“The doctor of the future will give no medicine, but will interest her or his patients in the care of the human frame, in a proper diet, and in the cause and prevention of disease.”
– Thomas A. Edison (1849-1931)
Appriss, Inc, is a Software as a Service (SaaS) company based in Louisville, Kentucky. It was founded in response to a tragic crime committed in December 1993. A rape victim was planning to testify in court against her former boyfriend and the alleged perpetrator of the crime. She believed she was safe since she thought he was being held in jail until his trial. Unaware that the accused man had posted bond and been released from jail, he ambushed and murdered her as she left work. Her death led the founders of the company to create Victims Information Network Everyday (VINE) a system that notifies crime victims when their offender is released, paroled or moved to another facility. Started first in Kentucky, the system quickly spread to nearly every state and many federal criminal justice jurisdictions. In 2000, VINE became Appriss, Inc., and the types of data gathering and dissemination services provided by the company continued to grow. By 2013 sales were approaching $200 million and more than 400 employees throughout the country were provided a wide variety of products and services, all consistent with the company’s motto of “using technology to keep people and communities safe and informed”.
In its brief history, Appriss was like most companies, trying to keep rising healthcare costs from eating into the company’s profitability. Passing the annual increases along to the employees was never an option, as one of the many unique benefits that differentiated the company from other employers was having employees contribute only $1 per month for their healthcare coverage. This and several other innovative employee-centric ideas created a great culture at Appriss and led to a long run of best employer and other local and national awards.
Innovative ideas and awards extended to its responses to the healthcare challenges it faced. Appriss became the first in their region to implement an extremely innovative and cost effective healthcare benefit design that is still in place today. It continues to achieve astonishing results through the careful integration of these inter-dependent components: (1) self-funding, (2) a very active biometrics / wellness rewards system, (3) an on-site clinic, (4) sophisticated data gathering and analysis, (5) a narrow network and (6) carefully designed steerage mechanisms.
The results achieved with the integrated model from 2006 to then end of 2012 are these:
- spending less per employee per month in 2012 than was spent 2006, with an ongoing downward trend in health care spending
- spending less than half per employee per month than others in the region, others in similar businesses and versus national averages
- prescriptions costs that increased at a rate lower than the average in the workplace
- employee biometric scores (predictors of later chronic diseases) that improved by showing lower risk, at every measurement period
- employee average biometric scores more favorable than new employees’ average scores
- employee surveys that consistently resulted in favorable unsolicited written comments about healthcare and the clinic, and very,very rare unfavorable comments about healthcare benefits
- A healthcare system that contributed to extremely low employee turnover and was cited by many job candidates as a recruitment advantage.
Because the systems that led to these results did not occur in a single step or as a solitary flash of insight, it’s easiest to explain the model chronologically, how it actually evolved.
In 2007, Appriss faced rising healthcare premiums and knew it reached a point where it needed to get more innovative with how it addressed healthcare, so it created an internal “think tank” to address the growing challenge. About a dozen employees from all levels and areas of the company volunteered to research the existing literature and report to the group any ideas about how companies deliver their healthcare benefits. This not only led to a wealth of ideas, it produced employee ownership, as well as an increased understanding of the healthcare landscape and its many challenges.
Starting small that first year (the 2008 calendar year), the input of the committee was used to design and implement a modest health education and wellness program to help the 200 or so employees better understand how best to use their healthcare coverage, how they might stay healthy and possibly reduce their health care costs.
Through a High Deductible Health Plan with a Health Savings Accounts (HSA) and the wellness and education efforts in place at the time, the company saw an eight percent reduction in overall healthcare costs. The insurance company rewarded this 8% decrease in healthcare costs with a proposed 22% increase in premiums for the next year! It was at this point that Appriss decided to entertain even more dramatically different ideas with its Healthcare plan!
In the 2009 plan year, with only about 225 employees, Appriss made the leap that the healthcare group had been discussing the previous year: it dropped its health insurance and became self-insured.
Self funding simply means that company will forego paying insurance premiums and will simply pay the healthcare bills accrued by its employees. This step relieves the company of many state mandated insurance requirements and enables much greater access to the healthcare utilization data of the group. The autonomy provides greater freedom in designing the plan to meet the company’s specific needs
When Appriss went self-funded, it kept the High Deductible Health Plan concept that was in place but switched from the HSA strategy to a Health Reimbursement Account (HRA). This meant that instead of dividing more than $300,000 amongst every employee on the plan and sending it directly to each employee’s health savings account, Appriss reimbursed only a limited portion of the healthcare dollars employees actually spent above their deductibles and after they reached their maximum out of pocket levels — and the company “got back” whatever was reserved but not used.
The idea was that Appriss would pay less in the HRA plan. Although the HRA did require fewer dollars than the HSA plan ($225,000 versus $300,000), it was better, but still not seen as an optimal solution and they continued to search for a way to use those dollars in a more strategic manner.
