ACA Blog

Chris Allen
Mar 31, 2011

The "So What" Factor, Part Three

My last blog spent a considerable amount of time highlighting some cultural considerations for Veterans and their families. If you haven’t read So What Factor 2, I encourage you to do so prior to reading this one. Today, I will discuss private industry considerations, the Veteran Market, and Partnership Potential for you as a Counselor.

As a quick disclaimer, in no way do I claim to be an economist or business expert. In fact, I have majors in Sociology and Criminology with my MA in Counseling; technical business model concepts etc.. are not my strong point. I’m the kind of guy that takes bigger pieces / concepts and breaks them down to a more manageable form, relying on smarter people to give me advice and guidance on subjects that I have little training or knowledge of along the way. As an Army Officer, I depend on others to give me advice all of the time, making my decisions based off of outside material provided and common sense.

The assertions I will make are based on a very cursory review of existing literature from a wide variety of sources, some peer reviewed in their respective fields and others not. As always, I welcome and encourage alternative view points and hope that my readers will do additional research on their own. I’ll provide sources upon request.

After reading this post, it’s my hope that you will begin to develop some ideas that both help Veterans and their families, while also moving away from depending on insurance companies for re-imbursements. Also, keep in mind these blogs are intended to build the foundation for a non for profit organizational concept I am developing. In the case of this specific post, I am developing the revenue generation model and using your input to do it.

Private Industry: As stated in my previous post, private industry is primarily concerned with making a profit, no surprises here. Factors heavily influencing a company’s “bottom line” are insurance costs, turnover and training costs, Industrial Psychologist effectiveness, Skill Sets and Traits Desired in employees, and “Head Hunters.”

Insurance Costs
“Private industry employers spent an average of $27.75 per hour worked for total employee compensation in December 2010, the U.S. Bureau of Labor Statistics reported today. Wages and salaries averaged $19.64 per hour worked and accounted for 70.8 percent of these costs, while benefits averaged $8.11 and accounted for the remaining 29.2 percent. Total compensation costs for state and local government workers averaged $40.28 per hour worked in December 2010. Total employer compensation costs for civilian workers, which include private industry and state and local government workers, averaged $29.72 per hour worked in December 2010.” (U.S. Bureau of Labor & Statistics, release # USDL-11-0304, March 9th, 2011).

Exact benefit breakdown and description was not included in this release; however, it is a pretty safe assumption that a significant portion of this “29.2%” goes towards healthcare costs.

While researching for this blog post, I came across an article in The New England Journal of Medicine Titled: Costs of Health Care Administration in the United States and Canada: Dated August 21, 2003. The article was written by Steffie Woolhandler, M.D., M.P.H., Terry Campbell, M.H.A., and David U. Himmelstein, M.D.

In this article, the authors assert that administrative costs make up about 31% of health care expenditures in the United States. The article’s primary purpose is to compare the U.S. and Canadian healthcare system, so the 31% might be a little high, but it’s an interesting figure. I’m wondering if this is an accurate statistic, but let’s assume for now that it is.

Let us think for a moment about the issue of “parity.” It’s an issue that I was not familiar with until this past week. For those of you like me, who have no clue about the issue of parity, I encourage you to simply Google about it or take a look at the ACA web site. If total parity is actually achieved, it should follow that at least 31% (assuming this is an accurate figure) of your potential revenue is lost due to administrative costs. For those of you that run a practice and hire people to do billing, administrative costs are probably even more detrimental to your bottom line.

You math geniuses can play around with these numbers and can come up with some figures. The BLUF is that whatever number you come up with represents potential lost revenue to the Counseling industry and you as a professional. I think the numbers can be reversed in your favor.

