Category Archives: Healthcare Reform

Posts about the new HCMS Healthcare Reform Model

Introducing Behavioral Economics to Healthcare

Introducing Behavioral Economics to Healthcare


Dr. Hank Gardner discusses the origins of HCMS Group’s revolutionary approach to healthcare.

What sets HCMS Group’s approach to healthcare apart is the combination of behavioral economics concepts with the holistic bio-psycho-social model for medical practice, Dr. Hank Gardner said in the introductory installment of the periodic HCMS Innovation Vlog.

He described three economic tenets on which the healthcare information company’s work with employers and health organizations is built. They are that there’s no free lunch, so there are trade-offs in costs and priorities; that consumers/patients need to determine priorities in healthcare; and that it’s necessary to keep score by capturing data and analyzing outcomes.

“As benefit costs go up – particularly in the component of healthcare cost that is represented by healthcare waste – resources to pay wages go down,” Dr. Gardner said. “It’s one of the very critical issues American businesses face these days. As benefit costs increase, resources for wages diminish.”

Click here to view the Innovation Vlog.


HCMS Unveils Purple Solution for Obamacare


HCMS Group today unveiled our Purple Solution for the fight over Obamacare between Democrats and Republicans in Washington. We outlined it in a news release: Click here for research findings supporting our position, and here to see the elements of the plan.

Our point is that there is a simple, proven solution to the challenges created by the Affordable Care Act. We test-drove and refined it in the state of Wyoming, and we advocate it every day for self-insured employers. We’ve shown that it works to reduce healthcare waste while protecting health.

For more news from HCMS, click here.


What’s Eating Up Your Paycheck? Healthcare Costs (Healthcare Waste)


Healthcare waste helps keep wages flat, widening economic inequality and fueling voter anger and frustration.

healthcare waste causes wage stagnation

Tuan Azizi/Getty Images/Thinkstock


Everybody talks about how insanely expensive healthcare and health insurance are. And there’s lots of talk about how wages have barely kept up with inflation for at least eight years.

But nobody’s really talking about how those two things – surging healthcare costs and stagnant wages – are directly connected. New research by HCMS Group, a healthcare reform company based in Cheyenne, Wyo., dramatically shows the link.

For a substantial cross-section of private employers and the people they cover, healthcare costs rose more than 10% in 2014, the study showed. Worker pay climbed just 4.1%. For those making less than $30,000 – predominantly women – wages inched up 0.5% while their healthcare costs jumped almost 17%.

What’s the connection? Well, employers lump wages and benefits together in their budgets for worker compensation. As healthcare expenses drain progressively more money out of total compensation budgets, there’s less available to put in people’s paychecks. Many employers try to limit their healthcare costs by raising premiums, copays, out-of-network charges and deductibles. But that just takes even more money directly out of people’s pockets, without improving health.

The study spotlights one of the biggest but least discussed economic effects of runaway health benefit costs. Flat wages widen economic inequality – one of the things fueling voter anger and frustration this election year.

“The key to resolving wage stagnation is to reduce healthcare waste and funnel those dollars into wages,” said Dr. Hank Gardner, the CEO of HCMS Group.

Healthcare waste is at the center of the problem. Waste is overtreatment by medical providers and overconsumption by patients, with risky narcotics at the top of the list. Waste accounts for 30% of national healthcare spending. The current healthcare benefits system encourages waste and does little to improve health.

The HCMS study of wages and healthcare costs was based on the company’s unmatched Research Reference Database, which includes healthcare, compensation and paid time off data for almost 4 million Americans whose benefits are provided by more than 300 employers.

healthcare costs and wage study

In 2014, average wages in the healthcare costs study group of more than 140,000 people rose 4.1% to $81,371. Average health plan costs – including those paid by employers and directly out of employees’ pockets – jumped 10% to $10,263 a person. Among people earning less than $30,000, wages increased $124, or 0.5%, while their health plan costs surged $797, or 16.6%.

