Gobs of options aren't the only reason cars are expensive: For every Chrysler minivan or Dodge Intrepid snapped off the showroom floor, about $1,100 of its sticker price can be traced to DaimlerChrysler's healthcare costs.
The Big Three automaker spent $1.3 billion on healthcare for its 122,000 U.S. lives last year, compared with $979 million in 1995, nearly a 40% increase. It spends more on healthcare than on all its contracts with parts vendors.
But unlike many other employers that have had to bear healthcare cost increases in recent years, DaimlerChrysler's human resources division in Traverse City, Mich., thought last year it had a solution-one so successful that it's affecting virtually every health plan in Michigan.
In 1998, DaimlerChrysler began sending out teams of efficiency experts to its 75 top healthcare contractors to conduct "continuous improvement workshops," where they identified ways to streamline processes to cut costs and increase efficiency.
"What we did is really apply a lot of what we've been doing the past 10 or 15 years with all our other suppliers," said Nancy Rae, vice president of compensation and benefits.
DaimlerChrysler has yet to tabulate potential savings from the continuous improvement workshops, although Rae said she believes they will be significant.
One contractor the automaker worked with was Mercy Health Services, a Farmington Hills, Mich.-based network of 31 hospitals. The automaker's senior vice president of human resources, Kathy Oswald, sits on one of Mercy's boards.
"We went through a lot of very intense exercises in a weekend workshop with 12-hour days," recalled Michael Markel Jr., executive director for emergency services at 409-bed St. Joseph Mercy Oakland in Pontiac, Mich., of a session that took place in February.
DaimlerChrysler discovered that physicians weren't communicating with one another and that diagnostic test data were grouped for later analysis rather than examined as they became available. The company also helped redesign St. Joseph's emergency room setup, reducing the time it takes for patients to be processed through the system. The average time was cut from eight hours to two.
By March, notes to the hospital from patients expressing thanks for expeditious care increased fivefold, Markel noted. ER costs were also reduced by about 9%, and the efficiencies are being copied at other Mercy hospitals, Rae said.
Beginning in July, DaimlerChrysler also persuaded its 12 health plans to use one standardized patient-referral form. "There was no reason it should take 60 days for a health plan (to process a referral)," Rae said.
Denise Christy, director of marketing for SelectCare, the Troy, Mich.-based HMO that spearheaded the design of the new form, could not immediately provide evidence that referral times were being cut.
However, Christy did note that physicians have been able to submit their paperwork to health plans within days as opposed to taking weeks because confusion over which forms to use have been eliminated. The form's cost-less than a penny-is also dramatically lower than what it costs for many health plans to print their own forms.
"In some cases, plans were spending as much as 32 cents to produce just one of their referral forms," Christy said.
The form has been so well received that the Michigan Association of Health Plans, the state's leading HMO lobby, is now promoting use of the form among all its members.