top of page
The Company That Solved Healthcare. By John Torinus Jr.

•At KI in Green Bay, Wisconsin, CEO Dick Resch broke the mold when he tied health premium levels to healthiness.  There are A, B, C, and D levels of health, determined by annual health risk assessments.  The health A players incur very low monthly premiums; the Ds pay the highest rate.  KI also promotes a wellness-fitness culture and has an on-site fitness center.























•Early on, we asked our people what incentives would help the most with behavior change.  The answer was a resounding Time Off!  Gift certificates didnt cut it.  Time off did.  


•Doctors are paid by procedure.  If you were paid by procedure, what would you do?  


•Manufacturers got rid of piece-rate pay geared to units of output a generation ago, because we got lots of production but lousy quality.


•Does the doctor or hospital do a good job or a bad job on categories of procedures?  Those of us who pay the bills should collectively demand transparency of quality data.  That happens in most parts of the business world.  Why not in health care?


•The health care delivery system is fundamentally flawed because of the uncoupling of costs and outcomes.


•There is a bell-shaped curve of quality among doctors, doctor-nurse teams, clinics, and hospitals, just as there is in any field of human activity.  How then can we justify a blind selection process that sends our people to the caregivers on the poor performance end of the spectrum?


•Our home grown transparency system shows volumes of procedures for each provider.  We want to know whether a surgery team, for example, performs six hundred hip replacements a year or six.  Evidence supports a correlation between volume and quality.


•Change who pays.  Instead of third party insurers or governments making virtually all payments, thus immunizing people from the economics, let the consumer pay directly for routine health care.  With consumer dollars in the game, behavior changes, and consumerism and marketplace dynamics take hold.


•Restructure Payment System.  Instead of piecework payment by procedure, make payments for complete treatments.  Bundle charges into one sum so consumers can understand what they are buying.


•Serigraph makes second opinions free.  Remember: before you decide on an elective surgery, check out the effectiveness of the procedure.  As many as half of stent operations have been found to be unnecessary.  Ditto for back surgeries.  Serigraph has a policy of paying 100% for second opinions.  Not all doctors are created equal.


•Good resources for medical information:,, 


•Three platforms for fundamental transformation and reform of the U.S. health care sector:

oIndividual Responsibility: we need to engage every US citizen as an individual actor in managing his or her own health care costs.  No system works without individual accountability.

oFocus on Primary Care.  We need to put primary care back where it belongs as the major foundation of the delivery system.  

oCenters of Value.  We need to promote the purchase of value-based health care in both private and public plans.  Some providers offer significantly higher value than others.  They should be rewarded with more business.

•Auditing companies find errors in eight of every ten hospital bills.

•Examples of price disparities in southeastern Wisconsin:

oNormal birth: $8,000--$12,000

oGall bladder removal: $3,000-$11,000

oCaesarean birth: $12,000--$14,000

oSpinal fusion: $30,000--$56,000

oHeart catheterization: $4,000--$9,000

oKnee arthroscopy: $10,000--$25,000


•Most health plans, including high deductible plans like ours, have a large flaw when it comes to major procedures.  Its the out-of-pocket maximum for co-workers.  Once a person hits $6,000 in out-of-pocket costs, Serigraph steps in to cover 100% of the remaining charges.  Its back to free lunch and no consumer discipline.


•We decided to use the carrot approach: cash rewards if co-workers would go to three or four providers we had selected as offering good quality, excellent service, and low prices.  In short, we seek out good value, and we steer our co-workers to those Centers of Value.


•Our cash rewards range from $150 for an upper GI endoscopy to $2,000 for a heart bypass.


•There is no proven correlation between price and quality.  High price does not mean high quality.  In fact, the reverse appears to be true.  Low price often means an efficient and effective provider and generally high quality.  


•There does appear to be a correlation between volume of procedures and quality.  A surgical team that does lots of hips gets good at the procedure.  And the better it gets, the more word of mouth pulls in clients.  Therefore, Serigraphs transparency model displays volumes as well as prices.


•Hospitals even hire consultants and large staffs to up-code.  That means making sure every line item is billed at the highest possible level.


•Hospitals need to move to bundled pricing.  Clarity and discipline could be added to the non-system of health care if providers would listen to pleas for bundled billing.  Serigraph has long pushed for an all in one bill for complex treatments like cancer care.


