By Maxwell Murphy – Wall Street Journal
In late 2012, Don Ulrich moved from the boardroom to the chief operating officer post and set about scrubbing its healthcare costs……The 8,600-employee chain operates in the $25 million to $30 million range for annual health-care costs………..
The “Cadillac Tax” isn’t the only reason executives are looking to shed health-care costs; low-margin businesses don’t have much choice but to arrest the increases and trim fat wherever they can.
As CFO Journal reported Tuesday, finance executives are turning their attention to the controversial provision of the 2010 Affordable Care Act, which is scheduled to take effect in 2018 and penalizes companies whose benefits are deemed overly generous. But even modest grocers whose benefits won’t trigger a levy can’t afford to ignore the burgeoning costs of coverage.
Bashas’ Inc., a family-owned chain of 119 supermarkets based in Arizona, emerged from bankruptcy protection in 2010, but cutthroat competition and razor-thin margins drove the grocer to look for breathing room. In late 2012, Don Ulrich moved from the boardroom to the chief operating officer post and set about scrubbing its healthcare costs.
Mr. Ulrich has used a third-party consulting firm, working on contingency, to claw back upwards of $4 million of excessive or erroneous billing since 2013, meaning the equivalent to the bottom line of up to $200 million in newfound revenue given Bashas’ roughly 2% net margin.
The 8,600-employee chain operates in the $25 million to $30 million range for annual health-care costs, he said, which is in line with similarly-sized firms in the industry.
“It became obvious that we were going to have to make more cuts to make it work,” Mr. Ulrich said.
Mike Dendy, chief executive of Advanced Medical Pricing Solutions, a Georgia-based company (http://advancedpricing.com/) that helps Bashas’ recover any unwarranted charges on a contingency basis, argues that the relationship between hospitals and insurers is both too cozy and opaque. He alleges that toothbrushes can cost $1,000 or more and both insurers and hospitals are gaming the system.
Mr. Dendy pointed to a skull fracture covered by a health-care provider on the East Coast. The bill topped $63,000, nearly eight times what Medicare would have paid for the same treatment, so AMPS challenged the amount and reduced it to below $17,000.
Bashas’ Mr. Ulrich, for his part, says he wasn’t looking to enter the health-care fray.
“All I wanted,” he said, “was to make sure we were getting a square deal.”