The CMO's essential role in containing costs and improving health

Controlling healthcare costs is not just a matter of financial prudence but a strategic imperative that impacts overall business performance. Studies have shown that for every $1 spent on healthcare, there is an associated $2 to $4 in lost productivity due to absenteeism, presenteeism, disability and turnover, among other factors. As organizations grapple with rising healthcare expenses, the role of chief medical officer (CMO) in collaboration with benefit brokers and HR leadership has become increasingly pivotal. 

While benefit brokers expertly navigate the complexities of healthcare negotiations to secure the best unit costs, CMOs focus on a different but equally critical aspect: reducing the demand or need for healthcare services. Additionally, HR leadership plays a crucial role in collaborating with the CMO to integrate these strategies into the organizational culture and ensure that health and well-being programs are effectively communicated and adopted by employees. 

Effective healthcare cost management involves two fundamental strategies. The first is negotiating the best possible unit costs for healthcare services, which includes securing favorable rates for medical treatments, procedures and pharmaceuticals. This is where benefit brokers excel, leveraging their expertise and networks to negotiate contracts that align with the financial interests of the organization.

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The second, perhaps more complex, strategy is reducing the overall demand and need for healthcare. This is the domain of the CMO, who works with brokers and HR leadership to implement and measure comprehensive health, safety and well-being programs that not only address immediate health issues but also foster long-term healthy behaviors among employees. To accomplish this, CMOs leverage the evolving science of population health and well-being, evidence-based medicine and behavioral economics.

CMOs and benefit brokers must work together, sharing information and resources to make data-driven business decisions. This collaborative approach ensures that immediate and long-term health needs are met, ultimately reducing the overall demand for healthcare services. By integrating these strategies, organizations can achieve a more holistic and effective healthcare cost-management system.

CMOs are uniquely positioned to influence an organization's health and well-being landscape. By focusing on preventive care, disease management and overall health consumer education, CMOs can significantly reduce the frequency and severity of health-related work absences and claims, and lower healthcare costs.

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In my experience serving as a corporate medical leader for Fortune 500 companies, I have seen firsthand the importance of understanding the illness burden of the population that's being served. Analyzing data to identify prevalent health risks and conditions is a crucial first step. This approach is detailed in a textbook I co-authored that outlines research and data demonstrating how building a sustainable culture of health and wellness can improve the health status and lower healthcare costs for a target population.

CMOs, with their medical expertise and understanding of healthcare systems, are pivotal in aligning health initiatives with business objectives. They can drive changes in the corporate culture that prioritize health and wellness, thereby embedding these values into the core operational strategies of the organization. Additionally, CMOs are well versed in navigating corporate dynamics, creating healthy work environments, implementing evidence-based benefit design and assuring healthcare quality. These attributes can foster a healthier workforce and help all covered lives access the best that healthcare delivery has to offer. 

The relationship between CMOs and benefit brokers can lead to a holistic approach to health and well-being management within an organization. While brokers ensure that the costs of services are kept in check, CMOs can direct efforts across the population health continuum, from securing center-of-excellence programs for catastrophic medical conditions to keeping healthy individuals healthy. This dual approach not only helps control direct costs but also addresses the indirect costs associated with poor health, such as reduced productivity and increased absenteeism.

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Just as companies find it necessary to retain legal counsel for compliance and regulatory purposes, having a CMO is equally important for navigating the complexities of healthcare management. CMOs provide the medical expertise and strategic oversight needed to foster a healthy workforce or respond to urgent issues such as pandemic response, much like legal counsel ensures adherence to laws and addresses regulations. 

As businesses continue to navigate the complexities of healthcare, the strategic integration of CMOs into the corporate structure will be a determinant of their ability to manage costs effectively while promoting a healthy, engaged and productive workforce.