Amy Borghese

Thursday, 26 March 2009 20:00

The new FDIC

In today’s changing financial environment, it is very important that business owners know how Federal Deposit Insurance Corporation (FDIC) insurance works, particularly in light of two recent changes.

“The changes made to FDIC coverage are important, as they provide stability to the U.S. banking system,” says Kim Gottfried, a business banking manager with FirstMerit Bank. “Today, customers are concerned with capital preservation and maintaining uninterrupted access to their working capital.”

Smart Business spoke with Gottfried about the changes in FDIC insurance, how they work to protect customers and common misconceptions about FDIC coverage.

What are the changes in FDIC coverage?

The first change is increased coverage, per person, per account. The coverage increased from the $100,000 to $250,000 for money held within an FDIC insured institution. Customers should understand they are not necessary limited to $250,000 in coverage. For personal accounts, the coverage can be multiplied by different ownership categories. For example, an individual can be insured on a single account as well as a joint account as well as selected trust ownership categories. Dividing your funds into different accounts is a great way to increase coverage for you and your family.

The second change is more important to businesses and corporations. This change is referred to as the Temporary Liquidity Guarantee Program (TLGP) and it provides full coverage for non-interest bearing transaction accounts regardless of the dollar amount. That means that business and corporate checking accounts are insured separately from business savings, money markets and CDs.

Under the previous law, if a business owner had $100,000 in a money market and $300,000 in their checking account, their total coverage would have been capped out at $250,000, but with the new rule the money market is insured up to $250,000 and the checking account is completely insured.

Why were such changes put in place?

In the weeks leading up to these changes, there was a great deal of concern regarding the stability of financial institutions. Many customers were moving money around to different financial institutions to ensure they were receiving as much coverage as possible. Increasing the insurance cap from $100,000 to $250,000 dramatically reduced the need to move money to multiple institutions.

The purpose of the TLGP change was to ensure that businesses could be sure that funds for vendor payments, payroll, etc., were guaranteed to be available. This program increased confidence in the payment systems between financial institutions, thus increasing stability.

Are these changes permanent?

The changes mentioned are in effect until December 31, 2009. At that time, the government will evaluate the state of financial institutions and customers’ trust in such institutions to determine if these changes should be extended or changed.

This time limit was put in place due to a concern about the effect these changes would have on the overall reserves of the insurance fund. By placing a time limit on these changes, the FDIC has allowed for the opportunity to reevaluate and make changes if necessary at the end of 2009. Many reports have stated that the chairman of the FDIC believes that the $250,000 limit will remain in place moving forward for consumers. The need to extend the TLGP will depend on the perception of the strength of financial institutions at year end.

How are banking consumers affected?

Customers who are aware of these changes can consult with their bankers to maximize their FDIC insurance coverage or earnings potential depending on their individual situations. In the case of business owners, the best way to maximize insurance coverage is to increase the percentage of deposits into their checking account as these deposits are completely covered under the TLGP.

Are there drawbacks to these new polices?

Yes, these changes have increased the amount of potential claims against the FDIC insurance fund which has resulted in an increase in insurance premiums for member banks. As for- profit businesses, all banks will be looking to reduce other expenses, pass the costs along to their customers, or some combination of both. Customers may see a direct charge that is identified as an FDIC fee, an increase in general fees to offset costs or financial institutions lowering interest paid to offset the FDIC premium.

Are there any misconceptions consumers currently have about FDIC policies?

How customers can increase or maximize coverage based on different ownership categories is confusing. It is important to have conversations with trusted financial advisers to ensure you are receiving the appropriate coverage for your individual situation. It is important that you think about insurance coverage within the context of the overall goals of your business. Your financial institution should offer a complete product set that will fit the needs of your business and your financial institution should have a strong balance sheet, available capital, and a track record of solid financial performance.

KIM GOTTFRIED is a business banking manager with FirstMerit Bank. Reach her at (216) 694-5638 or

Monday, 23 February 2009 19:00

Controlling cost

In the past decade, specialty drugs have helped bring about advances in medicine that have greatly improved the quality of health care. However, at the same time, these drugs have been a factor in the rising cost of health care and, as a result, become a matter of concern for many employers.

According to the America’s Health Insurance Plans (AHIP), only 1 percent of patients use specialty drugs, yet this usage accounts for 20 percent of drug spending ($54 billion annually). The annual cost per patient ranges from $10,000 to more than $1 million. By 2010, the U.S. specialty prescription spending is expected to reach $99 billion as the volume of new specialty products continues to pour into the market.