At this point in the Appriss story, three important pieces of the integrated solution were in place, the basics of a wellness design, a self-funded healthcare strategy that allowed for benefit from the gains and flexibility in strategic plan design, and smart decision making based on unfettered access to healthcare data.
The next key component to the model emerged from studying the data – which being fully self-paid allows you to do with greater detail than if you’re fully insured. When the data from 2008 were analyzed it became evident that about 20% of the costs went to nearly 1800 primary care visits, each costing in the $125-150 range. Because the workforce would soon grow to nearly 300 employees, this was a concern, since as the employee base grew there’d be a corresponding increase in these costs.
One way to control these expenses would be to find a provider willing to offer lower cost primary care or contract the services at a fixed rate rather than paying multiple variable rates.
In 2009 Appriss aggressively researched on-site medical services. Around this same time Appriss’ insurance broker, BB&T Insurance Services, had been meeting with all the healthcare providers in the region with the goal of finding a partner for a slightly different model they’d been working on. BB&T understood that the Appriss goal in researching an on-site clinic was to address three inter-related issues:
1. encourage employees to practice preventive medicine, (wellness + clinic)
2. reduce the costs associated with primary care visits, (lower fixed rates versus variable rates)
3. better manage the costs of prescription medications.
BB&T introduced Appriss to the key people at the Baptist Health System. BHS liked the onsite clinic idea and were very interested in partnering with Appriss to expand their HealthWorx and Immediate Care Center strategy at the Appriss facility.
The immediate reaction by Appriss could not have been more negative! Inviting one of the local competing health care providers into the company to provide primary care (and have them serve as the source of referrals to other specialists and inpatient and outpatient services) seemed a lot like asking the fox to guard the henhouse.
Appriss had many serious concerns, such as:
- Could a healthcare provider understand what Appriss was trying to achieve?
- If so, would they be willing and able to help drive down primary care costs?
- Would every visit to the onsite clinic lead to a referral? Would they ever provide referrals to any caregivers outside of their own network?
- Will they share their expertise to provide proactive preventive care in order to keep employees OUT of the very kinds of healthcare facilities they own and operate?
It took months of communication and planning for Appriss to become convinced that BHS not only understood the Appriss model and goals, they were every bit as committed to making it successful. After much discussion, it became apparent that Appriss’ health care strategy was consistent with the overall BHS business strategy of focusing on enhanced primary care, wellness and preventive medicine. What’s more,by partnering with BHS on the clinic enabled Appriss to negotiate superior rates inside the Baptist network – using their “narrow network”
Opening the Appriss/Baptist 800 square foot onsite clinic in early 2010, provided the next component of the integrated model. Appriss was self-funded, was getting and using healthcare data, was highly focused on wellness and preventive care and it had an on-site clinic.
The clinic was the first of its kind in the Louisville area designed to be a full service primary care, wellness and medical home to employees and their families. The convenient location increases the likelihood of preventive care for employees and their families and the free visits and free generic medications provide great incentives to use it.
The logic behind the clinic lies in the simple fact that there’s a fairly low breakeven point between the fixed costs of the contract versus the employer’s share of outside primary care visits. In other words, because the per visit costs are less at the clinic, a company does not need many patients to substitute clinic appointments for outside appointment before the cost of primary care comes down.
Clearly the success of the clinic depended upon its utilization. The first year at Appriss, the goal was to get more than 35% of the primary care visits redirected from outside doctors to the clinic. This would pay for labor costs and clinic supplies. Assuming only a slight increase in total primary care visits, any percentage above 35% would have actually represented a decrease in the primary care cost portion of the total healthcare spend. A 70-75% transfer of primary care visits to the clinic in the first year, would not only have paid the contract and the supplies but also the reconstruction costs incurred to house the clinic. (Approximately $75,000)
After opening on April 14, 2010, the clinic had enough use to reach the break even point, including construction costs by the end of the calendar year. Ninety (90) percent of the available appointment times were filled. Over 85% of the Appriss employees eligible to use the clinic or a family member used the clinic. Of those who used it 96% reported a favorable experience and would recommend it to others. Because of the immense impact of the clinic,the overall annual healthcare spend decreased almost 10% while the size of the workforce increased. This resulted in a lowering of the reinsurance rates to cover potential specific and aggregate losses – which are typically based on 125% of the previous years per employee healthcare spend!
The primary care center also served as the headquarters for the company’s Health Incentive Program. The goal was to promote higher levels of employee engagement in their health and well-being, to provide incentive to everyone to stay healthy for a longer time. To encourage these behaviors Appriss crafted a plan where part of the money saved on healthcare was shared with people who maintain their biometrics.
