Blackstone president Tony James talked to the San Diego County Employees' Retirement Association at length about the firm’s Equity Healthcare programme during a 15 April meeting –revealing that JP Morgan’s Jamie Dimon has approached him about joining the programme.
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. Rival buyout firm TPG was the first to sign up. JP Morgan Chase chief executive Jamie Dimon has also approached Blackstone about joining the programme, James said at the meeting.
Outside firms can join Blackstone’s purchasing programme for a cost of $2.00 per employee per month. In its 2009 annual report, JP Morgan Chase said it had 220,000 employees around the globe. James said no conclusion had been reached about JP Morgan’s participation, and he didn’t mention which units of the financial services giant would join.
“I said, ‘That’s a lot of employees,’” James told SDCERA.
At the moment Blackstone is largely focused on rolling out the programme for its own portfolio companies, and TPG’s portfolio companies, James said. But Blackstone has received “other requests” from companies looking to join the programme, and he 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.
James said that 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.
“[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 conditions, typically 3 to 5 percent of the employee population,” James said. “Those people have diabetes, high blood pressure, heart conditions, obesity, and so on. These are not curable conditions. But with the right combination of drugs, exercise, diet and regular monitoring you can keep them out of intensive care, which costs hundreds of thousands of dollars, and keep them relatively healthy and save a lot of money.”
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,” he added.
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.
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