“Taking control of specialty drug costs is not easy,” says Chronis Manolis, vice president of pharmacy services for UPMC Health Plan. “There is not one method that is right for all employers. But, an approach that incorporates evidence-based best clinical practices with sound cost-containment methods ensures the most sensible way to approach the problem.”

Smart Business spoke with Manolis about specialty drugs and what employers can do to control the costs connected to them.

What is a specialty drug?

A specialty drug requires a complex delivery system and has a cost that exceeds $5,000 per patient, per year. The average cost of a specialty drug is more than $1,500 per month. They are typically prescribed to treat rare, complex or chronic diseases.

Specialty drugs are high-cost injectable or oral drugs that typically involve intensive clinical monitoring and patient training. They often require specialized handling and/or frequent dosing adjustments to ensure proper treatment. Specialty drugs are sometimes limited or restricted to certain distribution channels, specifically specialty pharmacies.

Are employers taking a more active interest in managing specialty drugs?

According to a recent survey, 45 percent of employers from large companies say they recently reviewed their plan benefits or their limits for specialty or biotech drugs. This is an increase from the 34 percent that did so in 2005. Certainly, given the cost of these drugs and the number of new specialty drugs hitting the market in the next few years, there is definitely a sense of urgency and heightened interest with respect to the management of this class of drugs.

What are some of the factors driving up costs of specialty drugs?

First, a growing number of specialty drugs are in development and each year more of them enter the market. More than 600 specialty drugs are currently in the biotechnology ‘pipeline,’ including many oral formulations. In recent years, about one-third of all new drugs introduced were specialty drugs and specialty products are projected to be half of all U.S. Food and Drug Administration (FDA) approvals by 2010. Also, an increasing number of common chronic conditions, such as diabetes, osteoporosis and rheumatoid arthritis, are now being treated with this class of drugs. Specialty drugs already on the market continue to gain approvals for new uses.

An additional reason for the rise in costs is the increase in diagnoses of people with chronic conditions. An estimated 105 million Americans have chronic conditions, and in the first decade of the 21st century, the number is expected to increase by 16 million. In many cases, some diseases, such as many forms of cancer, have become chronic conditions that patients can live with, thanks to regular, sometimes lifelong, treatment with specialty drugs.

Are there generic versions of specialty drugs that can be utilized to help reduce the cost?

Specialty drugs are biologics so there is less of a chance that generic alternatives approved by the FDA can be developed. Biologics are genetically engineered proteins and are more difficult to manufacture. The FDA does not currently have a regulatory framework to quickly approve biologic generics, although this is expected to change in the next few years. Even when generics are created, they too can be expensive; sometimes the difference in price is only 30 percent, compared to nonspecialty generics, which are typically 60 to 90 percent less than their brand-name counterparts. However, there is still a huge savings opportunity for generic biologics as many specialty drugs currently on the market have already lost patent protection.

What are some strategies to effectively manage specialty drugs?

Effective pharmacy management requires a holistic approach to provide cost containment and management of this class of medications. Employers should take advantage of utilization management strategies, such as prior authorization and quantity limits to ensure safe, appropriate use of these medications in accordance with FDA guidelines.

Limiting supplies to 30 days per co-pay can reduce waste due to changes in dosing or side effects. Using specialty pharmacies helps to control the distribution of specialty drugs to provide high-touch clinical management of the patient, including counseling and training on the use of the medication, as well as better pricing and enhanced reporting.

CHRONIS MANOLIS is the vice president of pharmacy services for UPMC Health Plan. Reach him at or (412) 454-7642.

Chronis Manolis
Vice president of pharmacy services
UPMC Health Plan
Monday, 23 February 2009 19:00

Cutting costs, not morale

In hard times, employers are forced to look at their bottom line in an attempt to identify places within their company where they can reduce costs. Many times, employers look at benefits or staff first. One area employers should look to that can have significant impact is workers’ compensation costs.

A well-managed company will take the steps now to align itself with professional assistance. This can lead to desired results for properly managing workers’ compensation claims, says Dan Slezak, vice president with ECBM. For many companies, their workers find that the workplace is akin to an extended family. Employees need to know that you care about them by providing a safe workplace and having a comprehensive claims management program in place that will help them to get well and back to work. This is a win-win for companies because it increases productivity and reduces claims.

Smart Business spoke with Slezak about the effects workers’ compensation claims can have on businesses and how to manage these claims to reduce costs and claims while increasing productivity and morale.

How do workers’ compensation claims affect businesses?

