William Hoffman

Monday, 22 July 2002 10:04

By any other name

If you want to know how sturdy your insurance carrier is, call your state department of insurance. To find out how well your local hospital stacks up, check their status with the Joint Commission on Accreditation of Healthcare Organizations. You can learn your personal physician's history in part from the local medical society or, in even greater detail, from a new set of consumer guides to the nation's best and worst doctors.

However, if you're looking for a national, comprehensive, standard and generally accepted measure of how your managed-care provider compares to others in the market, you have nowhere to go. But that's about to change.

"I think it would be a great thing if we came closer to a national report card, with some good science behind it, available on the Internet, that small employers could just pull down and compare," says Tom Cragg, manager of managed-care plans for General Motors Corp., in Detroit. "We're trying to move toward a national consensus on quality measurements, though we have a long way to go."

Cragg's office of six, along with outside consultants, reviews, negotiates with, selects-and sometimes rejects-managed-care providers for some 1.5 million eligible GM employees and dependents in 30 states.

Cragg works with approximately 100 HMOs at any given time. While he has resources at hand that no small business could hope to command, he says, "There is more information on which refrigerator to pick than there is on how to pick a doctor or how to pick a health plan."

Managed-care companies and their watchdogs in government, industry and the public interest groups have been lurching toward a nationally standard set of quality measures since the managed-care concept caught on with employers about 15 years ago. Since then, managed care's share of the health-care market has ballooned from 5 percent to 80 percent of insured Americans. And quality concerns and consumer complaints have lately drawn congressional scrutiny, including a federal government mandate in the 1997 balanced-budget agreement for a national quality standard.

Yet employers searching for comparable quality measures on managed-care plans are confronted by a bewildering array of partial, developing and sometimes dated statistics-when they can make sense of anything they find. Following are some of the better, more readily available measures to help select a quality HMO.

"I think we're recognized as the standard," says Brian Schilling, spokesman for the National Committee for Quality Assurance, or NCQA. The 8-year-old private, not-for-profit organization is based in Washington, D.C.

For now, and probably for the future, NCQA is the gold standard for quality measurement of managed-care plans. "We are very comfortable with NCQA as a strong indicator of quality," says GM's Cragg. His staff insists the managed-care plans either be NCQA accredited or in the process of earning accreditation before they can be offered to GM employees.

To date, NCQA's work concentrated on two areas. Accreditation involves sending a team of physician and administrative surveyors into the managed-care organization to review six key areas:

  • Quality management and improvement. (Does the company have in place an effective quality-assurance program tailored to the needs of its customers?)
  • Credentialing (For example, do physicians have appropriate licenses and malpractice insurance?)

  • Utilization management. (Denial of benefits must be sound. If a cardiologist says surgery is needed, only another cardiologist reviewing the case may deny the surgery).

  • Preventive health. (Immunizations, etc.)

  • Members' rights. (24-hour customer phone service in appropriate languages, grievance processes, etc.)

  • Medical records, (especially coordination of inpatient and outpatient care, and various diagnostic and treatment regimes).

NCQA offers three levels of accreditation. Full accreditation lasts three years, and to date, 61 percent of plans reviewed have received that highest approval. About 30 percent of plans qualified for one-year accreditation, while 5 percent earned provisional (one-year) accreditation and 5 percent were denied. Somewhat more than half the nation's HMOs have participated in the NCQA accreditation process.

The other side of NCQA involves health-plan performance measurement through HEDIS-the Health Plan Employer Data and Information Set. If a health plan were a car, accreditation would tell you how safe the car is, while HEDIS would tell you how fast it goes. More than 50 standard indicators measure effectiveness of care (stop-smoking programs, immunization rates, chemical dependency treatment); access (availability of primary care providers, dentists, obstetrical and prenatal services); satisfaction (including "disenrollment," that is, insurance dropouts); rate trends, board certification and other statistics. "The idea of HEDIS is really pretty simple," Schilling says. Instead of employers approaching NCQA with innumerable subjective questions about quality issues, HEDIS offers an evolving but objective set of standard measures that allow comparison between competing plans.

HEDIS data is provided voluntarily to NCQA for review. In 1999, NCQA will require that the data conform to audit standards and be performed by certified auditors. Some 330 health plans participated last year in the group's "Quality Compass" program, which makes accreditation status and HEDIS available to employers. Most NCQA data is freely available on the Web at www.ncqa.org.

Starting next year, NCQA will integrate accreditation with selected performance measures (including member satisfaction, quality of care, access, service) into a new program called "Accreditation '99." The organization promises the new standard will be more complete and consumer-friendly.

Observers agree that NCQA accreditation and HEDIS data are the industry standard for quality measurement at this time. But there's still room for improvement, notes Dr. William E. Golden, president of the American Health Quality Association, which recently completed an audit of HEDIS reporting measures.

