Wall Street Journal Examines Health Cost Situation at Pitney Bowes

The Wall Street Journal on Tuesday examined efforts by Connecticut-based mailing-equipment and services company Pitney Bowes to "contain ballooning health costs" in a "dysfunctional market" that "creates few incentives for any of its participants to deliver efficient care." According to the Journal, Pitney Bowes has "had some success" with efforts to control health care costs by "changing the behavior of its employees and improving their health." Pitney Bowes manages eight advanced medical clinics for employees to reduce spending on physician visits; operates a "Health Care University," where employees can earn credits toward lower health insurance premiums and learn how to use medical services more efficiently; and has a seven-member health care strategy team that uses predictive modeling software to determine areas in which health care costs will increase and develops programs to address them. However, the total cost of health insurance claims paid by Pitney Bowes, which provides coverage for about 80% of employees, increased 11.5% -- more than expected in 2003.

Explanation for Increase
According to the Journal, an examination of the health insurance claims information for the 46,000 U.S. Pitney Bowes employees and their dependents can "pinpoint some of the big contributors to the nation's surging health care bill: Local hospital mergers; entrepreneurial doctors prescribing costly MRIs and CT-scans at their own private clinics; marketing for expensive drugs." Pitney Bowes found that hospital services accounted for 35% of the 11.5% increase in total health insurance costs in 2003, in large part because of high costs from hospitals in California, where many community hospitals have consolidated into large networks. The average cost of a hospital visit in California was $20,500 for Pitney Bowes, double the amount that the company paid in other parts of the nation. Outpatient services accounted for 35% of the 11.5% increase; Pitney Bowes paid for 7% more CT scans in 2003 than in 2002, and the cost of the test increased by 15% last year. Officials for Pitney Bowes said that entrepreneurial medical practices not attached to hospitals increased costs and prescribed more laboratory tests and radiological services. Physician services accounted for 17% of the 11.5% increase, and prescription drugs accounted for 13%. According to the Journal, prescription drug costs, which increased by 11% for Pitney Bowes in 2003, "remain stubbornly resistant to Pitney Bowes' efforts" to reduce them. Pitney Bowes requires employees to pay as much as 50% of the price of brand-name prescription drugs when generic alternatives are available, but "drug-industry marketing neutralizes the company's cost-control efforts" in some cases, the Journal reports.

No Impact on Health Care Market?
According to the Journal, the "struggle by American businesses to rein in health care costs is nearing crisis levels," and "competition among insurers, health care providers and producers of drugs and equipment can often lead to higher, not lower prices." The Pitney Bowes case indicates that a "big company with an entire team dedicated to rooting out the source of rising health care costs has little power to change these dynamics." Jack Mahoney, corporate medical director at Pitney Bowes, said, "We can isolate certain phenomena and try to act on some and advocate policy for others. But when you come right down to it, even the biggest company out there will tell you they don't have much influence on the market" (Fuhrmans, Wall Street Journal, 7/13).