Beyond ROI:Making the Business Case for Worksite

Health Promotion

George J. Pfeiffer

President

The WorkCare Group, Inc.

P.O. Box 2053

Charlottesville, VA 22902

(434) 977-7525

georgeworkcare@ earthlink.net

IAWHP Executive Summit, April 7, 2010

Critters

What Are We Going to Cover?

• Review the evolution of worksite health promotion• Does it make a difference? • Refocusing health promotion• Addressing your entire population• Common strategies• Promising practices

First…

In the beginning…

The Ongoing Proposition….

“A healthy employee saves the organization money and is more

productive.”

In the Beginning….

• A variety of employee support services:– Occupational health and safety– Recreation– Travel– Employee Assistance Programs– Executive Fitness Programs

Executive Fitness Programs1968…

• Exclusive

• Medical department

• Clinical— “The Executive Heart Attack”

• Cardiovascular risk reduction focus

• “Exercise prescription”

Employee Fitness Programs-1976…

• Inclusive-major locations• Cardiovascular focus• Running boom: “Jim Fix Effect”• Expansion of recreation services or

facility management

Employee Health Management Programs-1980…Phase I

• Hey! Our costs are rising!• Inclusive-all employees, and some households• Introduction of the Health Risk Appraisal (HRA)• Risk reduction focus• Health fairs/onsite programming• Medical self-care• Communication programs

Employee Health Management Programs-1986…Phase II

• Hospitals and MCOs become vendors to employers

• Onsite screenings• “Health management centers” versus “fitness

centers”• Computer learning• Telephonic nurse-line, EAP• Greater focus on high-utilizers

Employee Health Management Programs-1996…Phase III

• Rise of the Internet (virtual programming) • Greater integration of services• Greater use of third-party vendors• Concept of presenteeism• Concept of risk migration and cost

Employee Health Management Programs-Today…Phase IV

• Population management • Integrated data management/HPM• Predictive modeling• Disease management• Health coaching• Targeted and tailored messaging (social marketing)• Value-based benefit design• Incentives• Culture of Health

So…Where’s the Beef?

R.O.I./Where’s the Beef?

From a review of 73 published studies of WHP programs1

– Average $3.50-to-$1 savings-to-cost ratio in reduced absenteeism and health care costs.

From a review of 56 published studies of WHP programs2

– Average 27% reduction in sick leave absenteeism– Average 26% reduction in health costs– Average 32% reduction in workers’ comp. & disability mgmt. claims costs– Average $5.81-to-$1 savings-to-cost ratio

A comprehensive health management program at Citibank3

– $4.56-$4.73-to-$1 savings-to-cost ratio in reduced total health care costs

1. Aldana SG.

2.. Chapman LS.

3. . Ozminkowski RJ, Dunn RL, Goetzel RZ, Cantor RI, Murnane J, Harrison M.

So…what does this all mean?

“There’s a body of work that demonstrates the efficacy of worksite

health management programs.”

So…what does this all mean?

Let’s move beyond the debate regarding health promotion’s role in reducing direct healthcare costs. Let’s move to

productivity management.

It’s all about WORK!

What’s Wrong With...

WORK?

Max Weber

“One does not work to live;

one lives to work.”

Our Work Can Provide:

Well-being

Opportunity

Reward

Know-how

What Drives Competitive Advantage?

• Innovative products/services

• Market share• Shareholder value• Positive R.O.I.• Revenue/Profitability• Value of human capital

What’s a Productive Employee?

• Competence (“know-how”)• Results-oriented• Quality focus• Team-oriented• Fully-engaged (“present”)• Physically and mentally

well

Key Observations

ONE:

Employee health directly affects an organization’s bottom-line.

Runaway Health Care Costs

Year Annual Cost GDP2003 $6,020 14.9%2004 $6,880 14.3%2009 $8,160 17.6%2018 $13,310 20.3%

Employer Health Care Strategy Survey 2003, Delotte & Touche

The Problem: Rising Medical Costs/Eroding Profit

$454$488 $478 $486 $494

$263$284

$315

$359$402

$0

$100

$200

$300

$400

$500

$600

1996 1997 1998 1999 2000

Bill

ion

s o

f D

olla

rs

After-tax profits

Health benefitcost (does notinclude relatedproductivitycosts)

• Source: The National Data Book: 2001 IRS Data Reports

Key Observations

TWO:

Direct health care costs are the “tip of the iceberg.”

