Scott MacStravic
It is clear that employee health management (EHM) -- from worksite wellness to occupational health to disease management – is becoming an extremely popular strategy among employers. To paraphrase Winston Churchill: “You can count on employers to do the right thing…after they’ve tried everything else first.” (He said this about Americans.) Except for those that still think of their workforce as costs rather than assets, pay them as little and offer as few benefits as possible in order to keep costs down, employers increasingly accept that enabling employees to become and remain healthy is good business.
There have been literally hundreds of findings, in the US, Europe, South Africa, Australia and New Zealand, and even in a growing number of “developing” countries, that EHM produces significant financial benefits for employers. But employer ignorance of precisely how many benefits and how much net value they are getting from their EHM investments is still the rule, rather than the exception.
A recent study involving 242 large employers, for example, found that 75% offered some kind of EHM program to their workers. But only 38% of those who were investing in EHM had even attempted to measure their ROI from their investments, and that minority looked only at reduced healthcare costs as their sole source of return. [K. Capps & J. Harkey “Employee Health & Productivity Management Programs: The Use of Incentives” IncentOne.com 2007]
A larger study, by the International Foundation of Employee Benefit Plans, involving 454 employers in the U.S. and Canada, found 62% offered wellness programs for their workers, with another 15% intending to do so. They cited potential benefits such as improved employee health, higher morale, lower medical costs, reduced absenteeism and turnover, and improved productivity. But 41% said they didn’t really know what benefits they had gained so far, and 87% did not know what their ROI was. [J. Dresang “Exercise May Be Good Business” Beacon Journal July 9, 2007 (www.ohio.com)]
Based on published reports by employers in the U.S. and U.K. and the EHM providers they have hired to conduct EHM initiatives, the results achieved include at least the following kinds of positive impact:
- Reduced health care/insurance expenditures or at least reduced rate of increase in annual costs
- Reduced workers compensation and disability payment/insurance costs
- Reduced absences/lost workdays
- Reduced productivity impairment at work (“presenteeism”)
- Reduced turnover and replacement costs
- Reduced error rates and quality problems
- Improved customer satisfaction and loyalty
- Additions to new business revenue
Despite, or perhaps because of this long list of proven benefits, I have yet to see a single published report that includes measures of all of these effects. The vast majority deal with a minority of these effects, often only one, usually reduced healthcare costs. Yet studies that included both reduced healthcare and labor costs (usually absenteeism and presenteeism costs) have reported that the labor costs range from two to five times as great as healthcare costs. Any evaluation that omits labor costs is likely to vastly underestimate the full value of EHM interventions, and lead to making the wrong decisions about whether to continue, add to, reduce, or discontinue EHM investments.
If Ignorance Is Bliss, ‘Tis Folly to be Wise?”
While the blind faith of what appears to be the majority of employers investing in EHM is admirable, and probably justified, it is a poor basis for making decisions. Without accurate, precise and credible measures of ROI, employers have no sound basis for decision making. This means they not only don’t know whether and how much to invest, they do not know where are the best opportunities. If they measure only healthcare costs as the problem and results achieved, for example, they will tend to invest in chronic diseases affecting perhaps 3-5% of their employees, while ignoring the rest where health-related productivity and performance impairment may be caused by totally different problems.
For example, among the productivity impairment factors identified by employers worldwide are conditions and behaviors such as:
- Allergies (a major impairment factor during allergy season because of the large percentage of employees affected)
- Arthritis
- Colds and flu
- Emotional problems such as feeling down or anxious
- Smoking (primarily because of frequent ‘smoke breaks’)
- Inadequate sleep
- Poor nutrition
- Inadequate physical activity and fitness
- Poor hydration, e.g. frequent dehydration due to drinking coffee and tea which have diuretic effects, and not enough other liquids
- Overweight/obesity
These conditions are rarely identified as direct causes of major medical/surgical costs, but they are strongly linked to high levels or reduced performance at work, as well as absences. By contrast, most of the major chronic diseases that are major causes of healthcare expense are not major factors in productivity and performance, simply because they affect relatively few people. In fact, the generally low levels of coverage for medical treatment/management of mental/emotional problems means that these are rarely included in “disease management” efforts when reducing medical costs is the sole focus.
One study found that the absenteeism/presenteeism costs of such problems were 11.8 times greater than medical costs for such problems. [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] Prevention of such problems could save all these labor costs, while management thereof should save a large portion thereof.
Healthcare organizations should be among the leaders in both investing in and evaluating EHM results. They are under constant and continuing pressure to reduce their operating costs, which EHM can do, significantly and even dramatically. They are in a chronic and worsening labor shortage situation, which improvements in productivity can greatly reduce. They are paid more for good performance, so can afford better than most to invest in EHM initiatives that improve workforce performance. And they cannot afford to invest in anything less than the most promising and rewarding EHM initiatives in terms of ROI.
Moreover, HCOs are increasingly becoming involved in EHM as a revenue-generating sideline or hedge against the increasingly dismal revenue vs. cost realities of their sickness care missions. Whether HCOs compete in the EHM market, there will be plenty of other “vendors” specializing in EHM that will be serving the growing market therefor. By competing effectively, HCOs can benefit from the reduced sickness care expenditures that will inevitably result, instead of merely suffering from this reduction.
Moreover, because the biggest factors in reducing employee productivity and performance are not large factors in driving sickness care costs, at least in the short run, HCOs can invest in EHM for other employers without expecting dramatic reductions in the sickness care expenditures they now depend on. And because EHM saves employers money, instead of costing them money, they can afford to be far more generous in paying for EHM than they and the insurers they contract with when paying for sickness care.
But the only way HCOs can successfully compete in the EHM market is to become masters of measurement and evaluation of the results achieved. It makes total sense for them to master these challenges rather than relying on blind faith as is now so popular, since they cannot afford to achieve less than optimal results in their internal EHM investments. And with so much riding on pay-for-performance revenue from payors, measuring employee performance should follow naturally, making such results measurement that much easier.
While improving employee health is by no means the only or necessarily the best way to improve employee performance, it is clearly one of the better ways, and has the potential to deliver significant positive ROI for HCOs that invest in it optimally. And if HCOs cannot be better than average, at least, when it comes to managing health, they should be ashamed of themselves. All that is needed is that they become better than average, preferably at the top of the list, in measuring as well as managing EHM results.