People in higher income brackets had higher raises – 4.3% for those making $30,000 to $80,000 and 4.2% for salaries higher than $80,000. Meanwhile, their healthcare costs rose substantially less than expenses for people in the under $30,000 group. The data show how the costs of healthcare waste fall disproportionately on those with lower incomes, contributing to economic inequality.

“This shows the power and importance of real healthcare reform,” Gardner said. “We need to put more money in people’s pockets. People with the lowest incomes – notably women and single mothers – wind up paying the most for healthcare waste in the form of forgone wages.”


For self-insured employers HCMS Group offers offer comprehensive, REAL healthcare reform solutions to reduce healthcare waste and costs while improving health. Please contact us at or call (877) 883-5786.

— Bob Simison on behalf of HCMS Group data analytics.

Behind the Surge in Healthcare Cost: Healthcare Waste, by the Numbers

Behind the Surge in Healthcare Cost: Healthcare Waste, by the Numbers



an elephant calm in a restaurant interior. photo combination concept

There’s an elephant in the healthcare cost room that nobody wants to talk about. It’s healthcare waste, and it adds up to almost $1 trillion.

Researchers including the government’s own Institute of Medicine have found that 30% of the nation’s $3.2 trillion in annual healthcare spending is wasted.  According to research conducted by HCMS Group, waste in the form of over-treatment and over-consumption accounts for 30% to 40% of healthcare costs for risk-bearing employers and health plans.

Why not talk about it? Well, it’s a touchy subject. Who’s to say what waste is when we’re talking about someone’s health? What’s waste to you might seem like a life-or-death necessity to me.

Nonetheless, that’s what we focus on at HCMS Group, because reducing waste is the best way to lower cost for employers while improving health. Wasteful over-diagnosis and over-treatment by the health industry contributes to over-consumption by patients that increases their risks.

“Most healthcare providers know they over-treat people,” said Dr. Hank Gardner, the CEO of HCMS, based in Cheyenne, Wyoming. “They do it because that’s what patients expect – lots of tests and procedures and prescriptions – and the providers have to worry about customer satisfaction scores.”

To understand healthcare waste, it’s important to know these three numbers:

5 50 30 on blue

For self-insured employers HCMS Group offers a free Healthcare Waste Estimator so you can know your 5-50-30 numbers. Please contact us at or call (877) 883-5786.

— Bob Simison on behalf of HCMS Group data analytics.

Recovery Time: Another Dimension of Healthcare Cost Management

Recovery Time: Another Dimension of Healthcare Cost Management



How a Person-Centric Risk Management Model Helps a Speedy Return to Work… and Health.

HCMS Newsletter December 2014

Work time that is lost because of illness or disability represents a major indirect cost to employers in addition to the direct cost of healthcare and other health benefits. Most disability management programs focus primarily on a patient’s primary medical disease—hence the term disease management.

Variation in Recovery Time

Using our big data Research Reference Database on nearly 4 million people from over 300 employers with 10 million lost time episodes, our research shows the importance of population risk analysis and a person-centric approach in reducing lost-time cost.

Figure 1 is a population risk analysis on disability claimants that demonstrates the huge variation in lost time. Half of the claimants in this population lost 1.7 days from work while the high-risk 5% population lost an average of 91.5 days –over 50 times more than the other population. Our predictive Human Capital Risk Index (HUI) shows risk well before actual lost time which provides a preventive intervention disability management strategy.

Figure 1: Disability Claimant Population Risk Analysis

Disability Claimant PRA

(Click image to enlarge)

The Need for a Person-Centric Approach

Further research shows why a disease-centric disability-management system is less effective because, as shown in Figure 2, the cost of the primary disease in disability cases is only a fraction of the total cost and does not account for the many comorbidities, or additional diseases, those disability claimants have. This situation drives the need for a proactive, preventive, and person-centric approach that is informed by the predictive HUI which allows for focus on the whole person, not just the primary disease.

Figure 2: Disability Claimant Comorbidity Analysis

Disability Claimant Comorbidity Analysis

(Click image to enlarge)


Implementing a predictive analytic person-centric disability management strategy that focuses on the high-risk 5% population has major potential for reducing disability-related lost time and returning workers to productive health.