When an employee is injured at work, workers’ compensation pays for necessary medical treatment and lost wages. There can be a substantial cost associated with these expenses. If an employee misses work, then productivity suffers. The morale of the employee group is also affected if an unsafe condition existed. Employees want to know that someone cares about them and that is especially true in the workplace.

The longer lingering effect is that these claims add to a company’s loss experience and will adversely affect the modification factor with the state rating system that will end up costing that company more money.

How do you recommend business owners manage workers’ compensation claims?

Business owners must recognize that claim management cannot be delegated to an insurance carrier or a third-party administrator without someone providing oversight. If the business does not possess that expertise, then it becomes critical that it has a broker who can provide that oversight for it. That broker must play an active role in managing the costs in workers’ compensation. If you can get the best people and best program oversight, then you will be leaving nothing to chance.

Provide a safe environment; fill it with the best people for the functions needed and a company’s return on that investment will be forthcoming. Make working in a safe environment an important part of your culture.

Each company can enjoy the benefits of reducing their workers’ compensation costs. But there is not a one-size-fits-all approach. The demographics of the work force and the jurisdictions of workers’ compensation law will play an important part in the program structure. Business leaders should meet with a broker to discuss options and plans that meet the individual needs of their company.

How can you achieve cost savings through management of such claims?

When claims are managed properly, employees receive proper and immediate medical treatment, which means the employee will return to work sooner, thereby minimizing lost workdays that significantly add to a claim cost. If you analyze the component costs of a workers’ compensation claim management program, you will find ways to reduce each cost without having an adverse impact on the claim results.

Companies have experienced as much as a 35 percent reduction in workers’ compensation costs with proper management. The first step is to have an experienced consultant/broker analyze current processes, then, with management’s commitment, establish guidelines that will positively affect the program going forward.

Does investing in prevention lead to cost savings for employers?

A safe work environment leads to fewer claims and shows your employees that you care about their well-being. Many processes and procedures can be addressed to positively affect the number of claims. Prevention creates a safe workplace with the proper training and instruction. Both areas can be addressed without major expenses. The key is to identify the past trends in a company’s losses and establish a cost/benefits analysis of areas to be addressed.

How important is record keeping in the successful reduction of claims?

Record keeping is important for a couple of reasons. First, you can identify trends and note where you need to expand your resources. Second, proper documentation from the onset of a claim would help to determine if it was an unsafe act or unsafe condition that led to the claim. In either case, the injured employee and all co-workers can learn from the incident. Third, some claims can go bad, which can lead to litigation. This becomes very costly. If you have the proper documentation from the onset, including the medical management files, this will ensure that the correct facts appear in court.

DAN SLEZAK is vice president with ECBM. Reach him at or (610) 668-7100.

Monday, 23 February 2009 19:00

Tough talk

In a world full of negative economic news, many business owners are fearful of what reporting bad news to their banks will mean for the future of their banking relationship and, ultimately, their businesses.

“Today’s economic circumstances require that communication with your bank be timely, direct, open and frank,” says Nicholas Browning, president and CEO with FirstMerit Bank.

Business owners should not fear reporting bad news to the bank but they must be realistic about potential changes the bank may insist upon, says Browning. Banks understand that no one likes to have to give bad news but they would rather have the information as soon as possible so they can help you develop a plan to deal with the problem and move forward.

Smart Business spoke with Browning about how business owners should communicate with their banks during difficult times.

What causes difficult discussions between banks and consumers?

Banks and borrowers sometimes do not see eye-to-eye when the customer’s business has veered astray from the original business plan, as well as from historical results, both of which the bank used to make their loan decision. When the bank determines that this new information has changed the risk assessment of the loan then the terms of the loans will likely change. This may be unnerving or upsetting to business owners but in most cases it does not mean the end of the relationship. Banks are trying to modify the terms to return the risk profile to the same place it was at loan inception. These changes may include adding a personal guarantee, changing covenants, adding collateral to support the loan or a change in pricing.

What might this conversation between the bank and the business owner sound like?

If earnings and/or cash flow are below historical levels and below your plan, your banker will be interested in three things: how it happened, how it’s going to be fixed and when it’s going to be fixed. The prepared business owner will have a detailed analysis of the causes of changes in earnings, including data on sales, margin and expenses. The plan to remedy the current situation is equally important; what’s being done to return the company to its history or projected profitability? Of course, all plans cover a time frame and the timeliness of the turnaround actions is important.

Your banker will then assimilate this information and make a recommendation to management. Your banker is your advocate within the bank, so make sure he or she is prepared to accurately and effectively understand and communicate the circumstances. The banker will then tell you how he or she would like to address the situation.

What if I don’t like what I hear from my bank?