By making HEDIS data public, Golden says, "You're forced to be much more precise," because its very openness changes the dynamic of data gathering, consumer demands for particular measures, and HMO responses to inquiries. Yet the "science of performance measurement in 1998 does meet that kind of standard for patients or purchasers," he says. "I would say the HEDIS measures are better than nothing. But they are more of an indirect grade than they are a black-and-white measure of performance."

NCQA is likely to respond to this critique, if for no other reason than it now has competition in managed-care comparison business. Schilling estimates there are no fewer than a dozen institutions and businesses vying to join the accreditation industry. "It's hard to know what to make of a health plan that says, 'We're accredited by Joe's Accrediting Service'," he adds. Other organizations are offering their own quality measures. Some contenders:

JCAHO-the Joint Commission on Accreditation of Healthcare Organizations-actually jumped into the accreditation game the same time NCQA started. But they jumped right back out. Now the organization that accredits hospitals-and whose stamp of approval is federally required if that institution wants to receive Medicare and Medicaid funds-is getting back in the game with its own custom set of measures.

Consumer Assessment of Health Plans Survey, or CAHPS for short, is organized by the RAND Corp., Harvard Medical School, the Agency for Health Care Policy and Research, and the Research Triangle Institute. Their survey is aimed at more subjective measures of patient satisfaction and demands. "It's designed to give consumers basic information they've said they really want," notes Dennis P. Scanlon, assistant professor of health policy and administration at Pennsylvania State University. CAHPS questions are being merged into the latest iteration of HEDIS.

Ford Motor Co. and GM, working with the Foundation for Accountability and the RAND Corp., are developing a report card on HMOs that they intend to make available to their managed-care enrollees this fall. Cragg says the private initiative will be tailored to health issues most critical to its mostly male, aging unionized workforce. He notes that younger, smaller companies may have different health care emphases based on the gender, age and racial mixes-among many other factors-of their workforces.

Private firms are also in the business. HealthShare Technology Inc., an Acton, Mass.-based company, produces software and packages existing standardized outcome data gathered from hospitals in 30 states to compare which facilities turn out the healthiest patients. Such standardized information has long existed for hospitals, notes HealthShare president and CEO Richard Siegrist, but is just now being developed for managed-care companies. J.D. Power and Associates, working with The MEDSTAT Group, recently compared HMO performance with competing fee-for-service plans. And few employers have missed the periodic Consumer Reports, USA Today, and U.S. News & World Report compendia of managed-care quality on their bookstores' magazine racks.

So comparisons of managed-care performance and quality are available, and improving. But "the availability of that data assumes we have users who understand how to use it," says Penn State's Scanlon. "It's still unclear to me that at the end of the day whether people can feel comfortable making a choice from the information they have."

Small and growing companies often have just one criterion for choosing a managed-care plan: cost. "Cheap is not necessarily bad, and expensive is not necessarily good, in health care," says NCQA's Schilling. "That's definitely a bad shortcut for people to take, to shop expecting they will correlate cost with quality." Yet Golden adds, "At some point dollars and cents becomes a necessary but insufficient answer to the problem."

Comparing the comparisons seems to be the starting point. Look for NCQA accreditation, Cragg advises. Check to see which level has been earned. Compare the HEDIS data available for managed-care plans in your area. Seek out the multitude of varied measures offered by your local chamber, health purchasing coalition, state governments and reputable publications. Don't judge plans based on a few measures, and don't try to nitpick small differences in performance and quality scores: Golden says trifling statistical variations creep in. Look rather at scores in many areas; only broad differences in scoring will be truly indicate quality or the lack of it.

Monday, 22 July 2002 10:03

New art of the deal

The words "small business" and "IPO" may seem not to belong in the same sentence. But Wayne Huizenga (among others) changed all that when he bought up scores of small local garbage haulers and took them public as Waste Management Inc. Now, finance professionals are scouring the country looking for similar opportunities to consolidate fragmented industries, and offering small companies the chance to become part of a larger, potentially more profitable entity-or to cash out entirely.

"Poof IPOs" and "roll-ups" are direct descendants of the leveraged buyout (LBO) and merger craze that has swept the United States since the mid-1980s. But where mergers and LBOs focused on billion-dollar companies dominating their industries and employing thousands, "Poof IPOs" identify numerous small companies in a given industry and combine them in a public company that takes advantage of unrealized economies of scale. A "roll-up" does the same thing, except that individual companies are kept private by the buyer until they reach a critical mass, and only then are taken public.

