MIT Sloan Management Review

Business Ethics and Public Policy, Human Resource Management and Industrial Relations

 

A Health Care Agenda for Business

By Leonard L. Berry, Ann M. Mirabito and Donald M. Berwick

July 15, 2004

As health care costs continue to skyrocket, companies must aggressively seek ways to work with employees and providers to reduce costs, while improving quality.

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The health care system in the United States is in crisis, and it has become a business crisis. Costs are spiraling upward, and the implications for businesses and their employees are profound. As employers struggle with unrelenting, double-digit health-insurance cost increases, some firms have decided to drop coverage entirely and many others have shifted costs to employees. And the quality of the health care being paid for by companies and their workers remains highly uneven despite the ever-increasing amounts of money devoted to improving it.1

Underlying such problems is a broken health care market. Unlike companies in other markets, health care providers and organizations lack sufficient incentives to innovate broadly or to improve quality. Similarly, consumers are unable to make health care decisions in the same way they make decisions about purchasing education or housing. And businesses that are rigorous and demanding purchasers of other goods and services are meek and ill-prepared when it comes to purchasing health care. In no other area of supply would they tolerate such cost increases and uneven quality.

The seriousness of the problem is underscored by a recent survey in which U.S. CEOs ranked health care benefit costs as their number one economic pressure.2 To put the issue into perspective, consider that Sprint Corp. would have to add $750 million in sales just to... To read the complete article, login or sign-up using the form below.

 
 

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