As previously stated, your bank may propose changes of terms and conditions under which they will continue to lend money to your business. You may not like the proposal. First, understand that relationships are supposed to be give and take. Things didn’t go as planned; consequently, the bank wants to make changes. At the most basic level this is fair. In the vast majority of cases, neither party likes the circumstances but they find a tolerable middle ground. At times, however, the bank may take a very hard stand and will not budge. Conversely, I’ve seen borrowers do the same. These are the most difficult situations which cause the most disruption for the bank and the borrower.

Exacerbating the current times is the unprecedented upheaval in the banking market. Many banks have had capital pressure due to loan losses and asset write downs; these bankers may be less flexible. Further, the ‘economic crunch’ has caused the ‘credit crunch,’ so many banks have become less tolerant of perceived risk.

As always in a free market, if you don’t like what you hear from your bank you can always talk to other banks for a free assessment of your situation. Depending on the circumstances, you may find another bank interested in acquiring your business.

How should business owners keep lines of communication open with their bankers?

This communication is a two-way street. During challenging times, more communication is better than less. Monthly meetings are often helpful, as the bank is kept up to speed at regular intervals while business owners are able to get real-time feedback from the bank.

What is the bank’s responsibility in the communication process to its consumers?

It is the same as the borrowers. Banks owe their customers timely and straight answers to their questions and clear direction of how the bank will proceed with the relationship going forward.

Any other thoughts on this topic?

No matter what, be patient. Tough times often require steady perseverance to get the best outcome.

NICHOLAS BROWNING is president and CEO of FirstMerit Bank’s Akron region. Reach him at or (330) 384-7807.

Monday, 26 January 2009 19:00

A new spin on primary care

If you took a snapshot of the current health care system in this country, it would not produce a pretty picture. Physicians are under constant pressure to see more and more patients in less and less time.

Health care costs continue to rise faster than the economy. Employers, government and individuals feel increased financial burdens and still health care in the United States compares unfavorably to much of the rest of the industrialized world.

The reason for the unnecessary and inappropriate health care services that people receive in the United States is that there is little or no coordination of patient care among providers, says Michael Culyba, M.D., vice president of medical affairs for UPMC Health Plan.

“We also need to recognize that primary care in this country is a failing entity,” says Culyba. “We need to redefine and redesign primary care. That is a basic concept of the patient-centered medical home.”

Smart Business spoke with Culyba about the patient-centered medical home model and how it can improve the current health care system.

What is a patient-centered medical home?

It is an update of the old concept — the family doctor. It is also a way of approaching health care that differs greatly from the current system. Essentially, the patient-centered medical home means physician-guided, patient-centered care. The partnership between the provider, the patients and their families is what makes it work. From this partnership comes a holistic, coordinated plan of care that uses evidence-based medicine to produce better outcomes and lower costs.

How does this differ from the current system?

It differs in many ways. Most significantly, it would change the basis of how care is administered. At present, most care is episodic, illness-oriented and complaint-triggered. With the patient-centered medical home, care will become a patient-centered, physician-guided, cost-efficient model that encompasses both the art and the science of medicine. Prevention, wellness and health will be its focal points.

Physicians will become partners with patients and insurers in coordinating and facilitating care to help patients navigate the health care system. Patients will have a personal physician who works with a team of health care professionals in a practice that is organized according to the principles of the medical home. Patients will be treated within a context of their personal medical history and life circumstances, rather than just focusing on a specific disease or conditions.

There is much research around the world that demonstrates that where patient-physician relationships focus on primary care, people live longer, populations are healthier, there is higher patient satisfaction and costs are lower. The emphasis on preventive care that results from a system such as this can help to lower disease rates and reduce hospital stays.

How does patient-centered medical care differ from traditional disease management?

Most disease management programs use case managers who are provided by the member’s health plan. The primary relationship in that arrangement is between the case manager and the member. In the patient-centered medical home model, care and the coordination of care is the responsibility of the member’s personal physician and the physician’s health care team. The health plan provides information designed to help the patient and physician work together to set specific health care objectives and choose the best way to achieve those objectives. The member becomes more engaged in his or her health care, and the health care system will be better able to serve the needs of individual members.

What are the biggest factors driving the introduction of this new concept today?

The current system is not prepared to meet the needs of an aging population, either now or in the future. Primary care in this country is a failing entity. Each year, the number of primary care physicians drops by 6 percent. We need to redefine and redesign primary care with the patient-centered medical home. New ideas not only add value, they introduce new perspectives from which we can examine value and extend it. The world of health care is one of constant movement and transition. But the main objective never changes: the well-being of the patient.