HCMS Implementing Two-Factor Authentication for All Online Services

HCMS will soon be implementing an additional layer of security for access to online services such as O|BI, iHUI, and SMA. The new security feature is called two-factor authentication. You may be familiar with earlier generations of two-factor authentication that utilized dedicated tokens—a gizmo with a button that generates a code. We will utilize mobile devices and land lines as our method of two-factor authentication. Basically, you will register a mobile device and/or a land line. When you log in, you will be required to confirm your login via a code texted to your mobile device or a phone call to the land line. In addition to entering your password, two-factor refers to the fact that you have to supply something you know (a password) and something you have (the mobile device or land line) in order to log in, increasing security by reducing the chances your account can be hacked. More to come soon on this important new security feature!

KnovaSolutions in Action: Improved Family Health

KnovaSolutions Member ImageA middle-aged factory worker with neck and back pain was scheduled for surgery when he enrolled in KnovaSolutions. He had been in and out of work for almost a year and was taking narcotic pain medications. His wife’s elderly parents lived with them and his wife was on multiple medications related to stress.

His KnovaSolutions nurse discussed non-surgical options for pain management and the pharmacist reviewed non-narcotic medications for pain. The KnovaSolutions team also assisted the couple to locate resources within the community to help with the care of her parents.

With the information and support provided by KnovaSolutions, the member decided to postpone surgery while he tried other therapies. He also switched to non-narcotic pain medications which allowed him to return to work and so far, he has not missed any additional days. With the community resources to assist with care for her parents, his wife has decreased the number of medications she takes and reports feeling more in control of their home situation.

Both the member and his wife reported “how nice it is to have someone interested in more than just running tests or giving you pills.”

Click here to view or download this newsletter as a PDF.

The Illusion of Healthcare Reform: Why Healthcare Exchanges Are the Wrong Answer

The Illusion of Healthcare Reform: Why Healthcare Exchanges Are the Wrong Answer


HCMS Newsletter November 2014

To reduce ever-increasing healthcare costs, self-insured American employers are now offering benefit plans and giving workers subsidies for buying health insurance from a menu of plans in private healthcare exchanges. A new health risk score analysis shows how consumers’ choices exposed some health insurance providers to substantial losses.

Allure of Multiple Choices

The government Affordable Care Act healthcare exchanges are the model that consultants are using to construct private healthcare exchanges for private employers. These roughly match the levels of coverage in health exchanges created under the Affordable Care Act. They range from high-deductible, low-premium bronze and silver plans to low-deductible, high-premium gold and platinum plans.

A Behavioral Economics Population Analysis

Using our comprehensive Research Reference Database, we analyzed what happened when a benefit program is replaced with a private health exchange. We used our Human Capital Risk Index® (HUI, patent pending) to compare plan populations.

Consumer Choice & the Pricing Problem

What did we find? People are smart and make rational decisions in choosing the health plan option that best fits their needs. Those who chose the lowest-premium, highest-deductible bronze plans had HUI scores of 0.6, well below the average of 1.0. Silver plans attracted HUI scores of 1.0; gold, 1.49; and platinum, 1.75. This shows that consumers made rational decisions based on assessments of their own risk.

Using traditional actuarial risk analyses, insurance companies significantly overpriced the bronze and silver plans. Bronze premiums of about $4,000 were twice as high as the participants’ actual health costs in 2013. Gold and platinum plans were under-priced — by about 40 percent for the platinum level.

Recipe for Failure

For insurance companies with greater exposure to gold and platinum policies — with above-average HUI scores — the potential for losses was as high as 20 percent. Those companies that attracted below-average HUI ratings stood to be well in the black with margins of 50 percent.

There are two takeaways: HUI scores could have great utility in plan pricing, and offering a single, aligned-incentives health plan would prevent the problem.

Multiple Medications: A Top Problem in the 5% Population

The use of multiple prescription medications, or polypharmacy, is a common problem within the 5% high-risk, high-cost population that the KnovaSolutions clinical prevention service engages. The average person in this group is taking more than 10 unique prescription medications. Polypharmacy causes poor job productivity, high absence rates, and low work quality.