There are several parties involved in a typical "Poof IPO" or roll-up. Gabor Garai, managing partner in the Boston office of the law firm Epstein Becker & Green, represented the sellers of about 30 companies in roll-ups by buyers who later took them public. The seller must know what his or her business is actually worth in the market: "Sometimes the numbers are not as attractive as if someone walks in offers you $10 million in cash," Garai cautions. The seller should also be prepared to identify employees who should be retained by the buyer to maintain continuity. Seller's reps also advise business owners on compensation and equity issues, as well as what will be the former owner's role in the new company.

The Chicago investment banking firm Brown, Gibbons, Lang & Co., LLP, formed BGL Capital Partners as promoter for a pure roll-up of five discreet business service companies that went public earlier this year as Compass International. "They've grown substantially and they're doing well," says Michael E. Gibbons, senior managing director at Brown, Gibbons. The promoter usually starts the process by identifying, researching and contacting individual small businesses the promoter believes can be consolidated profitably. "It really is out of the business owner's hands," Gibbons says. "They're either really attractive to us when we find them, or they're not."

The promoter usually hires an underwriter's counsel, such as Ira N. Rosner, a partner with the law firm Steel Hector & Davis, LLP, in Miami, to research target companies and their industries. "Whenever a businessperson is considering getting rolled-up, it's critically important that they do very careful due diligence of the new management," Rosner advises interested entrepreneurs.

Garai agrees: "There are things at the granular level that makes these deals more difficult than people sometimes expect." He adds: "A lot of these marriages end in divorce very quickly." All parties must maintain the confidentiality of the deal, to keep competitors or other potential suitors from taking advantage of the situation before the process is complete.

Even if everything goes swimmingly, roll-ups and "Poof IPOs" are a risky proposition for most businesses. Though there's no comprehensive data tracking the performance specifically of these tools, initial public offerings generally have under-performed the stock market, according to Tim Loughran, associate professor of finance at the University of Iowa. His survey of 4,753 IPOs from 1970 to 1990 showed an average 5 percent annual return including dividends, compared with 12 percent for already-public companies for the same period. "That looks pretty pathetic to me," Loughran says, "considering it was a bull market." Yet people still invest in IPOs, "because they believe they have the ability to pick the next Microsoft," he says. "A lot of these [IPOs] don't take off right away. And some never do."

Monday, 22 July 2002 10:02

Can we trade for it?

Michael Becce knew he could successfully publicize the Summerland Group's innovative office workstation products, but the company couldn't afford his price. So Becce won them a lengthy feature spotlight in Fortune magazine instead, in exchange for Summerland designing, sponsoring and maintaining his Web site.

Becce also wanted FaxSav's powerful broadcast facsimile service, but he couldn't afford its price. So FaxSav discounted its rates in exchange for Becce's Sawtooth Public Relations savvy.

"We've been delighted with both situations," Becce says. Becce's introduction to the barter business was serendipitous, but his experience is shared by many companies today. The National Association of Trade Exchanges estimates 350,000 companies in the United States and Canada participate in barter or trade each year, and exchanged $4.3 billion of goods and services in 1996 alone.

The Internal Revenue Service declines to estimate how much unreported trade occurs. "I would suspect that there's a whole underground economy around this area that the IRS would love to know about that individuals have no desire for the IRS to know about," says Joyce Gioia, president of The Herman Group management consulting firm-who hastens to add that they report all trade transactions to the IRS on Form 1099(b).

Tom McDowell, NATE's executive director, says there's no reason to fear IRS scrutiny if businesses report the cash value of trade transactions as taxable income. In 1982, Congress passed the Tax Equity and Fiscal Responsibility Act, empowering trade exchanges as third-party record-keepers for their business members. "What we've really done is taken barter, which was considered part of the underground economy, and made it a taxable event," McDowell says.

Trade exchanges organized at the local level let companies match their barter needs with one another. Additionally, NATE has organized a "barter association national currency," which lets 55,000 participating businesses in 75 local exchanges find products and services for barter anywhere in North America. "The BANC is nothing but a trade exchange for trade exchanges," McDowell explains. Trade exchanges pay a small fee to participate in the BANC; member businesses pay nothing.

Companies do pay a one-time fee to join an exchange (ranging from $300 to $600), and buyers pay a 10 to 15 percent transaction fee-in cash based on the value of the product or service. Exchanges keep records for the IRS and member businesses to file tax returns, while establishing the local, regional and national markets available to their diverse memberships. "Just about every kind of business will have excess capacity, inventory or time that they can use in barter," says Jack E. Schacht, whose National Trade Association near Chicago facilitates $45 million in barter each year.

Whether you join an exchange or trade informally on your own, experienced hands offer a few tips (besides keeping meticulously accurate tax records) for barter success:

"Make sure you're comfortable with the people you're doing business with," says Sawtooth's Becce. "I would not have done [business with FaxSav and Summerland] if I wasn't sure that the people I was doing business with were going to come through on their end." Put any stipulations or guarantees in writing, he adds.

