Fed up with rising costs, big US firms dig into healthcare

The inside of a Walgreens-operated pharmacy is seen at a Cisco health clinic at Cisco Systems in San Jose, California, U.S., March 22, 2018. Picture taken March 22, 2018. REUTERS/Elijah Nouvelage

SAN JOSE, California – At its Silicon Valley headquarters, network gear maker Cisco Systems Inc is going to unusual lengths to take control of the relentless increase in its US healthcare costs.

The company is among a handful of large American employers who are getting more deeply involved in managing their workers’ health instead of looking to insurers to do it. Cisco last year began offering its employees a plan it negotiated directly with nearby Stanford Health medical system.

Under the plan, physicians are supposed to keep costs down by closely tracking about a dozen health indicators to prevent expensive emergencies, and keep Cisco workers happy with their care. If they meet these goals, Stanford gets a bonus. If they fail, Stanford pays Cisco a penalty.

At the center of it all is a spacious clinic inside Cisco’s San Jose campus, the first point of contact for many employees and their families. They often see Dr. Larry Kwan, a Stanford Health general physician who rubs shoulders with workers in the cafeteria and company gym.

“I’m in their space. I’m actually where they work,” Dr. Kwan said. “I’m a bit of a village doc.”

Cisco said costs for Stanford plan patients are 10 percent lower than conventional coverage still used by most of its employees. Chipmaker Intel Corp told Reuters it is saving 17 percent on its workers enrolled in a similar plan, known as Connected Care. Aircraft manufacturer Boeing Co and Walmart Inc, the world’s largest retailer, have likewise hammered out health plans directly with providers.

The movement is small, just a few very large U.S. corporations that have signed up tens of thousands of workers so far. Their early efforts show the challenges of changing behaviors among patients and doctors.

But they speak volumes about corporate America’s frustration with inexorably rising medical costs and the traditional insurers that sell them coverage.

“Before they were simply saying ‘Okay, our vendor is going to help us with this,’” said John Jackson, who handles corporate programs like Cisco’s for Stanford Health. “Many are no longer willing to do that.”

Corporations help pay for healthcare for more than 170 million Americans, in most cases working with an insurer to handle everything from the price of treatments to medical claims.

These employers will spend an estimated $738 billion on health benefits in 2018, a figure that has been rising about 5 percent annually in recent years, according to federal data.