The KnovaSolutions team, which includes a licensed pharmacist and master’s-prepared nurse, addresses the issue of polypharmacy by assessing the medications for interactions, duplication, compliance, effectiveness, and appropriate dosages. This assessment leads to many positive outcomes for the member including improved adherence in medications, a decreased number of medications without adverse side effects, less time away from work with medication adjustments, as well as improved health and productivity.

Research Findings

A Game-Changing Predictive Health Risk Index

We’re all defined by numbers such as age, weight, and credit scores. Each of these tells something about you now or in the past, but none of them can predict your future. Learn how our Human Capital Risk Index® predicts your future health here.

KnovaSolutions in Action: Alternatives to Drugs and Surgery

KS Knee ImageA female KnovaSolutions member who was recovering from surgery for colon cancer told her KnovaSolutions clinical prevention team about chronic pain in her left knee. Cortisone treatments and prescription pain medications over the years hadn’t provided significant relief.

The member asked about other options. Her KnovaSolutions nurse discussed with her the risks and benefits of knee surgery and non-surgical alternatives.

With support from her clinical prevention team, the member decided to try a physical therapy program aimed at strengthening the muscles that support the knee. With completion of the program and continued exercise, she reports the knee is now nearly pain-free. She says she is happy she avoided another surgery and no longer needs narcotic pain medications.

Healthcare Reform Seminar in Nebraska

Nebraska employers and healthcare organizations participated in our first healthcare reform seminar Nov. 14 in Omaha. The 26 individuals representing 20 companies learned how they can seize the initiative to carry out their own market-based reform programs even as the Affordable Care Act substantially increases costs with mandates for expanded benefits.

HCMS participants included Dr. Hank Gardner, our CEO; Shawn Petrini, our chief clinical officer; Justin Schaneman, vice president of data analytics; Dean Thompson, vice president of marketing and sales; and Neil Sullivan, senior human capital management consultant.

The program covered population risk analysis, the problems associated with health insurance exchanges, and the superiority of econometric over actuarial modeling. Breakout sessions provided deeper dives into the elements of our 5|50 Solution.

We plan to host a series of healthcare reform seminars in 2015 around the country and will be in touch when we come to a city near you.

Check out our website’s new content and updated design:


Click here to view or download this newsletter as a PDF.


Health Insurance Exchanges Increase Risk of Workers’ Compensation Claims

Health Insurance Exchanges Increase Risk of Workers’ Compensation Claims


Using private health insurance exchanges to hold down corporate health benefits spending results in higher use of workers’ compensation, researchers at HCMS Group found.

An analysis of private-employer data in the HCMS Research Reference Database showed that workers who selected health insurance plans with lower monthly premiums and higher deductibles filed more claims for workers’ compensation than the year before. Most of the people in the study opted for the less-expensive plans, designated bronze and silver under the Affordable Care Act.

Many American self-insured employers opted into private insurance exchanges in an effort to reduce their exposure to volatile and surging healthcare costs fueled by the healthcare law. Private exchanges are similar to the public exchanges established under the legislation. Notable employers using these exchanges to replace risk-bearing self-insurance plans include Sears Holdings, Darden Restaurants, Petco Animal Supplies, and IBM. These companies gave workers subsidies for buying health insurance from a menu of four or five plans, typically engaging a consulting firm to set up the exchange.

The HCMS findings show how medical-cost risk can migrate from one expense category to others, as documented years ago by HCMS. To prevent that from happening, employers need integrated health benefits data to carry out a comprehensive health benefits overhaul. This should take into account not only medical benefits but also incentives related to workers’ compensation and short-term disability. HCMS research shows that employers can lower total benefit costs by 10% to 15% by offering a single aligned-incentives health plan with a health account, incentives to use primary care and prevention services for complex medical situations, and a deductible design that favors value-based use of hospitals and specialists offering the best care at the lowest cost.Change in Lost Time for Bronze and Silver Plans

HCMS researchers compared expenses from the first five months of 2014 with those from the first five months of 2013. People with high-deductible health plans filed 8.1% more claims for workers’ compensation in the 2014 period than a year earlier. This suggests that people migrated to the workers’ compensation system in response to cost-sharing incentives. That happens mostly with musculoskeletal conditions (such as back injury or pain and carpal tunnel) where patients and providers have leeway to say whether it is work-related or not. If chalking a condition up to work avoids out-of-pocket expense to cover a deductible, then workers have an incentive to do so.

