Fitter, happier, less expensive

The Blackstone Group’s healthcare programme – used across its portfolio companies – has proved so popular that even JPMorgan’s chief Jamie Dimon has asked about getting the bank’s employees on board.

Tony James, Blackstone’s president, talked about the programme, Equity Healthcare, at a meeting of the San Diego County Employees’ Retirement Association board in April. James went before the board to try and secure a commitment to the firm’s sixth fund, which is expected to close on $12.5 billion this year.

Equity Healthcare aggregates the purchasing power of Blackstone’s portfolio companies to secure discounts in healthcare insurance from Blackstone’s two primary providers, Aetna and Anthem.

Blackstone began inviting other firms to join the platform last summer and rival private equity heavyweight TPG was the first to sign up. Outside firms can join Blackstone’s purchasing programme for a cost of $2 per employee per month.

James said that no conclusion had yet been reached regarding JPMorgan’s participation in the scheme.
At the moment Blackstone is largely focused on rolling out the programme for its own portfolio companies, and those of TPG. But Blackstone has received “other requests” from companies looking to join the programme, and it hopes to someday be able to accommodate them.

“I think it’s a model for the country to follow in a way,” James said.

James also gave more detail on how the programme works at a portfolio company level. In addition to the cost savings from aggregated purchasing power, Blackstone tries to ensure that its employees’ use of healthcare is more efficient.

The programme’s architect, Dr. Alan Muney – a former executive and chief medical officer at Oxford Health Plans and United Healthcare – saw early on that managing chronic conditions among employees could be a significant driver of cost reductions, James told the pension board.

“[Muney] knew from his experiences in the healthcare industry that 60 to 70 percent of the cost of healthcare really stems from a small percentage of the population with a few chronic disease condition: typically 3 to 5 percent of the employee population,” James said.

Such conditions as diabetes, high blood pressure, heart conditions and obesity may not be curable conditions but with the right combination of drugs, exercise, diet and regular monitoring, employees can be kept out of intensive care, which, says James, “costs hundreds of thousands of dollars”.

In order to help employees manage these conditions, Equity Healthcare assigns a nurse advocate to each of its “high-risk” employees, who checks in on the employee and provides advice. James likened the nurses to personal trainers.

“They can call and say ‘Gee, I see you didn’t fill that prescription, you really need to take that drug. If it makes you feel nauseous, let’s get you another one,’ or ‘You missed your appointment again, let’s get you in, let’s get that tested.’ It’s sort of like having a trainer who gently nags at you, but the results are fantastic,” James said. “We’ve identified people at risk who didn’t know they were at risk.”

Blackstone negotiated with its health insurance providers that any savings from this initiative would be passed back to Blackstone. Equity Healthcare is projected to save Blackstone $90 million by 2010 and $140 million by 2011. The programme saved Blackstone $35 million in 2009.