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Time for savvy managers to shoulder intervention schemes - part three
Alizanne Cheetham, Ian Sanne and Chris Barker. 21 May 2003. Business Report. Republished courtesy of Independent Newspapers (Pty) Ltd.
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Many companies are destroying shareholder value by implementing partial HIV/AIDS programmes. Employers are either holding off on treatment or implementing minimalist interventions, in the mistaken belief that they are saving money.
In so doing, they throw away yet another year of cost savings and can even render their entire initiative financially unviable.
It's time to put the management of HIV/AIDS in the hands of financially savvy business managers. Last week we explored current thinking on the financial viability of a firm sponsoring the treatment of HIV/AIDS among the workforce.
A key success factor is timing - for each individual patient and for the company's intervention. The economic argument for treatment is simple: sick employees cost the employer money, and treatment costs less.
If you allow an employee to traverse most of the disease cycle and only initiate treatment in the employee's last six months of life, then you have carried the cost of illness plus the price of treatment.
Research has shown that most current HIV/AIDS interventions cannot possibly be financially viable for the company.
Most companies make one of two critical mistakes: they offer treatment in isolation, targeting only the employees they absolutely have to pay for; or they offer a comprehensive programme but don't get it working correctly.
One in two currently recognised intervention programmes suffers from the first problem.
Employers decide to minimise costs and make a public offer of treatment to employees, with the intention of treating only the very few employees who will identify themselves out of pure desperation.
What these employers fail to realise is that these people identify themselves so late that every Rand the company pays is a rand lost, and the company has done absolutely nothing to curtail the impact of HIV/AIDS on the business.
In short, the whole economic viability argument, which shows that the impact of HIV/AIDS can be significantly reduced, is lost. Executives need to re-evaluate these decisions in the interests of value creation.
The second problem is more subtle. Some companies truly do intend to manage HIV-positive employees, but audits of patients across several treating companies have shown that most are in an advanced stage of the disease.
Thus, treatment programmes for most employees in this country are not examples of cost saving but of cost doubling - the cost of treatment plus the lost productivity of employees treated too late.
Sometimes this problem is a result of poor management, but mostly it is a reflection of misaligned incentives. Often the party paying for treatment is external to the company, such as a medical aid, and has absolutely no financial incentive to identify and treat patients early.
From an employer's perspective, early treatment is the only financially attractive solution, and the key lies in identifying patients early. This in turn means the employer must drive an education and awareness programme and not leave it up to the paying party.
To achieve this, new educational messages are required, to explain the merit of early identification and push the proportion of testing up to the 98 percent which has been experienced with pregnant mothers.
One such message would be to show employees that if they are diagnosed as HIV positive too late, their kids will be orphaned while in primary school, while if they are diagnosed early, they have every chance of seeing their kids through to matriculation and later.
The second issue is the timing of the intervention. Most companies feel that since death rates are not yet very high, they can afford to wait. But clearly death rates are an even worse indicator than illness.
If you drive a petrol 4x4 and you can save R1 000 a month by switching to a diesel car, then clearly the sooner you switch the sooner you start saving.
If you hear that the government is about to improve diesel subsidies, then the savings can only be better in future.
This future decrease is not a reason to delay.
Further, if the possibility exists that your company will subsidise the running cost of the car by a fixed amount irrespective of the fuel used, but this policy is not yet finalised, you can still switch cars today and take advantage of the company scheme when it becomes available.
In the same way, employers wait to see how they can offer treatment in collaboration with their medical aids, or imagine that by delaying an HIV/AIDS programme for a year they will save a year of costs. The same logic could be applied to delaying your home loan repayments, or starting a new business.
It is very easy to get started straight away and to ensure that the employer is not locked into anything which cannot be changed in future.
First, programmes should be managed by people who are completely independent of the party footing the bill.
Second, this management should be outsourced to ensure employee confidentiality.
Finally, the right kind of funding model, of the type offered by independent risk management brokers, puts the company in the position of being the financing party.
This model allows the employer to recoup costs from a medical aid, yet simultaneously manage uninsured employees within exactly the same programme.
This is the third in a series of eight weekly features
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