How would the actions motivate the employees? What incentives might be needed to change behaviors?

HealthT, a midsize for-profit hospital company, was seeking ways to improve its bottom line. Charlie, its chief operating officer, noted the huge company expense for employee healthcare insurance. Costs had risen from about $140 million three years ago to $195 million in the current year. HealthT, like most large companies, was self-insured, which meant its healthcare expenditures were reported as operating expenses and came directly out of its profits. The huge increase in overall healthcare costs infuriated Charlie, and he immediately called the human resources (HR) department demanding that its director meet with him in two hours to justify the large increase.

Glen, the HR director, arrived at Charlie’s office on time, knowing that Charlie was a demanding boss. Glen had the following spreadsheet to share with Charlie.

Glen was pleased to report that over the past three years, HealthT’s healthcare cost per employee had risen only 12.1 percent, or about 4 percent per year. He also pointed out that, with the new network of physicians and hospitals, the per-employee physician expense had dropped from 2017 to 2020.

Charlie was still upset. He almost yelled at Glen. “Look at the total figures! We are spending almost $200 million on employee healthcare expenses, and the costs of chronic illness care have jumped 47.5 percent in just three years. That’s 18 percent per employee! You must come up with something to control these runaway costs. You have one week to present your recommendations.”