Direct Costs Related to Indirect

*$6,000Per Employee Direct

Medical Costs

Medical& Pharmacy

Absenteeism

STD

LTD

Presenteeism

Estimated $12,000

per Employee Medically Related

Productivity Costs

Estimated Total Costs $18,000

PEPYSources: Loeppke, et.al., JOEM, 2003; 45:349-359 and Brady, et.al., JOEM, 1997; 39:224-231

Being “There” or “Here”?Presenteeism

• Chronic disease (e.g, depression, diabetes)

• Acute conditions (e.g., allergies, U.R.T.I.)

• Work issues (e.g., management style, change)

• Personal issues (e.g., care-giving, financial)

We Can’t Ignore Direct Costs, Yet, We Need to Focus More on…

• Absenteeism

• Presenteeism

The costs of absenteeism and presenteeism may be three times your direct health-

related costs.

Key Observations

THREE:

A “perfect storm” is brewing that will further impact the affect of employee health and

health care delivery on organizational performance and competitiveness.

“A Perfect Storm?”

• High health care costs with questionable quality

• Aging workforce

• Rise of chronic health conditions

• Low consumer accountability

• Global economy/competition

High Costs/Questionable Quality

• U.S. is near bottom of Western countries regarding healthcare measures, but pays the most.

• Participants received only 54.9% of recommended care.

• Majority of chronic conditions were underused regarding care.

• Deficits pose serious threats to the health and well-being of Americans.

Sourse: McGlynn, E.A., Asch, S.M., Adams. J. et.al. The quality of health care deleivered to adults in the United States. N Engl J Med 348;26, 2003

Aging Workforce/Chronic Conditions

• The median age of workers in 1988 was 35.9, and in 2008 was 40.7

• In many “mature” industries the average age is 48 years and above.

• 125 million Americans had chronic ailments in 2000 ($510 B)

• 78% of costs attributed to chronic conditions

1. Bureau of Labor Statistics:http//bls.gov/opub/ted/2001/june/wk4/art02.htm 2. Partnership for Solutions. Projection of chronic illness prevalence and cost inflation. Johns Hopkins University and Robert Wood Johnson Foundation, 2001;

http://www.partnershipforsolutions.org/statistics/direct_costs.htm

Low Consumer Accountability

• Entitlement mentality

• Traditionally distanced from true cost of health care (CDHP)

• Low commitment to self-care

• Lacks appropriate decision-making skills

• Low compliance to treatment regimen

Economic Uncertainty

• Global competition • High unemployment• High overhead costs• Eroding profit margins

Key Observations

FOUR:

Health management needs to not only focus on disease management, but on primary

prevention and risk reduction.

Why?

In order to stay competitive, we cannot ignore the impact that employee health has on

organizational effectiveness.

To begin, we need to understand that our population’s health risks can be a predictor

of business performance.

Understand Your Population!

Understanding Your Risks

• Within a population, the distribution of medical costs is always the same

• Approximately 60 percent of a working population is categorized as low risk (e.g., market share)

• At any given time, there is a migration (“churn”) of employees between risk categories

Source: University of Michigan Health Management Research Center.. The Ultimate 20th Century Cost Benefit Analysis and Report. March 2000; 1-12

Understanding Your Risks

• Health risks and medical care costs increase and decrease independent of interventions (e.g., natural flow of a population)

• Identify the “natural flow” of a defined population–benchmark against this cohort

• Move population to low cost or low risk

Source: University of Michigan Health Management Research Center.. The Ultimate 20th Century Cost Benefit Analysis and Report. March 2000; 1-12

Understanding Your RisksHealth risks follows costs:– Direct medical costs

• Tests/procedures• Out-patient• In-patient• Pharmaceuticals

– Indirect costs• Absenteeism (STD/LTD, sick days)• Presenteeism

Group Your Risks, Move Your Population

Risks: Categories

0-2 Low3-4 Medium5+ High

HPM research shows a direct relationship between health risks

and direct and indirect costs.