Employees were rewarded for either keeping their four biometric scores in a healthy range, or had to not get worse! This concept was based on the research by Dr. Dee Eddington at the University of Michigan, and reported in the groundbreaking book, “Zero Trend”. Providing rewards for not getting worse not only provides an incentive that can appeal to the most anti-wellness couch potato, it is proven to be an effective strategy to avoid increases in healthcare costs.
Twice per year every employee on the plan (and his/her spouse or partner) has the chance to earn cash rewards for maintaining or improving their current level of health as measured by four key predictors of chronic illness (those being blood pressure, bad cholesterol levels, body mass and glucose levels). The goal is to keep people healthy and to avoid the slide into any predictable chronic illnesses caused by simple neglect. An employee can earn $50 for each of the factors that do not get worse between semi-annual assessments, or stay in the healthy range. That’s a potential $400 in “health dividends” each year. If there are two adults on the plan, they can each earn $400 annually.
This plan financially rewards healthy behaviors. These incentives are a much better investment of then the money that had been given away (through HSA or HRA) plans which either reward just being on a high deductible plan, or worse, reward the highest users of sick care.
In one of the first set of assessments Appriss paid out $80,000 (or about 80% of the maximum possible) for maintenance of the key biometrics. This represented a $160,000 annual investment annually to reward healthy behaviors, rather then distributing 250,000 to 300,000 dollars in HRA or HSA plans that do nothing to encourage the desired behaviors.
Recall that allowing the clinic to be run by BHS enabled Appriss to negotiate deep discounts with the Baptist network. When inpatient or outpatient care was needed — the plan provided steerage towards the available narrow network.
A narrow network is a group of medical and healthcare providers who provide employees and companies with deeper discounts for agreeing to use their services. Steerage to a narrow network is a company strategy to provide greater incentives in order to “steer” users to a particular network. So by negotiating a high value (high quality / low cost) option, the plan was designed (remember self-insurance allows greater flexibility in plan design) to pay a larger portion of the preferred option – in this case the Baptist network. Appriss used a tiered system where it paid 90/10 for the preferred network, 70/30 for the next and 50/50 for anything out of the first two networks. Maximum out of pocket levels and deductibles were also stratified in a way that encouraged the use of the preferred providers. Employees still had a choice of any provider the reimbursement rates just made certain choices more financially attractive.
Appriss carefully designed other intrinsic and extrinsic benefits, policies, processes and initiatives to support the culture shift towards overall health, such as on-site fitness programs, reimbursing half of employees’ gym memberships, free smoking cessation, providing healthier food and snack selections at meetings and in vending machines, paying half of the entrance fee for runs and walks, nutrition and wellness classes, contests, convenient onsite delivery of a healthy foods through a Community Supported Agriculture (CSA) program and even sizable random drawings (for trips or major cash prizes) for all the people whose biometric scores did not get worse between measurement periods.
While this comprehensive integrated strategy worked well for Appriss locally and a few others nationally, many (most) companies have fewer than 150 employees and cannot justify their own primary care center or feel they cannot afford to risk the investment in the prevention of illness. To address that need, companies and neighborhood business associations are collaborating to establish near site primary care centers and using the wellness programs that the centers provide. These clinics provide primary care services and the same benefits to employers without requiring the company to provide the up front capital to build their own center, does not require them to research and operate a wellness program, nor does it require them to sign what may feel might be a risky long term contract for care. Like self-funding, improved data gathering and analytics, shared near site clinics or other forms of alternative medical home for enhanced wellness and preventive care are very likely to increase in use over the next few years. It seems that Edison was correct…just way ahead of his time!
The constant changes in health care policy, practices, rules, and regulations makes longer term prognostication in healthcare very difficult. What we can say for sure is that for Appriss the integrated solution has proven to be very effective and is likely to continue to be a cost savings tool as well as an appreciated employee benefit for the foreseeable future.
It’s very likely that “bending the trend” since 2006 has saved Appriss more than two million dollars in healthcare spending – and through financial transparency and sharing some of the gains it continues to create a culture of excitement and collaboration. Companies simply have to find and implement innovative methods and practices like these to change healthcare from an annual “employees versus management” adversarial zero sum contest to a longer term and much more unifying “Us against healthcare costs” survival strategy.
A well thought out and carefully implemented integrated design offers an efficient and constructive healthcare solution…and what other valued benefit can an employer provide to its employees that also saves the company money?
Dr. Rick Cartor holds a Ph.D. in Industrial / Organizational Psychology from The University of Tennessee. Rick has taught graduate and undergraduate classes in psychology and management at UT (Knoxville) Maryville College (Maryville, TN), the University of Louisville and Bellarmine University, where he was the Director of the Bellarmine MBA program from 1992-1995. Dr. Cartor was the VP of Organizational Consulting with Right Management Consultants, then served as the VP of HR at Appriss from 2006 to February 2012. Rick currently operates Custom Healthcare Designs, LLC which contracts exclusively through the Louisville office of BB&T Insurance Services.