Consider joining an exchange, McDowell suggests. There, rules and markets are already established: "See if there are people [in the exchange] who will buy what you sell, and people who have what you need."

Barter only for what you need. Becce emphasizes: "Make sure it's something that's really functional." Gioia adds: "What you want to find is what has a high perceived value to the potential customer, and a low cost to you."

McDowell notes: "[Barter] can be a very effective business tool up to about 5 percent of revenues. After that, you need to be bringing in cash, because we can't do your payroll and inventory. For that, you need to be bringing in business."

Treat barter money like cash. Some companies, especially smaller ones, spend barter money more freely than cash, according to Allan Chernoff, corporate barter director at Central Florida Investments Inc., which does $3 million a year in trade.

"A barter dollar should replace a cash dollar that's already been budgeted," Chernoff insists, so the cash can be spent where barter won't be accepted.

"Someone in the company should be given the responsibility for making the barter work," Chernoff adds. Typically, the distracted entrepreneur takes charge of all barter deals, or no one does it. "If there's no one the owner can hold responsible," Chernoff warns, "then nothing happens."

Monday, 22 July 2002 10:02

Reap the whirlwind

Some time early next year, as the incoming 106th Congress sits down to whatever business the lobbyists have decided is most important to it, members are likely to experience an uncomfortable sense of dj? vu. Because after all the pre-election posing and proclamations about the chief executive offender, after October's dramatic vote for an impeachment inquiry, Congress will probably have to vote again to authorize impeachment.

This being December, and the general public being thoroughly tired of the Reich-wing witch hunt against Clinton, expect Henry Hyde to move heaven and Earth to finish enough of his lame-duck preliminaries before the January swearing in to avoid another impeachment vote. The GOP knows how much Americans have enjoyed the past months' respite from Monicamania. They'd have to be as stupid as they are obsessed not to have an inkling of the backlash they court if the Starr Chamber cranks up its act again. Barring shocking new revelations (Bloody glove fits Clinton's hand! Prez joins O.J. to search world golf courses!), most of Congress would just as soon pull a Bobby Ewing and write off the last year as a bad dream.

But real life is not Dallas, and there are still enough dittoheads out there who can't admit Clinton beat 'em, so impeachment will probably drag on through spring. Lately, they've taken to whipping up the peanut gallery by declaring that Clinton's behavior was worse than Nixon. Worse than Nixon. Truly an argument for historical amnesiacs.

But with enough weight for the 105th to lift verbatim the articles of impeachment used on Tricky Dick, change the names, and drop them on Slick Willie. O! Irony! If only ol' Tricky himself were here to give play-by-play at the hearings, so we could watch him try to contain his laughter!

Worse than Nixon? Richard Milhous Nixon presided over the losing-side slaughter of more than one million Vietnamese and 30,000 American troops. More Americans died in combat in a week under Nixon than in six years under Clinton.

Nixon launched an 18-month secret war in Cambodia that destroyed that country and led directly to the Pol Pot trauma, from which his victims are only beginning to recover. Clinton landed a platoon of Marines on a beach in Somalia for a photo op.

Nixon authorized a secret war at home, too, unleashing the FBI and CIA on anti-war protesters and civil rights activists, ordering break-ins, using the IRS against opponents. Clinton hired a flunky who called up a couple hundred old FBI files for bathroom reading.

Nixon's operatives systematically sabotaged Democrat candidates for the party's 1972 presidential nomination to assure the weakest would be his November punching bag. Clinton's GOP challengers offered up their weakest candidate in 1996 with nary an encouragement.

Nixon's vice president was driven from office for accepting cash bribes in brown paper bags. Clinton's vice president is being hounded for allegedly accepting campaign donations from monks who took a vow of poverty.

Nixon's secretary of defense was so scared of what his boss might do to avoid impeachment that he slept on a cot in his office and insisted military orders be cleared through him. Clinton can't keep Janet Reno from investigating his secretary of agriculture.

Nixon was and Clinton is the subject of impeachment hearings for violating the same statutes. But on the evidence so far, that's like comparing vehicular homicide with speeding because both are traffic violations. The difference is that one provokes outrage and a lust for vengeance, while the other elicits points against one's license and a proportional fine.

Clinton should resign, if not for us then for himself. Who wants to be followed the rest of his life by reporters and pundits who ask after every statement, Are you lying to us now? But like Nixon and syphilis, Clinton just keeps coming back. Whether his offenses (and they certainly are) in fact were crimes (which a sufficiently dedicated prosecution can certainly make them appear to be), Clinton will insist on being dragged kicking and screaming from the White House if he's not allowed to leave in peace two years from now. The question is, can Clinton's prosecutors manufacture the visceral loathing against him which Nixon inspired without assistance? Because if they can't, they will reap what they have sown.