•Price competition is what has been missing in health care for decades.


•Any self-respecting management system is grounded in good numbers and analysis.  So Serigraph tracks its health and health cost metrics with great rigor.  Our consultant compiles and annual dashboard on our key metrics.  It is derived from our claims data and sliced and diced with an analytical tool called Health Plan Intelligence.


•10 percent of our claims were related to unhealthy behaviors.


•Politicians talk endlessly about whos covered, who pays, and where to find more money to cover everyone.  They miss the main point about controlling inflation.


•The medical side of health care is often brilliant.


•It is the economic side thats bankrupting the country.


•It is well known that two-thirds of the diabetics in the United States do not follow their regimens and, therefore, are out of control on three blood tests: A1C, lipids, and cholesterol.


•We also dangled an incentive, a $100 bonus to each diabetic for every quarter he or she met standards in three key blood tests.  


•Our data shows that an obese co-worker costs our health plan $24,227 per yearmore than three times our average co-worker.


•20 percent of the people in a population cause 80 percent of health costs.  They are people with chronic disease conditions.  Sometimes the ratio estimate is 90/10.


•Six prevalent chronic diseases (coronary disease, obesity, high blood pressure, depression, asthma, or diabetes).  That 14 percent was responsible for 55 percent of our health costs.  The case is closed on the need to address those six killers.

•Summary: in 2003, Serigraphs annual health care bill was its third largest expense and growing at a rate of 15% a year.  Health care cost escalations were in danger of bankrupting their company.  In order to significantly lower costs, company leaders knew they needed to take a radical approach.  Serigraph focused its strategies on three areasconsumer responsibility, primary care, and centers of value.  Instead of double digit inflation of its health care costs, the companys average increase dropped to 2.8%, far below the national average of 7%.  Serigraphs cost per employee actually dropped.


•Serigraph: 1,200 employee private company in Wisconsin


•Most Americans have almost no idea whether their doctor or hospital system is good, bad, or average for performance.  The information has been nearly impossible to track.  In contrast, Serigraph makes available to its co-workers the quality range & price range ratings.  The performance and price variations are huge.  The same operation can vary in price by a factor of two or three times.  They make such comparisons available on their intranet site.


•Health costs are Serigraphs third-largest expense after payroll and raw materials, and in 2003 they were heading to second-largest.


•In 2003, Serigraphs medical costs averaged $8,302 per family.  Kaiser calculates the U.S. average each year and put it at $9,068 per family, so we were running 8.5% lower than the national average.  In 2009, Kaiser put the U.S. average at $13,591.  We came in at $8,631 per family, 36% below the national average.


•Example of price range for same procedure:  employee at Serigraph in WI priced a mole removal (45 minute procedure) $8,900 at one plastic surgeon and $1,130 for another.


•Serigraphs old health insurance plan: $300 deductible, 80/20 coinsurance


•Serigraphs new health insurance plan: $1,000 or $1,500 deductible, 75/25 coinsurance

oEmployee annual premium savings for new plan was $1,500

oEach employee was given $468-$3120 per year in their Health Reimbursement Accounts

oMaximum out-of-pocket for co-workers ranging from $3,250-$6,000 per person 

oStop Loss for Serigraph of $200,000 (self-funded for all claims under $200K)

oFree preventive care for; mammograms, pap tests, prostate tests, colonoscopies

oDoctor visits at $20 copay

o$5 copay for Generic drugs

oRequired annual physicals, including blood work

oCash rebates of $250-$2,000 for selecting from a panel of Centers of Value for different procedures

oTransparent price and quality ratings on company intranet site

oCash rewards for finding overbilling errors on doctor & hospital bills


•Most of the national debate, and subsequent legislation, is about access and cost-shifting either to employees or to other payers: the government, taxpayers in general, specific taxpayers, and/or consumers via passed-on taxes on health care vendors.  But that does not reduce the national health care bill; it just shifts who pays.  Behavior change accomplishes what cost-shifting does not.



Most of the national debate, and subsequent legislation, is about access and cost-shifting either to employees or to other payers: the government, taxpayers in general, specific taxpayers, and/or consumers via passed-on taxes on health care vendors.  But that does not reduce the national health care bill; it just shifts who pays.  Behavior change accomplishes what cost-shifting does not.

bottom of page