The University Record, November 5, 1996

Hospitals benefits changes to be proposed by end of year

By Mike Harrison
Medical Center Public Relations

The University of Michigan Health System Benefits Redesign Project Management Team has worked for the past three months with Watson Wyatt Worldwide, a consulting firm, to focus on five areas of potential benefits changes: retirement, health plans, retiree health, disability and access to benefits for part-time staff.

Recommended changes in staff benefits for UMHS employees are expected to be proposed for administrative consideration before the end of December.

Changes in staff benefits are proposed to help the Health System reduce costs to remain competitive with other hospitals and health systems in southeastern Michigan. The first year of a three-year Cost Effectiveness Program reduced costs by $60 million. Another $140 million is targeted for the next two fiscal years, and reducing benefits costs is one of the strategies. Proposed changes in benefits could help the Health System reduce benefits costs by 20-30 percent, or $19 million.

In a quantitative comparison, the U-M Health System ranks first in total benefits among separate groups of regional and national health care centers. A benefits redesign plan will help reduce the Health System's cost per case, which is $2,000 higher than its competitors. Compensation and benefits expenses comprise 46 percent of the Health System's total operating expenses, so reducing benefits expenses will have an impact on the cost per case and help make the Health System more competitive.

The proposed plan would more closely align the Health System's benefits package with the health care labor market. The plan would provide employees with benefits at or above those provided in the local health care labor market and allow employees to make choices in benefits where possible---including opportunities to provide greater benefits value for the same or less cost.

"As we looked at our local and regional health care market and peer institutions nationally, we learned that the cost of our benefits package---and the scope of those benefits---significantly exceeded our competitors," says Laurita Thomas, director of the Medical Campus Human Resources Department and the chair of the benefits project team. "Our challenge is to propose a competitive benefits package for Health System employees that is less expensive, yet allows us to offer benefits at above-market value."

The project team compared its benefits program with a regional and national group of hospitals and health systems. The regional group included Catherine McAuley Hospital, the Detroit Medical Center, Henry Ford Health System, Oakwood Healthcare System, William Beaumont Hospital and W.A. Foote Memorial Hospital. Nationally, the comparison group included the Cleveland Clinic; Duke, Harvard, Johns Hopkins, Vanderbilt and Pennyslvania State universities; Yale-New Haven Hospital and Bay State University.

"If we don't take steps toward reducing benefits costs, we won't be able to reduce our costs per case and, ultimately, compete with other health systems," Thomas says. "We've grown accustomed to having a generous benefits package, but now we are proposing difficult changes to protect some jobs and allow us to continue to be successful as a health system."

Before the UMHS benefits redesign plan goes to Health System leadership, then to the U-M executive officers for consideration in February, employees will have opportunities to provide input. Focus groups and an electronic survey will be held this week and next to draw input from Health System employees.

Benefits changes for employees represented by a labor union will be addressed separately during contract negotiations.

If the new benefits options are approved by the University executive officers in February, employees will be informed of the changes in the months leading up to fall 1997 open enrollment, with a targeted implementation date of January 1998.

For comments or questions, send e-mail to Thomas at