How can this system benefit employer groups that provide health care for their employees?

If this concept is able to redefine the concept of service excellence, it will be a start toward making health care work better for all of us. That will mean more efficient care, healthier employees and lower costs. This will work through a series of partnerships. The health plan partners with its members, with the employer groups it works with and with its physician community.

MICHAEL CULYBA, M.D., is the vice president of medical affairs for UPMC Health Plan. Reach him at or (412) 454-5532.

Monday, 26 January 2009 19:00

Rebuilding the foundation

Many people would argue today that there are serious problems in our health care system. We pay twice as much as other countries for health care, but our outcomes are no better and, in many cases, worse. Other countries utilize the patient-centered medical home (PCMH) model of organized, comprehensive, coordinated primary care as the foundation for their health care system. We can learn a great deal from the success of other countries.

Rebuilding our delivery systems should be the same as rebuilding a house; one should start with the foundation, says Jim Byrne, M.D., M.S., chief medical officer with Priority Health.

Smart Business asked Byrne about PCMH, how it affects overall health care and why employers are moving toward such care.

What is the patient-centered medical home?

A medical home is not so much a place as it is a relationship, one that involves a patient and his/her personal physician. That physician leads a team within the PCMH that provides all the preventive and chronic care that the patient requires. This care will vary depending on age and gender. This physician is both knowledgeable and accountable for all patient care, whether in the office, hospital or elsewhere.

In this relationship, patients take accountability for their own health care. They are informed and activated to manage their own health in partnership with the personal physician. Health care is very complex in the 21st century. As more technology becomes available, it will be an invaluable asset for patients to have one knowledgeable human being who can oversee their care. This model has significant benefits to health care such as improved access; organized, comprehensive, high-quality and affordable care; and focus on the individual patient as a partner in overall health care.

If primary care physicians are providing care instead of specialists, is there a risk of a decrease in the level of care?

No one is advocating a return to the era of requiring primary care physician (PCP) approval of all referrals. Rather, this model allows the patient and the care team to work together to make sure the patient gets care in the right place. This includes, for example, getting care in the PCP office instead of the ER, avoidance of duplicative testing, monitoring of all of a patient’s medications to avoid interaction, duplication, etc.

If patients receive all of the age/gender care that is appropriate for them based on the best clinical evidence, it can be described as optimal care. A study published in 2003 showed that, on average, patients get only about half the recommended care.

Why are employers supporting the patient-centered medical home?

With the optimal level of care provided and patients activated to improve the aspects of health that are manageable through their own efforts, employers will see fewer lost workdays, higher productivity and lower trends in health care costs.

How do employers implement such new care practices for their employees?

The alignment of the personal physician with the insurer and the employer provides a terrific opportunity to drive the improvements that the model promises. One example is the employer selects a benefit design that asks the enrollees to:


  • Select a personal physician
  • Complete a health risk assessment
  • Set up an appointment with their doctor for a physical exam, and make sure that, at that visit, they receive all the care that is required for their age and gender
  • Agree to seek care on a scheduled basis for any chronic condition, and to fulfill their part by pursuing a healthy lifestyle


  • The employer can attach economic incentives to these benefit plans that will help promote these behaviors.

    Employers are also positioned, in many cases, to support behaviors that promote healthy lifestyles and personal accountability for health management. Examples: smoke-free environments, smoking cessation programs, health club memberships, etc.

    How does the patient-centered medical home affect the future for physicians?

    The number of new physicians going into primary care is dwindling rapidly. This model, as noted, will improve patient care. However, if the change is to be sustainable, it must also produce improvements on the physician side — namely, in professional satisfaction and by addressing reimbursement deficiencies.

    Such a change will not be easy. To transform from current state to PCMH is a daunting challenge. It will take years and there will be significant cost. Physicians need to reorganize the way they deliver care. It will require investment in people and technology (electronic medical records, portals, e-visits, etc.) that will greatly improve care in the 21st century.

    Primary care would present a much more compelling image if practices had the infrastructure and organization required to provide the kind of care that the model dictates and if they could be assured of a reasonably competitive income as a reward for the value that the model provides.

    JIM BYRNE, M.D., M.S., is chief medical officer with Priority Health. Reach him at or (616) 464-8362.

    Tuesday, 25 November 2008 19:00

    Plan ahead

    By all intents and purposes, 2009 may bethe most challenging year for businessowners since the Great Depression.

    The changes that are underway in the financial service industry are historic and businesses have to learn how to grow as they facethese challenges. The more reliant you are ona bank for capital, the more you need to be incontact with your banker.

