Logansport Memorial Hospital: Carrots and Sticks
Cover Story
Written by Mike Sharkey   
Thursday, 31 January 2008
Cover Story - Logansport Memorial Hospital: Carrots and Sticks - RedCoat Publishing
How can America make healthcare more affordable?

At the junction of the Wabash and Eel Rivers in Northern Indiana lies the small city of Logansport, where one of America’s oldest working carousels still delights generations of children.

Cover Story - Logansport Memorial Hospital: Carrots and Sticks - RedCoat Publishing
Brian Shockney, CEO
The iconic hand-carved wooden horses are just one sign that life in this city of 20,000 is much the same today as it was decades and decades ago. The old State Theater is still a first-date destination, the police blotter in the weekly paper remains a must-read, and high school basketball is still an institution. But one thing has changed dramatically in this decidedly American community in the past 10 years—healthcare.

While politicians, healthcare professionals, and activists across the nation have been pointing fingers at insurance companies, a bogged down bureaucratic system, big pharma, and outdated hospital processes and cultures, CEO Brian Shockney and his team at 104-bed Logansport Memorial Hospital have been working tirelessly to enact real change.

“We don’t have a healthcare system in America, we have sickcare system,” said Shockney. “It incentivizes people to be sick. We need to start changing the behavior of Americans and incentivizing them to be healthy. Until we do that, we’ll continue to see costs spiral. Our current system has already proven that.”

That belief led Shockney and his team to create a comprehensive program that focuses on prevention and wellness. And no, this isn’t just another story about feel-good wellness programs. In Logansport, people are driven to change behaviors and lead healthy lifestyles with tried and true carrots and sticks. The results—healthier citizens and lower costs—provide ample evidence that this old-fashioned community is on the cutting edge of American healthcare reform.

Changing behavior
When the Balanced Budget Act was passed in 1997, the administrative team at Logansport Memorial read the writing on the wall: a steady decline in Medicare reimbursement would eventually make inpatient stays an expense rather than a source of revenue. Said Shockney, “We knew we had to do things differently to keep people out of the hospital.”

Cover Story - Logansport Memorial Hospital: Carrots and Sticks - RedCoat Publishing
Keeping people out of the hospital meant reaching out to the community and encouraging citizens to lead healthy lifestyles. But before asking the community to change, Shockney knew Logansport Memorial had to set the example. So in late 1997, the hospital hired a consultant to help implement a wellness program for its employees.

It was a nice program, but it lacked bite. Like most wellness programs, employees were offered a physiological screening. Those who accepted the offer were given the results as well as tailored information on how they could improve their health. There was even a carrot in the form of cash incentives for those who achieved results. From there, it was up to employees to decide whether or not they wanted to lead a healthier life.

“We discovered that traditional wellness programs don’t do a whole lot,” Shockney said. “They pick the low-hanging fruit, but they don’t make considerable changes. Every year, we looked at our research and saw the impact we were having wasn’t anywhere near what we hoped.”

To truly change employee behavior, the hospital knew it would not only have to use carrots, but also sticks. After interviewing a number of insurance companies, it found two that bought into the unique philosophy: network Southeastern Indiana Health Organization (SIHO) and broker Consolidated Union. The companies agreed to give Logansport Memorial significant discounts for its proposed program, discounts the hospital could then pass on to participating employees.

With the insurance tied in, Logansport Memorial’s wellness program was transformed into a health maintenance program that focused on three keys: identifying specific risks, tying the results of risk appraisals to benefits costs and data, and creating behavioral change through incentives and dis-incentives. Along with prizes, rewards, and cash incentives, which can total more than $500 a year, participating employees were given a 50% discount on insurance deductibles and co-pays. Conversely, as a dis-incentive, those who didn’t participate had to pay full cost for out-of-pocket insurance expenses.


Cover Story - Logansport Memorial Hospital: Carrots and Sticks - RedCoat Publishing
“Without tying insurance directly into an individual’s health maintenance program, you really can’t monitor behavior and ensure people are changing behavior,” Shockney said. “You have to tie those two things together. When we did that, it really took off.”

The statistics prove Logansport’s carrots-and-sticks approach works. Before the health maintenance program was launched in 2004, nearly 75% of the hospital’s employees did not get regular exercise. Today, that number is down to under 25%. Cholesterol, high blood pressure, and triglyceride levels have been reduced across the board, and the hospital’s benefit cost per month per employee has fallen from $694 in 2004 to $597 in 2007. On top of all that, the health maintenance program has created a culture of loyal, motivated employees.

“I really appreciate the hospital being proactive with preventive programs,” RN Carma Hefley said. “It says a lot about how the hospital cares for its employees. I also get rewarded for participating by paying a cheaper rate for insurance. It’s a win-win situation.”

Reaching out
Having set the example, Logansport Memorial was ready to launch its health maintenance program in the community. The hospital formed a separate business venture, Healthy People, and in partnership with SIHO and Consolidated Union, set out to make Logansport’s citizens more healthy.

The organization created a Healthy People “toolbox” to help companies build healthy behaviors in their employees. The toolbox includes a health insurance plan, a health maintenance program that focuses on education and communication, nurse coaching for individual employees, a 24/7 nurse hotline, chronic case management, and predictive modeling of costs and needed education through aggregate claims data.

“Healthy People is the only program I know that has all the components in one place,” said Alan McCloskey of Consolidated Union. “When we go to see employers, it is unique to bring the health provider, the insurance company, and the plan administrator to the table to show the benefits of the program. Most insurance plans are put in place for when employees are sick or injured. Healthy People’s aim is to keep people healthy and reduce healthcare costs.”

The program took off with its first major customer, Indiana’s Cass County Government. County administrators liked the concept of the program and were thrilled with the almost instantaneous result: a more than $200,000 discount in healthcare claims costs. And Cass County Commissioners president Steve Kain said the Healthy People program continues to generate positive results.

“Cost claims are down, and anything we can do to keep employees healthier helps employees and the county taxpayers. When we began, 17 employees were categorized as needing chronic health management. They have all made improvements and moved to health maintenance with normal nurse coaching. That benefits everyone.”

January marks the start of the second year of Logansport’s Healthy People, and there are already more than 2,000 members. To Shockney, it’s a growing body of evidence that proves American healthcare can be transformed if all stakeholders begin focusing on health rather than sickness.

“The only way we’ll make change is if we stop blaming hospitals, doctors, and insurance companies and start talking about changing the behavior of Americans,” he said. “We’re proving that can be accomplished by providing incentives for good health and dis-incentives for not doing the right things. And we as healthcare executives have to take charge of this. Whether executives like it or not, it’s our responsibility to improve the health and wellness of our communities. There are partners at the table to help us, but it’s the hospitals that have to take the lead role because no one else is stepping up to do it.”

 
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