Steven Burd, the former CEO of Safeway and the current CEO of Burd Health, was a key voice in the debate that shaped elements of the Affordable Care Act.
According to Burd, the American health care system is unique, and the challenges that come with changing it are multifaceted. Factors that contribute to the high cost of health care in the United States include the high rate of adult obesity, the overuse of diagnostic equipment, the overtreatment of patients that stems from doctors’ fear of lawsuits, and the fact that health care in the United States does not operate in a market-based economy.
In 2005, as a result of these factors, Burd was saddled with a billion dollar healthcare expense as the CEO of Safeway, and faced costs of ensuring his employees that were estimated to continue to grow 10% annually. In response, he began to construct a new, market-based model, one that addressed the larger, systemic problems within the health care system.
There were several obstacles to overcome, one of which was the notion that insured workers viewed their health care as a “free good.” Unlike most facets of the American economy, when it comes to health care, employees were not acting like consumers—those who had substantial coverage were ignoring the actual cost of their care. The money to pay for health care wasn’t coming out of their pocket, so the price tag that came along with it was largely viewed as irrelevant. To combat this at Safeway, Burd increased deductibles and instituted a series of valuable incentives.
“When patients have more skin the game, they’re more likely to pay attention to cost,” he explained.
But putting more employee skin in the coverage game created a demand for more information on the cost and quality of health care. However, to meet that demand, Safeway would have to solve a significant problem—in the US healthcare system, costs are not transparent to consumers.
“The health care market is unlike the majority of markets Americans engage with,” explained Burd. “If you want to buy a cell phone or television you can go online and gather information on prices and quality. Health care isn’t like that. If you call a hospital and ask how much a MRI will cost you, they don’t have an answer for you.”
In order for Burd to pull back the curtain on the true cost of health services, Safeway developed and utilized a tool that allowed their employees to see what the cost of a procedure would be at different facilities. When employees were looking at a higher deductible and a more accurate picture of cost and quality, they acted as more responsible consumers. The result of empowering employees resulted in the simultaneous reduction of out-of-pocket expenses for both the individual and the company.
Employees could also reduce the price of their health care premiums by getting healthier. Burd surveyed the workforce and set up goals for his employees to meet. If a Safeway worker gave up smoking, for example, they would pay a smaller premium. This practice applied to other barometers of heath as well, measuring things like blood pressure, BMI, and cholesterol levels. Workers at Safeway could also join small exercise groups that encouraged weekly weight loss goals.
“The only way for real change to take hold is to work from the margins,” said Burd. “We encouraged losing a half pound a week by reducing calories—replacing a latte with coffee, switching from regular to diet soda, vinaigrettes instead of creamy salad dressing—and a half pound a week through exercise—walking after meals, pacing a room while talking on the phone, lifting weights.”
The Safeway Solution worked. By 2013, health care costs at Safeway had fallen by $850 million, the overall health of the workforce had improved dramatically, and Burd had spoken to both sides of the congressional aisle about how his tactics could help shape the Affordable Health Care Act. To Burd though, the Safeway Solution is just the beginning.
“I asked representatives—Democrat and Republican— if I could get 30 companies to adopt what we did at Safeway, will you let me write the next health care bill?” said the former CEO.
Burd Health, the new company Burd currently heads, is trying to do just that. Formed in 2013, Burd Heath aims to applying the Safeway Solution to other self-insured employers with 10,000 or more covered employees. According to his projections, he believes that a Safeway Solution could reduce a company’s annual health care cost by 30-50% and materially improve the health of their workforce.