without diabetes
Hawaii’s Diabetes Data
> According to 2003 data, approximately 110,000 people in Hawaii (7.6 percent) have diabetes.

> As many as 39,000 of the 110,000 were undiagnosed.

> The estimated direct medical costs for people with diabetes in Hawaii were approximately $964 million in 2002.

> In 2002, diabetes was an underlying or contributing cause in 11 percent of all Hawaii deaths.

The Ten Cities Challenge is a program that Hawaii could really use, given that diabetes is a direct or underlying cause of 11 percent of all deaths here and racks up nearly $1 billion a year in direct medical costs. (See related sidebar on opposite page.) The executive director for the American Diabetes Association (ADA) in Hawaii, Majken Mechling, says the rising rate of diabetes in the Islands is such that, while one in every three children born in the United States in the year 2000 will come down with diabetes during their lifetimes, in Hawaii, the chances are more like one in every two. The ADA will help promote the Ten Cities program to Hawaii companies. Mechling says, “If we say one thing to anybody, it’s, ‘We are all at risk in the community.’ We’re at risk as individuals for diabetes. We’re at risk as companies for the cost of diabetes impacting on us significantly.”

With fewer than 1,000 employees, Times didn’t have the numbers to qualify for the Diabetes Ten Cities Challenge on its own. However, under the HBHC banner, with Punahou and Outrigger in the program. Times Human Resources Director Clifford Hayashi estimates, that out of the 5,500 employees in the three pilot Hawaii companies, about 450 will be diabetic or have the potential to become diabetic. Not all employees will sign up to participate, but the goal is to hit at least a third, to meet the required 125-employee minimum set by Ten Cities. By March, Times had already convinced a third of its diabetics to sign up for the program and was about five employees away from a 50 percent participation rate.

Also, 13 of its 29 regular staff pharmacists volunteered for the program and underwent the training necessary to prepare them for their pivotal roles. “You talk to these people and they’re doing it because they didn’t go to pharmacy school to count pills. They went to school because they’re interested in patient care. That’s their calling in life,” says Hayashi. “The business model is also motivating some people, too, because we want to increase business. The more people that get into this program, the more customers we’re going to have.”

Pauline Lo Bailey, director of human resources and co-curricular programs at Punahou School, also is the current president of HBHC and has been actively involved in researching best business practices across the country to reduce health-care costs. She was quick to get Punahou involved when the Ten Cities opportunity was presented. Says Bailey, “It seemed to have quickest return on investment, so that, from the business standpoint, we could convince businesses that it was worth investing in.”

Punahou added the program to its arsenal of health and wellness initiatives. The organization is trying to win over its employees with a sustainability argument. A recent employee newsletter outlined, “Punahou healthcare costs are one of our largest operating expenses ($4 million in 2005). By focusing on health improvement, we can cut healthcare inflation from 10 percent to 5 percent and save over $1 million in the next five years.”

Bailey says programs such as the Ten Cities Challenge are important to Hawaii on a number of levels. “I think it is a business imperative as well as a moral imperative if you want to stay and live in our town,” she says.
There is also the opportunity for businesses to shift the focus of healthcare from entitlement to privilege and to educate employees that there is responsibility that should be borne along with the right to healthcare. Bailey says, “Businesses have a great opportunity to educate people as to how to do better for themselves in terms of their health and, at the end of the day, their bottom line as well. You know if they are going to have to spend a lot of money on healthcare, they are not going to have it for retirement and their retiring medical … So I think it really is an economic imperative and it’s not just bottom-line economics.”

Estimated 2:1 ROI in Year 1
The three Hawaii companies piloting the Ten Cities Challenge here are hoping to achieve an almost 2:1 return on investment (ROI):

Times Supermarket Punahou School Outrigger Hotels
Total gross savings*: $93,000 $53,066 $245,000
Less cost outlay**: $50,600 $26,600 $132,000
Net savings: $42,400 $26,466 $113,000

*gross savings includes reduced diabetes-related expenses, such as emergency room visits and hospitalizations.
**costs to employers include waiving co-payments on diabetes supplies and treatments and some administrative expenses.

It makes sense that this program is projected to mushroom even more in September, when other HBHC companies, beyond the pilot three, plan to join the Ten Cities Challenge. One of these will be Finance Factors Ltd. Vice president for human resources and administrative services Stephanie Tom says, “Hawaii’s a very small town. You’re going to hear a lot of it by word of mouth about what’s going on and there will be more employees and patients requesting that this kind of service be provided.”

If all of the HBHC’s member companies participate, there could be around 90,000 employees in the program come September. A couple of large public employee groups have expressed interest and have the potential to increase that number to 200,000. A large chain pharmacy has also expressed interest in the program. That’s fine with the pioneering folks at Times Supermarket.

Hayashi says: “You can’t withhold this kind of stuff. You can’t be proprietary. It has to be something where we have to involve everybody, because it has to reach the maximum number of people.”

And, if all goes well, HBHC will expand the program even further. The Asheville project has been operating in North Carolina for eight years now, and covers three other chronic diseases. Hayashi says, “This model has the potential to be replicated in almost every other chronic-disease state. That’s the beauty of it. Because what you’re talking about here, whether you are talking about obesity, high blood pressure, it’s driven by people’s individual behaviors. The key to Asheville is you have a personal coach that you are meeting with to change your behaviors, to live a more positive lifestyle and that, coupled with taking your medication, leads to effective control over chronic-disease states.”

The HBHC expects to begin reporting clinical and economic outcomes of the Ten Cities Challenge in mid-year 2007. Punahou’s Bailey adds: “If we can reallocate some of our resources to just health-status improvement rather than paying for diseases and episodic care, we could create a whole new type of healthcare industry, which is focused on prevention as opposed to treating disease.”


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Kelli Abe Trifonovitch