Monday, 22 July 2002 10:02

Keeping your digits from decay

storage technology come at the price of increased care for the media and periodic upgrading of the drives The Rosetta Stone, which unlocked the secrets of ancient languages, is still legible after 22 centuries. Gutenberg's first Bibles can still be read from the pages he printed more than 500 years ago. But the 1960 U.S. census had to be rescued from microfilm, because the magnetic tapes on which the cumulative data was stored had so degraded that most of the information was indecipherable.

As businesses move their records onto electronic storage media-disks, tapes and CD-ROMs, issues of information durability and retrieval arise that were absent or at least less problematic than with earlier storage systems. "In fact, the record of the entire present period of history is in jeopardy," writes RAND Corp. senior computer scientist Jeff Rothenberg in "Ensuring the Longevity of Digital Information," a paper for Scientific American magazine. "The content and historical value of many governmental, organizational, legal, financial and technical records, scientific databases and personal documents may be irretrievably lost to future generations if we do not take steps to preserve them."

To be sure, most business records need not last centuries, and digital storage media have become more reliable and economical over the last two decades. On the other hand, disasters natural or manmade may place such records seemingly beyond reach, as businesses hit by recent floods in Texas found out this summer. "If you're down, you could lose everything-not just the customers you have, but the businesses who depend on you," notes Mark V. Rosenker, vice president of public affairs at the Electronic Industries Alliance in Arlington, Va. Fortunately for many of these companies, data recovery specialists, such as those at EIA's risk management center (phone 800-300-3083), can often restore damaged electronic storage systems.

Short of catastrophic loss, however, electronic storage systems, because of their unique nature, have unique safety and maintenance requirements. Many are simple common sense. Don't place magnetic media, such as tapes and disks, near magnets, Rosenker cautions. Optimal storage temperature is 60 to 70 degrees Fahrenheit, at 30 to 40 percent humidity. Avoid dust and moisture. Keep media in their original cases. Don't place them where something may crush them. Don't place heavy objects on top of them; where possible, stand tapes, disks and CD-ROMs on their ends on a shelf, like books. Avoid light that might heat them up and warp them.

"They are fairly durable," says Quan O. Logan, EIA manager of database operations. "Just don't do something stupid with them."

Properly maintained, most electronic storage media should last decades, even centuries, according to Koichi Sadashige, a consultant to National Media Lab in St. Paul, Minn. The bigger risk is obsolescence of the media format and hardware. Eight-inch floppy disks gave way to 5 1/4-inch floppies, which were superceded by 3 1/2-inch floppies. There are a half-dozen new mass storage drive and disk standards, from the popular 100-megabyte Zip drive by Iomega to 5-gigabyte disks by Syquest. Four- and eight-millimeter tapes may hold up to 125 gigabytes of ultra-compressed data, Logan notes, while CD-ROM "juke boxes" allow access to limitless combinations of 650-megabyte optical storage platters. And manufacturers are adding to the confusion every year, by introducing new storage drives and media.

The best insurance against obsolescence is to plan on transcribing your data onto a new, modern, popular format approximately every 10 years, Sadashige and others advise. As older formats decline in popularity, it will be harder to find parts for broken drives, or experts who can recover crucial information from old media.

"If your entire livelihood is based on this [data], you'd probably want to duplicate it onto a brand-new tape every few years," Rosenker says. "But if you just want to have it around, you should be able to depend on it for three to five years."

Monday, 22 July 2002 10:01

Dialing for dollars

The one thing all salespeople have in common is customers. Finding and interesting the customer who can say "yes" to your company's product or service is called prospecting, and it may be the toughest task salespeople love to avoid.

For companies with money to spend, there are list brokers in every big city who will deliver names and phone numbers of pre-qualified potential customers for your salespeople to call. "As a rule of thumb, the more money you spend, the better the quality of information you get," says Paul S. Goldner, president of Sales & Performance Group, LLC, in Katonah, N.Y. But a trip to the library to review Dun & Bradstreet listings, a browse on the World Wide Web, a copy of the local chamber of commerce directory, or even the Yellow Pages in the right hands can serve as a starting point for prospecting.

More important is how your company prospects and who does it, according to Bruce Wedderburn, director of sales training for Dale Carnegie Training in Rockville, Md. "Credibility has to come before selling," Wedderburn says. That means your prospector-whether a sales rep or an in-house staffer dedicated to finding leads for the rep-has to reach the buyer with something that person wants hear. "The main person who qualifies whether a sale is going to take place or not is the customer." The more complex and expensive your product or service, the more skilled and knowledgeable the prospector must be.

