The real money, according to new research from a group of experts led by Alere's Dr. Ron Loeppke, is in a holistic approach. Employers need to not only look at the medical and pharmacy costs their workers incur, but also their productivity.
In addition to Alere's Loeppke — who serves as EVP of health and productivity strategy for the health management company, the research group was comprised of representatives from the Integrated Benefits Institute and Harvard's medical school. A summary of this research originally appeared in the Journal of Occupational and Environmental Medicine.
EBA spoke with Loeppke recently to discuss the research.
What did you look at and what did you find?
We looked across 10 employers, ultimate employee total is 150,000, analyzed over one million medical and pharmacy claims data across that population and matched claims data analysis with responses of presenteeism and absenteeism related to health condition among the employee populations. [We] then aggregated all that back up and identified what are the top health conditions driving full cost impact of poor health on employers — not just medical pharmacy costs, but also the health-related productivity costs associated with poor health.
What did you find?
The bottom line is that the health of the workforce is inextricably linked to the productivity of the workforce and therefore the health of the bottom line for employers, and therefore the health of our economy nationally and globally. What we found was that for every dollar of medical pharmacy cost that employers pay out they, on average, also pay out $2.30 of lost productivity.
The research shows how factoring in employee productivity information dramatically changes the list of cost-drivers for a company. How do you collect that information on worker productivity? Is it just self-reported?
Yes, the instrument [was developed by Harvard Medical Schools' Dr. Ronald Kesller] and [is used by] the World Health Organization. [It] is being used in over 22 countries worldwide now. It's been validated that the self-reported info that people generate is in line with and is validated by objective data of performance and supervisor observation.
With the claims data you can say we spent X amount of money because you have a paper trial. Then when you go back to that employee and say we've got that information on you, how do you feel today or are you working at full speed? The top five conditions with medical and pharmacy are cancer, back/neck pain, coronary heart disease, chronic pain and high cholesterol. Factor in self reporting and the top five conditions are depression, obesity, arthritis, back/neck and anxiety.
What's an employer do when coronary heart disease is the top issue on one list and depression is tops on the other. Those demand dramatically different strategic interventions.
The underlying question is we need to deal with the health behaviors of people. It's this constellation of lifestyle and health behaviors that drives the development of these chronic conditions, whether they are heart disease or they are depression or other types of conditions, diabetes, etc.
Unfortunately, we just have a sick care system that we've developed over the years in our medical delivery system. We really need to move more toward a health care system that moves upstream and is more proactive and wellness-based rather than just reactive and illness based.
A recent study from the National Business Group on Health and Watson Wyatt shows that despite the economic climate, many large employers are keeping up their wellness efforts. Does that indicate a shift amongst employers, that they finally understand the connection between better employee health and better business health?
There is clearly a shift. I would say it's a tectonic plate shift actually in how employers are looking at investing in health, rather than justifying the cost of health benefits. The fundamental philosophy driving the adoption of these strategies is that health is not only of great value to individuals and the population, but it is also of great value to businesses and industry. They can look beyond health care benefits as a cost to be managed and rather to the benefit of good health as an investment to be leveraged. When you factor that together, ultimately a healthier, more productive workforce can help drive greater profitability of employers as well as a healthier economy for our nation.
One of our things that I have actually heard from the employer community, they are saying because you have the economic situation going on and when you have financial capital frozen like this you have human capital heat up. What they mean is that one CEO said we have a chief financial officer that comes in every day focusing on the economics and financial capital of our business, but we need to focus also on the health assets of human capital of our business. That's what's going to allow us to differentiate ourselves in the global marketplace. It's the creativity, the innovation, the productivity of people that's going to make the difference.
You mention a big shift in the marketplace. Look into your crystal ball and tell us what the future looks like. Some people have pointed to well-being indices, some kind of population health score that could give companies a leg-up on the competition when they try and tap the capital markets or look for loan or deal terms. What do you see?
I do think that's actually something that's going to be considered in terms of the health asset of the human capital and finding accounting methodologies that can acknowledge that, because you do see this making a huge difference in the viability and sustainability of corporate enterprises.
Any predictions there? Do you look to any employers as pioneers on that front? Any case studies? Anything you can highlight?
What I have seen is some employers, in one case a Fortune 100 employer, a CFO actually wanted to move this beyond the traditional ROI methodology about impact of interventions to what we call VOI, the value of investment. You look at all sorts of indicators — clinical indicators, prevention screening indicators, health risk improvement indicators and productivity indicators. One of the things that he added was shareholder value. The way they were able to do this ... is to look at the value of the current lost produ ctivity related to health in that particular employer, which totaled up to about $150 million across 58,000 employees. That was, on average, about eight days of lost productivity per employee, per year. They said, 'Look, we could have interventions that could just help us impact one day per employee, per year and get that productivity back by improving health.' That would drop $18.8 million to their EBITDA bottom line. For them to generate that same impact they would have to grow top-line revenue by over $75 million. Then they looked at it in terms of the number of shares outstanding that they had and their multiple on Wall Street that they deal with. They were able to show that $18.8 million, when they have their multiple, would convert to $244 million market cap improvement. And with 292 million shares outstanding, that translates to $0.84 of value per share improvement.
They are looking at this and they are talking about it in terms that go far beyond what the typical medical community is considering about the value of health. That's why I think the value of health and the power of prevention is going to be driving future corporate health strategies.
Tallying your top five
Be careful how you calculate the cost of poor worker health. Just looking at medical and pharmacy data might having you chasing one cost-control strategy, while taking a broader view of the problem could lead you in yet another direction entirely.
When considering medical and pharmacy costs alone, the top five drivers are:
- Cancer (other than skin cancer)
- Back/neck pain
- Coronary heart disease
- Chronic pain
- High cholesterol
Factoring in health-related productivity costs produces a different list, however:
- Depression
- Obesity
- Arthritis
- Back/neck pain
- Anxiety
Source: Health and Productivity as a Business Strategy: AMultiemployer Study. JOEM. 51(4):411-428, April 2009.Journal of Occupational & Environmental Medicine. 51(4):411-428, April 2009.
Podcast
Taking a look at the big picture. That's the lesson from this research, according to Alere's Ronald Loeppke. Listen to our interview with Loeppke online at eba.benefitnews.com/podcasts.
