HFMA VIEWS

Scott MacStravic, Ph.D.

While numerous hospitals are involved in various kinds of “health” programs that involve businesses as clients, there is a new market emerging for “productivity health management” (PHM). It involves integrated “health” (in the broadest sense) services aimed at reducing the total labor costs of employers, primarily through improving worker productivity.

It has long been known that improving employee health can have a wide range of cost-savings effects, by reducing:

• medical/hospital care/insurance costs
• short- and long-term disability costs
• workers compensation insurance costs
• absenteeism
• declines in productivity due to worker “unhealth” on the job (“presenteeism”)

In addition, there has been plenty of evidence that healthier employees can promote improvements in product and service quality, in customer satisfaction, market share and revenue, along with cost reductions. And health preserving and promoting program efforts by employers can increase both employee retention and new employee recruitment, further reducing labor costs, along with quality and customer satisfaction. While there will always be problems of attribution in crediting the correct portion of wide-ranging improvements such as these to employee health investments alone, the full range of effects have been found when looked for.

PHM focuses on the known fact that cost savings to employers from health improvements are often two or three times as great as reductions in sickness care insurance costs. Dow Chemical Co., for example, found that on average, the total productivity costs of common chronic illnesses were five times as great as medical/hospital care costs. [J. Collins, et al. “The Assessment of Chronic Health Conditions on Work Performance, Absence and Total Economic Impact for Employers” JOEM (Journal of Occupational and Environmental Medicine) June 2005 547-557]
While almost all mega-studies of chronic disease management (DM) efforts have found mixed results in terms of ROI, but almost all have failed to count the productivity and total labor cost savings therefrom, so have vastly underestimated returns. Employers, however, tend to include these, and have become enthusiastic proponents and customers for such efforts.  In one study, for example, researchers at Brigham Young University found ROI ratios were nearly $16:1 for every dollar invested in worksite wellness programs, once productivity impacts were included. [“16:1 Return on Investment from Workplace Health Promotion BYU Study Finds” Wellness Junction.com Feb 2, 2006]

Hospitals and large health care organizations should clearly be at least considering PHM – for themselves to reduce their operating costs, as well as for local employers as a revenue generating venture. Developing and refining PHM programs with their own workforces will give them the experience needed to learn the most cost-effective methods and the full extent of savings possible. It will also give them the experience and results needed to market PHM programs to employers.