That person is usually your sales rep, if for no better reason than the cost of training and supervising a dedicated prospector. Yet the skill sets aren't the same; a prospector needs to be superbly organized. Joel Linchitz, president of Phone For Success, Corp. in New York City, advises clients (including BankBoston and Sharp Electronics) to secure powerful contact management software to track prospects through the sales process. Linchitz suggests training even the most technophobic salespeople from day one to use computers for contact management-that way, the information stays under your control, rather than exiting through the door when the sales rep does. And computers have never been more affordable.

Once the training and the tools are in place, prospecting experts offer these tips for success:

Organize your prospecting like a campaign. Go after one industry or type of prospect at a time. Pre-qualify using public information, the Internet or direct inquiries to minimize wasted effort. Keep meticulous records for follow-up. Dedicate no less than two hours at a time to prospecting calls.

Use a dialogue guide instead of a script. You're selling, not surveying. A guide makes the pitch sound less rehearsed. Your prospectors will perfect their pitches with each call.

Don't isolate your prospectors. Put them together in one room if possible. Each can encourage and discipline the others, reinforce a positive momentum, and share what works and what doesn't.

Set multiple goals. That way, if a sales rep can't set five appointments during the day, perhaps he or she will still meet the goal of making 40 calls, or identifying 10 new prospects, or getting information on eight new companies, and won't be discouraged.

If you send an introductory letter or fax, don't wait more than 48 hours after its receipt to follow up. Write the introduction to maximize the prospect's interest in taking your prospecting call.

"Smile and dial" was a corny old telemarketing trick to train sales reps to maintain a positive, mellifluous, engaging tone of voice. And it works. "You should be making calls when you're feeling good," Linchitz says, "when you can be enthusiastic."

Monday, 22 July 2002 10:01

A second chance for second chances

You may not have noticed in all the impeachment ruckus, but the 105th Congress actually did get something accomplished this year.

The Workforce Investment Act of 1998 "is the biggest makeover or reform of job training programs probably in our history," according to Jay Diskey, spokesman for the House Education and Workforce Committee in Washington, D.C.

The act, signed into law by President Clinton last August, consolidates and streamlines more than 60 federal job training programs dating as far back as the 1940s. It authorizes nearly $6 billion a year in federal block grants to the states, mandates a system of new local one-stop service centers, sets up Individual Training Account vouchers for financial assistance and establishes employer-dominated Workforce Investment Boards to monitor training quality and results. At least 1.2 million Americans now enrolled in Job Training Partnership Act and summer youth jobs programs will move into the new system, with millions more displaced workers and former welfare recipients expected to be eligible.

"We hope to build some credibility into the system, which it currently doesn't have," says Cynthia Pantazis, manager for government and policy relations at the American Society for Training & Development in Alexandria, Va. Employers derided JTPA and other federal job training programs as ineffective government bureaucracies, Pantazis notes. Just one in 10 welfare recipients ever consulted the available jobs banks, Diskey adds. Tom Lindsley, vice president for policy and government relations at the National Alliance of Business in Washington, D.C., believes, "If this is done right, and it is an easy-to-use system, and it is market-driven and business-led, it is a system [employers] will use."

Here's how it will work: Most states already have one-stop retraining centers. The new law will clear away the confusing and occasionally contradictory welter of programs accumulated from the 1940s, '50s, '60s and '70s, in favor of a flexible approach driven by local needs.

The U.S. Department of Labor will issue interim final regulations, probably in February. After that, states have until July 1, 2000, to set up a State Workforce Investment Board and submit a five-year workforce development plan to the Labor Department. Appointed by the governor, with nominations from the business community, the state board must seat a majority of business owners and representatives, with additional seats for educational institutions, economic development agencies, labor and community organizations.

The governor of each state will then designate local workforce investment areas. Boundaries will be drawn considering the geographic service areas of established educational bodies, labor market demographics, transportation and resources needed for effective administration of job training programs. Local governments serving populations of 500,000 or more may request designation as a workforce investment area.

Then, in partnership with local elected officials, local workforce investment boards will be set up to organize, deliver, monitor and evaluate job training services. The local board must also have a business majority. A one-stop delivery system will be established by each local board. Training vouchers will be distributed to qualified workers; generally, youth ages 19 to 21; adults; and "dislocated" workers, meaning those unemployed through no fault of their own. The vouchers may be used for services at accredited educational institutions. Their value will be established by the state in conjunction with the local boards; trainees, employers, or other institutions may make up any shortfall.

