What The Doctor OrderedWhat The Doctor Ordered

As a group, Cisco Systems employees are generally a healthy bunch. But with an average age for employees of 40 and a 90% worker retention rate, Cisco knows it's only a matter of time before many in its workforce begin to develop the chronic health problems that often come with getting older.

Cisco is hoping to avoid what other employers have had to do in recent years as they struggle with double-digit increases in health costs: reducing benefits or shifting more of those costs to employees. "We're trying to set the stage for the next five to 10 years," says Dr. Jeffrey Rideout, Cisco's corporate medical director and VP of health for Internet business solutions. "We want to keep the lid on the rate of increase by using a health IT strategy."

A big part of that strategy is to encourage its health-care providers to change their business processes, by adopting electronic-health-record systems that can keep costs down by reducing waste and redundancy, as well as help prevent medical mistakes and improve quality of care. The company also is encouraging its large health-insurance providers to reimburse doctors for "E-visits," or E-mail exchanges between patients and doctors that can substitute for office visits in certain nonemergency situations. E-visits are less expensive and more time-effective than having an employee miss work for a doctor office visit, Rideout says.

Cisco has 37,500 employees worldwide, and two-thirds of them are based in the United States. Overall, Cisco provides health-care benefits to about 65,000 employees and their dependents worldwide, costing "hundreds of millions of dollars" annually, Rideout says.

About 66% of its U.S. workers are located near Cisco headquarters in the San Jose, Calif., area. Many of them and their dependents receive health care from a number of the large medical groups in the Bay Area, including Palo Alto Medical Foundation, which already has deployed electronic-health-record systems but doesn't yet offer E-visits, Rideout says.

While the insurance industry has adopted a new billing code for E-visits, very few health-care providers offer those visits, and few health-insurance companies reimburse for them. More doctors would provide those E-services if payers reimbursed them, Rideout says, and Cisco wants some of its largest health payers, including Cigna and United Health Care, to do so.

Cisco is developing a pay-for-performance program for 2006 that would offer its health-care providers incentives to adopt electronic health records and other cost-saving IT programs. In the development of its pay-for-performance program, Cisco has been working with the Integrated Healthcare Association, which represents health-care stakeholders in California.

The association's pay-for-performance program rewards California managed-care organizations based on clinical quality, patient experience, and investment in IT. The association says California physician groups that participated in its program and achieved key quality measurements in 2004 received a total of $50 million in additional income.

The majority of Cisco employees have health-care coverage under preferred-provider organization plans, or PPO models, which differ from managed-care organization benefit plans, Rideout says. However, many of the same large medical groups in the Bay Area that participate in HMO plans and the Integrated Healthcare Association's pay-for-performance program also participate in PPO programs. So Cisco is modeling its pay-for-performance plan after the association's program so it's less confusing for doctors participating in the quality programs, Rideout says.

Some large health-care payers--including Medicare--also have launched pay-for-performance pilots or programs that include incentives for physicians and hospitals to adopt health IT systems.