    A banker should ask you how he or shecould assist you and your business in 2009.This will initiate thoughtful conversationabout the goals and needs of the business inthe upcoming year, says David Janus, president and CEO of FirstMerit Bank’s Clevelandregion.

    “Programs should be designed to increaseefficiency, lower overall banking costs andgrow capital,” says Janus.

    Smart Business spoke with Janus aboutways business owners should approach 2009and how to utilize their banker in theirapproaches.

    What should a banker be able to do for yourbusiness?

    Each company’s needs are different and abanker’s services range greatly. Let yourbanker be an asset to your team.

    Here are a few suggestions:


    • Brainstorm your 2009 business plan. Your banker can help you start a business plan and cover any unforeseen areas.



    • Play the devil’s advocate. Let your banker use other businesses’ mistakes to help you. Allowing your banker to identify gaps or holes will make your business plan stronger.



    • Find a means to your plan. If you have designed your business plan and identified your goals, allow the banker to introduce what banking programs or products will help you reach your goals.



    • Bring value to the business. Your banker should have a general understanding of your industry and be able to help you keep an eye on changes in your market.


    What should a business owner look for in abanker?

    Typically, business owners do businesswith individuals they know, like and trust.You can’t know your banker unless you visit with him or her often. Business plans willneed to be adjusted throughout the year so abanker should be there to provide revisedsolutions and to introduce any new productsthat can enhance a business.

    Business owners should identify what qualities or services are important to their needsand business. Qualities such as convenientbranch locations, bankers who can offersound advice, banks with the newest products or banks with a plan to help their business grow and make profit may be necessary.

    How do you recommend business ownersapproach their 2009 business plan?

    Business owners need to always be thinking of ways to retain their current profit andgrow it in the future. The SWOT approachencourages business owners to evaluatetheir strengths, weaknesses, opportunitiesand threats. Today, some business ownerspredict that their customers will requestfewer orders in 2009. With this reduction inrevenue, retention may be the biggest goal.

    In 2009, business owners anticipate theircustomers may pay them slower. Because ofthe credit meltdown, lines of credit may belimited. It is helpful to determine how restrictions on consumers’ credit may affect yourbusiness and plan accordingly.

    Are there any approaches to running a business you recommend business owners takein 2009?

    Cut costs overall. This is the year to take thetime to evaluate every line item. If you arespending money, it should add value to yourcompany. If you spend a dollar, one shouldquestion if it was necessary to spend the dollar and, if deemed necessary, is there any waythat cost can be reduced to 99 cents?

    Business owners should take advantage ofthe products and services the bank offers tomeet the needs of increased efficiency. Someservices may cost you money initially, butthey can save you in the long run. Productssuch as remote deposit capture allow you todeposit customer checks from your office.This means you are not wasting the time tovisit the bank, the money it costs to get you tothe bank and the loss of productivity.

    In light of the financial insecurity in 2008, arethere steps business owners can take toincrease financial security in 2009?

    There are four steps to take:


    • Have immediate access to your capital. It is important that business owners be vigilant of the soundness and security of their financial institution. You need to know that you can visit your bank at any point and access all of your capital. Ask your bank if it intends to provide you with the same access to credit and capital as it has in the past.



    • Diversify. Even if you are happy with your bank, it is a good idea to know other banks that may be able to handle the needs of your business should you ever need another option. Have a backup plan.



    • Research. Know the background and future outlook for your bank, vendors and customers. They all play a role in the future success of your business so you need to know how they can weather the storm.



    • Know more people at your bank than your banker. You should know your relationship manager, his or her boss and his or her boss’s boss. Thus, if your banker leaves, there is more than one person who has knowledge of your company and its needs.


    DAVID JANUS is the president and CEO of FirstMerit Bank’s Cleveland region. Reach him at or (216) 694-5658.

    Sunday, 26 October 2008 20:00

    Thank you for not smoking

    Even though the smoking rate among adults in the United States has dropped from 42 percent in 1965 to 21 percent in 2006, tobacco use continues to kill 440,000 Americans a year. What may be more astounding is that secondhand smoke kills an estimated 53,000 persons each year. It is estimated that exposure to secondhand smoke in the workplace kills more people than any other occupational hazard.

    Secondhand smoke is a Class A carcinogen. State and federal governments have strict laws to protect workers from all other powerful carcinogens, but employers are given much more leeway in protecting their workers from secondhand smoke.

    “Helping employees quit smoking has evolved from a generous outreach effort to a health and business imperative,” says Michael O’Donnell, Ph.D., MBA, MPH.

