Bob Stevens knew something drastic had to be done. His company's health-insurance costs were soaring, up about 15% a year. At the same time, his employees were becoming increasingly frustrated by the lack of alternatives to the restrictive managed-care coverage he was buying.
And Stevens runs a hospital.
So last fall Stevens, the CEO of Ridgeview Medical Center, a $110 million-a-year hospital and network of clinics in suburban Minneapolis, opted for an experimental course of treatment. He offered his 800 full-time doctors, nurses, administrators and other personnel the choice of a new scheme called a "defined contribution" health plan, courtesy...