How to Save American Business

The second step is to encourage hospitals and clinics to put small-business owners on their boards. Very few hospitals do that now. Although their boards have really good people, the members often have no connection to the marketplace. It's an inbred system. That's why I agreed to sit on the board of the local hospital that provides health care for SRC employees. I wanted to make sure they were represented. The other board members pay attention if I present my case forcefully, and I can be enough of a pain that they make sure they have their ducks in a row before bringing up any new spending increase.

And they do listen. I was in a restaurant the other day, and one of the hospital's leading surgeons came over to my table. "I want you to know that we've heard what you're saying about keeping our costs in line with inflation, and we're working on it," he said. That's what I like to hear. Because of the hospital's efforts, it costs our company about $90 a month to provide a single employee with health care coverage, compared with a national average of $308 a month, according to the Kaiser Family Foundation. As President, you might be able to bring that average down if you can get other boards of health care providers to listen to the business owners who are footing the bill.

Please understand, I'm not saying you should drop your own ideas for addressing the health care situation. Most of them we support. Health savings accounts certainly have the potential to help small businesses like mine. Because employees would be using their own pretax dollars to pay for medical expenses, they would no doubt become smarter consumers of health care services, which is good for everyone.

Most of us in small business are also behind your effort to curb medical malpractice suits through tort reform. It's just not enough. The $24 billion that the health care industry doled out in malpractice awards in 2002 represented less than 2% of its total costs for the year, according to the Congressional Budget Office. Measures like capping attorneys' fees and limiting awards will help reduce health care costs in some areas, but we need to do more.

As for allowing small businesses to band together in associations that would let them qualify for discounted health benefits, it sounds like a good idea, but be careful. There's a danger that associations would favor companies with a young work force and reject those with older employees -- with the result that some people who have coverage now might lose it. And before you spend a lot of your political capital on getting a bill for association plans through Congress, you might want to check out how many additional people would actually be covered. I understand that's a matter of some debate.

Nevertheless, these are steps in the right direction. You can help us most, however, by using your considerable clout as President to get the health care industry to bring its cost increases under control.

Lawsuit Nightmare

Medical malpractice is not the only area in which we need tort reform, as I'm sure you're aware. Lawyers on contingency fees have turned all kinds of litigation into a nightmare for small businesses. In my company, it got to the point where we'd get a call from the same lawyer every time we let one of our employees go. We were becoming the guy's meal ticket, and we had to put a stop to it. So a year and a half ago, we began requiring our employee-owners to agree to arbitrate any disagreements that might arise. Now, rather than going to court with every problem, we hire arbitrators, who are paid by the hour, to work out compromises. With no 30% or 40% contingency fees to be had, the lawyers have stopped calling, and our annual spending on legal fees, lawsuits, and claims has plunged from $414,362 in 2003 to $97,169 in 2004.

With arbitration, moreover, everybody has to be reasonable. For instance, one of our employees recently filed a complaint about another employee who had allegedly made an inappropriate remark. We don't condone such behavior, and we put the offender on suspension. During the arbitration process, we got the sense that the employee who had complained wasn't happy being at the company anymore. We offered him a 90-day severance package. He asked for three years of severance pay. When we refused, he decided to come back to work.

I'm not saying that all lawsuits are frivolous. Of course, some employees have legitimate complaints, and some employers don't treat people as they should. But the vast majority of business owners try to do the right thing, and they shouldn't have to pay because of a few bad apples. We've cut down on employee lawsuits by switching to arbitration, and we urge other business owners to do the same. But we could all use some help from the government in terms of tort reform.

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