    Smart Business talked with O’Donnell about how smoking cessation programs can be instituted in the workplace.

    What are the costs of employee smoking to an employer?

    In addition to the health problems caused by smoking, the increase in medical costs is estimated at $1,600 per year per smoker. On top of that, employees who take three 10-minute smoking breaks a day are spending 15 eight-hour days of paid company time a year away from the job to smoke.

    What smoking-restriction policies are available to employers?

    There are three options:

    • Restrict smoking to designated areas. This is a good start for companies that have no restrictions, but it is very difficult to keep the smoke in the smoking areas. Also, smoke in confined smoking areas is so concentrated that it puts people who are forced to work in these areas at double risk.

    • Establish smoke-free buildings. Not only are you providing clean air in all indoor work locations, you are also forcing smokers to go outside to smoke, which is enough to convince some to quit and most to smoke less. However, the main drawback is that smokers tend to congregate by the doors, which means that other workers, customers and visitors have to walk through the smoke.

    • Implement an entire campus as smoke-free. When employers create smoke-free work environments, the benefit to workers who were previously exposed to secondhand smoke is immediate. All workers now have access to clean air to breathe and do not have to worry about risking their health just coming to work.

    Is altering hiring practices appropriate?

    A growing number of employers have decided not to hire smokers, including the American Cancer Society and the Union Pacific Railroad. Not hiring smokers does not directly benefit smokers, but it has clear direct benefits in terms of worker productivity and medical costs. A small number of companies have fired employees who smoke. This has attracted much visibility and numerous legal challenges.

    How can you make these policies succeed?

    Any new smoking policy should include support, such as smoking cessation programs to help smokers quit. Implementing a smoke-free workplace will increase the number of people who try to quit. The key to success is an approach that combines expert advice and medication.

    Regardless of the policy an employer chooses, there are four factors that contribute to success. One, the leadership team should have a unified message regarding the policy and announce it to employees. Two, employees, including smokers and nonsmokers, should be engaged to determine how to best implement the policy. Three, communication efforts should focus on the importance of protecting the health of all workers by providing clean air to breathe. And, fourth, clear protocols should be in place to enforce the policy.

    What are the benefits to an employer of instituting a smoking cessation program?

    Worker productivity should increase as soon as a smoker quits because he or she is able to spend more time at work. However, much of this productivity gain will be offset by the struggles of overcoming the physical addiction to nicotine.

    Many smokers who quit have very real physical withdrawal symptoms, including irritability, fatigue, insomnia, headache, cough or sore throat. These symptoms can make it difficult for some workers to focus on work, so productivity may actually drop for a few days. Showing compassion for quitters during this time will go a long way.

    Smokers have higher medical costs because they are sick more often and more severely. Smokers who quit because of an acute health problem may actually see their medical costs increase in the first year or two because of the disease, not because they quit smoking. It will take time for former smokers to recover, and their costs will drop as they heal. In fact, these costs will drop to the costs of non-smokers over a period of five years for former smokers who do not have chronic diseases and 10 years for those who have chronic diseases.

    MICHAEL O’DONNELL is a Ph.D., MBA, MPH. For more information, contact William Modoono, senior writer, UPMC Health Plan at or (412) 454-7781.

    Sunday, 26 October 2008 20:00

    Integrating health

    As our national health care costs reach $74 billion per year, wellness programs are in place at nearly every midsize and large business across the country. For wellness programs to truly become a solution for controlling health care costs, the programs must be well integrated into the benefit design and company culture, says Sally Stephens, president of Spectrum Heath Systems. Well-integrated programs will eliminate confusion and provide the best outcomes.

    Integration can create a healthy corporate culture that motivates rather than stimulates fear, says Stephens. Business owners should strive to make the programs personalized and easy to access so that the entire population can become engaged. Statistics indicate that the more integrated the program, the higher the return on investment. Averages can be 12 percent or greater.

    Smart Business spoke with Stephens about the steps business owners can take to properly integrate wellness programs and the importance of doing so.

    How does a business owner properly integrate wellness programs into the company?

    Wellness programs can be properly integrated by streamlining human resources and third-party vendors to work more effectively together, by branding and marketing the program to employees and families and, most importantly, tracking outcomes to ensure the initiative is having a positive impact. Breaking down the silos between health and wellness will generate a focus on total health management, not just a wellness program.

    Business owners must also reach out and communicate to families when integrating wellness plans. Often, the dependents are the more costly members of the employer’s health plan. According to Hewitt, 60 to 70 percent of an employer’s costs are generated by the dependents, not the employees. And, 70 percent of health care decisions are made by women.