Since the funds for the Workforce Investment Act will be distributed as block grants, states will have far greater discretion than before in how they'll be spent. Pantazis acknowledges there was some skepticism about the system: "Whenever you block grant, there is politicking over who gets what." But she's satisfied that multiple layers of federal, state and local oversight, along with the emphasis on employer involvement, will discourage abuse. "I think there is a lot of good intent out there."

The federal Department of Labor has posted a Web site for information on this evolving program, www.usworkforce.org.

Monday, 22 July 2002 10:00

Back on the burner

Now that our long national nightmare—i.e., the Clinton-Lewinsky scandal—is moving from center stage to the sidelines of the 106th Congress, business groups can start worrying about health reform again.

“The [106th] Congress is once again going to be the sounding board for future, more sweeping health care reform,” says Todd McCracken, president of National Small Business United in Washington, D.C.

The way McCracken sees it, a presidential re-election, three congressional elections and retreat of ultra-conservatives since the original Clinton reform plan crashed and burned, combined with renewed upward pressure on insurance premiums and lingering anxiety about 40-some million uninsured Americans, will make the political landscape once again habitable for some proponents of national health care reform.

One sigh of relief for business, according to Chip Kahn, new president of the Health Insurance Association of America, is that employer mandates are off the table. A veteran of 15 years as a staffer on Capitol Hill, Kahn believes the final nail was driven into that coffin during the waning days of the doomed Clinton initiative. Concerns about an employer mandate’s impact on a nervous economy will likely keep the idea buried.

Still, there are the uninsured—but in most cases, gainfully employed—Americans, whose numbers in part motivated the last reform drive, and whose ranks have since increased. “The health insurance industry can provide coverage for everyone,” Kahn says. “But there’s no free lunch.” The association plans to announce its proposal some time this spring for alternative funding to cover the uninsured.

In another corner, the so-called Patients Bill of Rights is stirring back to life. Smothered by the Lewinsky shenanigans and a Gingrich-led scheme to divert the issue through a House Republican “working group,” Georgia Republican Rep. Charles Norwood’s PARCA bill will be reintroduced to Congress early this session. “The job won’t be done until we have passed this bill into law,” pledges Norwood spokesman John Stone.

The Patient Access to Responsible Care Act won 234 co-sponsors (more than any other single piece of legislation in the 105th), and Stone thinks its reincarnation this year will come close to that number. But Democrats have their own patients rights bills, and some Democrat PARCA co-sponsors may abandon the GOP bill for their own.

Kahn believes PARCA and similar proposals will expose employers to potential lawsuits by employees denied coverage for certain conditions. Stone rejects that claim, saying language included to protect employers while allowing managed care companies to be sued will be strengthened this session. Kahn counters that he doesn’t think any patients rights language can completely protect employers. And PARCA-type legislation would raise premiums, he adds, notwithstanding employer protections.

Elsewhere, McCracken and others suspect Congress will extend a federal pilot program on the feasibility of medical savings accounts. The program ends this year, with disappointing enrollment. McCracken thinks that’s because Congress placed too many conditions on participation and business hesitated to participate in anticipation of an enrollment rush that never materialized, then backed further away when the pilot’s expiration date loomed.

NSBU will also push again to speed up 100 percent tax deductibility of health insurance premiums for the self-employed. “We’ve always advocated for 100 percent [deductibility] right now,” McCracken says.

The American Health Quality Association, representing physician groups that monitor quality of care, wants Congress to extend federal monitoring of Medicare and Medicaid quality to standardize private quality controls and share information. “Quality is going from being perceived as being a proprietary advantage to being a community good,” says AHQA president Dr. William E. Golden.

Monday, 22 July 2002 09:59

'I'm rubber, you're glue'

Historians may one day recall it as the antitrust trial of the century, but participants in U.S. Department of Justice v. Microsoft Corp. often sound less like passionate scholars of bedrock economic principles than bratty schoolkids playing King of the Hill. Consider:

  • Bill Gates threatens to cut off Intel Corp., his closest business partner, if its executives don't stop developing software Gates calls competitive with Microsoft products. Industry players say Gates wants the whole software playground to himself.

  • Former Intel vice president Steven McGeady says Microsoft wanted to "extinguish" Web browser pioneer Netscape Communications Corp. Microsoft lawyers accuse McGeady of being a sore loser because he got edged out of his job.

  • America Online acquires Netscape. Microsoft lawyers plead no fair to the Feds's antitrust prosecution, because if AOL can do it, Microsoft should be able to do it, too.

  • In open court, the judge laughs out loud at Bill Gates's videotaped deposition.

"Whatever the outcome is going to be from this lawsuit, we all have to survive in this industry together," says Lora Loftis, vice president of business development at The Pixel Company in Seattle, Wash., one of the thousands of firms that have grown up, literally or figuratively, in the shadow of Microsoft. "We're growing up and I think a lot of these things are happening because of our youth."