Turnover / Training Costs
Turnover and training costs incurred by both private companies and public institutions are usually costly and disruptive, like insurance, eating into the profitability of a company. I wanted to find out about turnover and training costs, so I “googled.” I came across a well written article by a company called Workforce One. Workforce one is a “head hunter” agency out of Florida, so the figures in the article are probably bias in an effort to sell their services to potential employers. Title: High Cost of Employee Turnover. Take the numbers in the article with a “grain of salt,” but the process of turnover is really something to consider.

According to the article, turnover rates in the U.S. average around 23% if you bunch the different regions of the United States and the different industries. Factors to consider when an employee leaves according to the article are: Separation Processing Costs, Replacement Hiring Costs, Training New Hire Costs, and Lost Productivity Costs. This article highlighted a sample for a Registered Nurse position in Denver, Colorado, and the total cost for turnover at a local hospital was $32, 226. YES, I know… Denver is a very expensive city. Bblablablablabla

Again, take the numbers with a grain of salt b/c there are way too many variables to come up with something concrete, at least for me.

Role of Industrial Psychologist
While putting this post together, I thought about Industrial Psychologists and did a little research on them. I also talked to an Army Apache Pilot who used to work as an Industrial Psychologist. Here’s the general definition I found:
“Apply principles of psychology to personnel, administration, management, sales, and marketing problems. Activities may include policy planning; employee screening, training and development; and organizational development and analysis. May work with management to reorganize the work setting to improve worker productivity.”

I asked my co-worker about the accuracy of the definition, and he basically said yes and agreed with it. There must be more to it right? For my “IO” friends out there, please let me know if I’m missing the mark here, but I don’t think that IO involves much counseling or personal interaction with employees does it? What about Veterans? Do Industrial Psychologists know much about Veterans? Are their measures of effectiveness tied to turnover rates and insurance costs? Answer: it all depends on the industry.

Hang in there with me!! I know you’re like “get to the point Chris!” I’m getting there. I promise.
What do skill sets and leadership traits cost? Again, it all depends on what the job entails no surprise here. Are they transferable? Absolutely!

Head Hunter
Enter the “head hunter.”
“A headhunter can seem like an urban job market myth because they are not used for every possible vacancy. The fact that they are reserved for the more difficult vacancies means that their skills must be well-targeted to find the right person for a position that often must have a number of specific characteristics.” Explaining Headhunter Fees by Natalia Jones.

The headhunter is basically a job scout. He or she tracks down vacancies as well as potential job seekers and goes about matching available vacancies to their applicants according to their experience, qualifications and even personality.

Sometimes headhunters are placed on a retainer and some charge “by the head.” There are tons of headhunter companies recruiting Military Members as they transition. They know that both large and small business will pay top dollar for the skills, qualifications, and traits that Veterans have to offer.

Skills and Qualifications = security clearances, specialized training, connections for contract work, etc... Servicemen and women have skills and qualifications that private industry often wants and will pay top Dollar for, especially when the military “foots” the initial bill.

Traits = Leadership qualities, attention to detail, ability to backwards plan, mentor others, good health, on time, responsible, hard working, dependable, mission and people focused, etc...

Headhunters get paid very well for what they do, but where is the Professional Counselor in the process? What Professional Counselor or mental health care provider specializing in Veteran and family care is interacting with the people and organizations I’ve mentioned? Where are they? Oh that’s right, they aren’t around! At least, I haven’t heard about them, so there’s potential.

Partnership Potential:
Ah, finally. We are at partnership potential, the “so what factor” for today’s blog.
There are potential lucrative partnerships between you as the provider, head hunters, Industrial Psychologists, and both public and private institutions if you simply look at the numbers. Research them yourself, and you will probably come to similar conclusions. You will realize that the insurance “middleman,” as relating to mental health care can indeed be eliminated to the benefit of everyone involved.

In my next blog post, I will illustrate what partnership can look like.



Chris Allen is an Army Officer currently serving in Afghanistan who counsels Soldiers on a volunteer basis and will pursue licensure upon his return. He is passionate about developing counseling practices that best address Veterans and their families. Blog comments are not representative of the Army or Department of Defense.

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