Bottom line for employers: The study shows that reducing the risk of healthcare costs is more complex than simply steering workers to medical insurance exchanges. These systems will push some of that risk back to employers in the form of increased use of workers’ compensation and lost time benefits. This should be a major factor for employers in deciding on healthcare exchanges.

— By Robert L. Simison, HCMS Communications
On behalf of HCMS Data Analytics


Healthcare Reform Webinar Series Video 5: Centers of Excellence and Finding the Best Care


In the fifth webinar in our healthcare reform series, Dr. Hank Gardner, Dr. Tim Ryan, Rene Sims, MSN, RN, and Justin Schaneman, MS discussed centers of excellence and how clinical prevention plays a role. Watch the video recording to hear how centers of excellence are commonly evaluated and learn a new way of evaluation that measures how efficiently healthcare networks/providers manage patient risk.

For HD viewing, please click on the video and then click on “HD” in the bottom right of the pop-up window. The HD button will be blue when it is turned on.

Have any questions or comments? Leave a comment and we’ll be sure to get back to you.

To see the other videos in this series, please click here.


Can a Backache Be Contagious?


Contagious BackacheIf you have a backache, a knee sprain, or some other injury to the body’s structure of bones, joints, and muscles, the risk that someone else in your family has such an injury rises by more than a third.

That’s what researchers at HCMS Group LLC discovered in analyzing healthcare data on more than 3.7 million people whose medical benefits were provided by more than 200 employers. They found that when a covered employee has medical costs for treating a musculoskeletal condition, there’s a 27% likelihood that a dependent will, too. That compares with a 20% risk for dependents when the employed family member doesn’t have such an injury.

Among dependents, the risk is higher for adults than for children, but the findings are consistent across all groups. (See figure 1 below.)

Likelihood of Dependent Musculoskeletal Cost

For more than a century, economists and psychologists have observed a contagion effect in social networks and workplaces. One 1996 study found that health symptoms often spread through groups of workers without any physical cause. In 2000, researchers, led by Dr. Hank Gardner,  the CEO and principal owner of HCMS Group, analyzed data on claims for workers’ compensation and family leave. They found evidence that workers learning from each other about the benefits fueled a contagion effect in filing of claims.

With respect to musculoskeletal conditions, multiple cases within a family can have significant cost ramifications. Average annual expenses for treatment of these conditions range from $500 to $55,087, according to HCMS Group research. The low end of the scale is for the healthiest 50% of the population. At the high end are those in the 5% of the population who account for 50% of healthcare costs. People in this group have an average of 10 other conditions, with several medications and specialists involved in their treatment. (See previous blog post. For information on HCMS Group’s 5|50 Solution™ designed to address this problem, click here.)


— Robert L. Simison, HCMS Group Communications

On behalf of HCMS Group Data Analytics


This is the final installment in the series on musculoskeletal discoveries. Please visit the links below to read the other posts in this series:

1. Musculoskeletal: Top Contributor to Total Claim Costs

2. Musculoskeletal Costs Nearly Twice that of Condition-Specific Costs

3. The $55, 087 Backache



Healthcare Reform Webinar Series Video 4: The Importance of Primary Care


The fourth video in our healthcare reform webinar series focuses on the importance of primary care. Watch this live webinar recording of Dr. Hank Gardner, Dr. Nim Patel, Shawn Petrini, MSN, RN, and Justin Schaneman, MS as they discuss a market solution for healthcare reform, primary care and clinical prevention analyses, key issues with primary care usage, and clinical prevention’s synergy with primary care.

For HD viewing, please click on the video and then click on “HD” in the bottom right of the pop-up window. The HD button will be blue when it is turned on.

Have any questions or comments? Leave a comment and we’ll be sure to get back to you.

To see the other videos in this series, please click here.