The Transition from Health as Cost
to Health as Business Value
Thomas Parry, Ph.D.
President
Integrated Benefits Institute
About IBI
•
National, not-for-profit organization representing
1,100 organizations with 20 million employees
•
Business value of workforce health. Linking
absence, employee performance and productivity
to business metrics
•
Better measurement. Providing practical
measurement strategies for linking employee
health, care delivery and business outcomes
•
Modeling tools. To give employers a way to
estimate the economic burden of illness when they
don’t have all the data
•
Practical evidence. Using case studies to show
employers what leading employers have done and
how they’ve done it
A New Employer Setting
• ACA: Transition from tactics to strategy
• Show the C-suite the value of improved
workforce health
• Dead end: attempting to control claims
costs in separate program silos
• Looking for new strategies to improve
workforce health, reduce lost time,
enhance productivity and impact
business
• Limited data, time and dollars
Where employers started: healthcare as
cost of doing business
Health Costs
The first response: cost shifting
Plan Design
Health Costs
Moving upstream: getting on the front
end of cost
Health Risks
Chronic Health
Conditions
Treatment
Plan Design
Health Costs
Moving downstream: incorporating
outcomes
Health Risks
Work
Performance
Chronic Health
Conditions
Lost Productivity
Treatment
Work
Absence/Disability
Plan Design
Health Costs
Next: Encompassing a Broader View
EE Health
Behaviors &
Engagement
Corporate
Culture &
Structure
Health Risks
Wellbeing
Business
Performance
Work
Performance
Chronic Health
Conditions
Lost Productivity
Treatment
Work
Absence/Disability
Plan Design
Health Costs
Modeling What’s at
Risk for Employers
FCE Data Sources
•
•
•
•
Bureau of Labor Statistics
Integrated Benefits Institute
Center for Disease Control
National Academy of Social
Insurance
• Agency for Healthcare Research and
Quality
• Kaiser Family Foundation
• Nicholson, Pauly, Polsky, et. al.
The economic impact of illness:
case example
• 10,000 life hospital system
• Workforce
 81% female
 46% between 35-54
 44% professionals, 20% service
workers
Distribution of costs for employees:
healthcare as silo
Distribution of costs for employees:
adding payments to absent workers
Distribution of costs for employees:
adding absence lost productivity
Distribution of costs for employees:
including reduced performance
Translating Lost Time into Lost Productivity
• Degree of difficulty in replacing workers
• Time-value of output
• Degree of working in teams
** Source: Sean Nicholson, Mark Pauly, et al., "Measuring the Effects of Work Loss on Productivity with Team
Production," Health Economics 15: 111-123 (2006).
The Opportunity Costs of Absence
Most likely response by management to length of absence
(13 managers, 93 employees)
90%
80%
Nothing
Overtime
Assign to other EE
Hire new EE
Substitute worker
Other
70%
60%
50%
40%
30%
20%
10%
0%
One Day Absence
Three Day
Absence
Two Week
Absence
One Month
Absence
Quantifying Financial Lost Productivity*
• Lost productivity – “the financial impact on a
company when employees are not at work and fully
functioning”
• Two components: absence and decrements in job
performance (“presenteeism”)
• The Financial Impact of Absence
 Wage replacement payments
 “Opportunity costs” of ER’s response
• The Financial Impact of Presenteeism
 Wage
and benefit “overpayments”
 Opportunity costs of resulting lost time
** Source: Sean Nicholson, Mark Pauly, et al., "Measuring the Effects of Work Loss on Productivity with Team
Production," Health Economics 15: 111-123 (2006).
18
Linking Healthcare to
Productivity Outcomes
Going Beyond Medical & Pharmacy
to Absence and Presenteeism
$400,000
Cost per 1000 EEs
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
Medical
Pharmacy
Absence lost prod
Presenteeism lost prod
Co-Morbidity and Lost Time
The CFO’s View of Health
MGM Mirage Case Study
IBI Health & Productivity
Snapshot Results
6.2 lost
days per
FTE/Year
1.8 lost
days per
FTE/Year
Lost worktime = 8
days per FTE/Year or
$2,598 per FTE/Year
in Lost Productivity
Lost-Time Improvement’s
Impact on EBIDTA
Reducing 1 lost day/FTE = $15
MM to EBIDTA* from
Productivity Gains
*Earnings before Interest, Depreciation, Taxes and Amortization
The Bottom Line
One Day of Productivity Improvement
Savings
Wall-Street Multiple
$15.0 MM
10.7X
Outstanding Shares
284.3 M
Gain in Stock Price
$ .56/share
Principal Owner (56%)
$90 MM
IBI Research: Making
Health the CFO’s
Business
Key Findings
 CFOs are key participants in benefits decision
making
 Health is an organizational priority
 Productivity is critical to bottom line but the
role of health is less clear
 CFOs understand health impacts financial
performance
 Internal information is most credible but critical
information is lacking
Health’s Link to Financial Performance
What’s “Very Important” to
Workforce Productivity
Health
Strength of Health Culture
In a Health-Focused Culture
• Improving health is seen as very
important to productivity
• Health’s impact on business goes
beyond healthcare costs and includes
sick leave, “opportunity costs” of
health, turnover, and absence
payments
• Broader information available to make
investment decisions: EE satisfaction,
health risks, performance impact, ROI
Linking Health & Financial Performance:
Putting Results in the CFO’s Terms
•
•
•
•
•
Healthcare costs
Sick days
Turnover
“Opportunity costs”
Absence payments
CFOs Desire Broad Health Information …
But Often It’s Not Available
The Challenge of “Big
Data” to Employers
Workforce Key Health Dimensions*
 Financial (cost)
 Program participation
 Biometric screening
 Health risks
 Utilization
 Preventive care
 Chronic conditions
 Lost worktime
 Lost productivity
 Employee engagement
* Thomas Parry and Bruce Sherman, A Pragmatic Approach for Employers to Improve Measurement in
Workforce Health and Productivity, Population Health Management, Vol. 15, No. 2, 2012
Dimensions & Dashboard Metrics
Dimension
Summary Metric
Financial
Program cost/EE
Program participation
EEs participating/All EEs
Biometrics
EEs reaching target/All EEs
Health risks
# of health risks/EE
Utilization
# EEs getting care/All EEs
Preventive care
# EEs getting screened/All EEs
Chronic conditions
# EEs w/ chronic conditions/All EEs
Lost worktime
# of lost workdays/EE
Lost productivity
Lost productivity $/EE
Employee engagement
Engagement score/EE
The Temporal Dimension
Leading indicators
 Health risks
 Biometrics
 Chronic condition prevalence
Treatment indicators
 Preventive care
 EE engagement
 Health services utilization
 Program participation
Lagging indicators
 Financial
 Lost worktime
 Lost productivity
Thinking about Metrics as
Hierarchies
Dashboard
metrics
Component
metrics
Contributing
metrics
For more information:
Thomas Parry
[email protected]
415-222-7282