Antitrust lawyers, government regulators, industry CEOs, investors and executives are anxiously eyeing the spit fight that seems to have broken out in a Washington, D.C., courtroom. Billions, maybe trillions, of dollars are at stake. The outcome-including the possible break-up of Microsoft-promises lengthy appeals and more market upheavals, which will leave allies and competitors uncertain for years.

Observers differ on what might be the long-term fallout of bitter exchanges between one-time, and most likely next time, collaborators. The cut-throat invective against market rivals on display at the Microsoft trial "are par for the course in aggressive, fast growing industries," says Jay Amato, chairman of the Technology Access Action Coalition, a Washington, D.C., lobbying group formed this summer. "The shareholders are not paying [high tech executives] to be nice or to be popular. They're paying them to win-period."

Some are playing for higher stakes than others. Bryan Sparks's company, Caldera Inc., has a two-year-old lawsuit pending against Microsoft. When he filed, alleging anticompetitive and illegal acts, Sparks was alone and fearful of retaliation. Today, "It doesn't matter how the verdict goes," he says. "We believe we have a rock solid case." Whether the Justice Department wins or loses, Sparks believes, "There will be a cloud of suspicion around Microsoft's behavior." Since Caldera filed, Netscape, Sun Microsystems and others have followed suit. Sparks believes the challenges to Microsoft's hegemony will continue.

Jeffrey M. Shohet agrees that more legal action is probable. "Microsoft has not had any trouble making enemies along the way," says the chairman of the antitrust practice group at Gray Cary Ware & Freidenrich LLP in San Diego. "I don't think anyone really trusts a long-term alliance with Microsoft. It's so powerful. They don't really need anyone."

Shohet thinks Microsoft's go-get-'em attitude toward competitors is normal for its industry. But he also believes the company probably violated the Sherman Antitrust Act, as the Justice Department charges. He dismisses Microsoft arguments that the turn-of-the-century trust-busting law is out of date. The Sherman Act is barely two paragraphs long, he notes. "It's more like a constitution than a piece of legislation and a constitution can last forever."

Amato, at TAAC, counters that if government probes into intellectual property disputes with Intel and partnership practices at Cisco Systems go forward, technology standards may be thwarted and prices could go up. Meanwhile, government subpoenas of e-mail records at Microsoft set an ugly precedent for all companies, encouraging them to alter their recordkeeping policies. "The more [e-mail] you save, the more there is to discover, and the more there is to be misunderstood," Amato says.

Monday, 22 July 2002 09:58

Pass it on

There’s no empirical proof that it works, and marketers are split over how and whether it works, but among small businesses, word-of-mouth advertising is one of the most sought-after competitive advantages.

“I think when people talk about word of mouth advertising, they’re really talking about discussion,” says Stan Madden, chairman of the board at the American Marketing Association in Chicago. “It’s not like thought control, where you begin this process, one, two, three, and then you get word of mouth. You can’t control what people say, and sometimes they say nothing.”

“I believe that most people think [generating word of mouth advertising] is not possible,” counters Godfrey Harris, president of Harris/Ragan Management Group in Los Angeles, and author of “Don’t Take Our Word for It” (Americas Group; book or cassette). “I think that is totally naïve.”

One thing Harris and Madden agree on, the author says: “All our ideas are to get the conversation started.”

Getting the buzz started about your business is something every entrepreneur desires. Whether you believe that buzz comes from word of mouth doesn’t matter as long as it has the desired effect–more sales. Here are some tips for the believers and the merely curious.

“It won’t automatically happen; you have to make it happen,” says Audrey Duskey, professor of marketing at Duquesne University in Pittsburgh. Word of mouth is active-tense, not passive. “What you need to have is something so wonderful, so unique, so outstanding that people are bound to talk about it.” Personalized service, “extra-mile” attention, celebrity endorsement and special events are some of the more common ways to start the masses murmuring.

Make the customer special. Harris recalls a client who made awnings and covered cushions at his boatyard. After a job was done and he’d assured the customer was satisfied, he’d send a note that read, It’s our policy to share any savings we get on materials: Here’s your share. Enclosed would be a check for 20 or so dollars. That got them talking, Harris says.

Make customers curious. Guskey remembers a local restaurant that offered everyone in the place a free dinner–but only on the first Monday of randomly chosen months. “They packed the place.” Another restaurant let customers pay according to how satisfied they were with the meal and the experience.

Members get privileges. As an example, Harris suggests setting up an on-hold phone recording that rewards inconvenienced customers. One company’s recording told the customer to say the word “sunob” (bonus, spelled backward) next time they came to the cash register for a limited-time 15 percent discount on a purchase. The idea is to let some people in and make others want to get in.