    What are the risks of not integrating wellness programs into the company’s health benefit plan?

    The results may not be as effective. Company health and wellness programs work best in an environment where improving well-being is understood, accepted and encouraged by all employees. A sense of group cohesiveness is one of the most effective methods to obtaining a well-integrated program.

    How can business owners decide what wellness programs will best work with their health benefit design and their employees?

    Managers need to fully understand employee issues and cost drivers before implementing a wellness program. Determining management attitudes, knowledge and support can help drive the implementation strategy.

    Today, there are far more options for employers wanting to implement a wellness program. When selecting a vendor, choose one that takes a strategic partnership approach to health management. Look for the right partner who can integrate health and productivity programs, and ensure that it is aligned with the interests of the employer and will significantly impact the company culture.

    How can you integrate wellness programs to be well received by employees?

    As with any effective initiative, senior management buy-in is critical. Personal participation by management will reinforce the value of the program. To integrate wellness programs successfully, business owners can:

    • Nurture a culture of health

    • Change the benefit design from an acute focus to prevention and chronic care

    • Use incentives

    • Integrate data
    • Commit long-term for the future health of employees

    How can business owners increase participation for wellness programs?

    Offering incentives will maximize participation. The most effective incentives are those that are tied to the health plan, such as premium discounts and contribution to flexible spending accounts. This also helps tie the wellness program to the employee’s health plan.

    Communication is key. Employees have to understand what benefit participating will have on their future. Address upfront specific issues such as privacy and confidentiality with employees. Use positive messages regarding the program and any incentives so that employees can recognize the benefit. True behavior change happens when plan participants have an investment in the game and they want to change.

    SALLY STEPHENS is the president of Spectrum Health Systems. Reach her at

    Sunday, 26 October 2008 20:00

    Asset-based lending

    Many businesses today are looking for loans that can help their businesses advance in a market where credit standards are tighter than they have been in recent years.

    During good or bad times, asset-based loans allow companies to leverage their assets to obtain the cash they may need, according to Robert Friend, a senior vice president with FirstMerit Bank. Asset-based loans are a working capital finance option available to business owners.

    Smart Business spoke with Friend about the benefit of asset-based loans in today’s trying market and how business owners should prepare to apply for such loans.

    How does an asset-based loan work versus a traditional loan?

    An asset-based loan is structured using the value of the borrower’s collateral as opposed to financing that is primarily based on the borrower’s cash flow and overall balance sheet leverage. Because the conversion of collateral (accounts receivable and inventory) is the primary source of repayment, a major characteristic of an asset-based borrowing structured loan is the emphasis on monitoring the collateral.

    Asset-based loans have the potential to provide a business with greater liquidity because the loan advances are based on the current level of the company’s working capital assets. These loans may be ideal for companies that are fast-growing or undercapitalized and need assistance to finance their working capital assets.

    Have lending standards changed for asset-based loans?

    In general, the lending and credit markets have changed dramatically this year with the failure of some major financial entities. This means that the scrutiny has increased for business loans. More and more banks are implementing some form of asset-based structure in the loans they are offering businesses.

    On-site field exams are conducted by the bank to determine the advance rates on the collateral and other terms of the loan. Field examiners will review the accounting records, verify the account receivables and review the systems and procedures for recording and tracking inventory. This allows for a detailed and hands-on review of the company in addition to the traditional financial overview.

    How can businesses prepare to apply for asset-based loans?

    Accurate accounting records are critical in the bank’s ability to evaluate the quality of a company’s working capital assets. The accuracy and timely completion of financial records is essential to the bank obtaining a level of comfort with a company’s collateral and financial reporting. The borrower’s ability to provide financial data and collateral supporting schedules in an electronic format can greatly speed up the bank’s due diligence process. This leads to a quick response to the borrower and ultimately to better understanding of the borrower on an ongoing basis.

    What types of business are best suited for asset-based loans?

    Typical asset-based borrowers are heavily invested in working capital assets. These companies can be experiencing high growth or have seasonality in the business cycle.

    Other candidates include turnaround situations, leverage buyouts and ownership transitions.

    Are there any drawbacks to asset-based loans of which business owners should be aware?

    Asset-based loans typically provide more borrowing capacity for a business. There are incremental costs for asset-based loans for field exams and monitoring fees. However, interest expense is minimized because the loan is repaid daily as accounts receivable are collected and borrowing only occurs when checks or other items are presented for payment.

    ROBERT FRIEND is a senior vice president with FirstMerit Bank. Reach him at (614) 545-2763 or

    Page 1 of 4