Source: University of Michigan Health Management Research Center.. The Ultimate 20th Century Cost Benefit Analysis and Report. March 2000; 1-12

Don’t Ignore Your Healthy! Improve Your “Market Share”

• Keep healthy people healthy– $350 is saved when a low-

risk employee remains low-risk

• Target high risk populations– $153 is saved when a high-

risk employee’s health risks are reduced

Source: University of Michigan Health Management Research Center.. The Ultimate 20th Century Cost Benefit Analysis and Report. March 2000; 1-12

No Engagement, No Effectiveness

• 80%-85% low risk• 90% total participation within

three years– Health Risk Appraisal– Health Coaching– Two other programs

So…What’s Health Management to Your Organization?

• Cost-driver?

• Performance driver?

St. Paul’s American Workers Under Pressure , 1992

“Successfully managing human risks requires organizations to pay

attention to the whole employee, both on and

off the job.”

The M.E. Factors

Meaningful Employment is a product of:

Meaningful Engagement

+

Meaningful Environment

Shifting the Discussion

We need to question the value of our health

promotion initiatives:

Cost Effectiveness?

versus

Life Effectiveness?

It’s Alive!

I See Dead People

The Bottom Line…

• Though we need to focus on the “hard factors” (e.g., products, markets, margins) of the business…

• We cannot ignore the “soft factors” that truly sustain a business…

The Organization is People!

Healthy Employees…

A healthy workforce improves an

organization’s ability to survive and thrive within a competitive

economic environment.

Health Promotion is…Work Promotion

“Organizational policies and practices that protect, support, and enhance your human capital.”

Employee health and safety are primary

agents

ProfitAbility

The ability of an organization to optimize value by maximizing

growth (revenues) and managing costs (expenses)

“Work promotion addresses the productivity of your

human capital with health as a critical success factor.”

EmployAbility

The ability of an individual to increase his or her value through

the acquisition and practice of transferable work-related

competencies.

“Health management is a transferable job competency”

Integrating Self-Care and Work-Care

• Self-Care: “Accepting responsibility for ones health.”

• Work-Care: “Accepting responsibility for ones work.”

Each have their own skills and competencies.

Common Strategies

Cross-Functional Integration• Human Capital Teams

• Alignment/Accountability to Business Goals

• Cross-marketing: wellness, benefits, work/life, safety, communications

• Dashboard metrics

Common Strategies

Culture of Health• Culture is elastic• Culture is nodal• Culture begins at the top, but needs to be systematic• Leading by Example: Partnership for Prevention• Management accountability, alignment with

business goals• Team leaders: grass roots• Environmental supports• Reducing barriers to participation

Common Strategies

Value-Based Benefit Design• Uses integrated data to guide benefit design decisions• Identifies opportunities for targeted interventions• Identifies and reduces/removes cost and access barriers• Tiered incentive plans (e.g., HSAs contributions)

– Pitney Bowes: reduced coinsurance to select medications– Improved medication adherence to asthma and diabetes drugs– Reduced hospitalizations, E.R. visits, and disability

Common Strategies

Integrative Databases• Establishment of data warehouses that integrates

data into person-centric files

• Evaluates the total cost per life

• Helps focus on the best R.O.I.

• Establishes benchmarking and “performance dashboards”

Common Strategies

Health Risk Appraisal• Emerging as a “risk engine” for predicting total

costs and establishing benchmarks for program outcomes.

• Stratifies population—intervention• Often linked to incentives for participation.• Accumulative participation drives market share to

lower risk/cost status. • “Health Score” serves as a dashboard metric.

Common Strategies

Incentives• Carrot or Stick Approach?• Used to motivate and engage• Different plans: premium decrease, HSA

contribution, cash, merchandise• Questionable impact on sustained behavior

change except for tobacco cessation• “Dutch Auction” model

Common Strategies

Risk Intervention• Based on HRA data and other screening tools,

organizations are able to identify, invite, and intervene at pre-clinical stages.

• Linked to health coaching and other intervention tools—online and telephonic coaching.

• Incentive and disincentive plans

Common Strategies

Medical Consumerism• Important component for Consumer Directed

Health Plans• Medical self-care education and informed

decision-making designed to reduce inappropriate medical utilization.

• Decision-tools to improve patient-provider interaction

• On average 3:1 R.O.I.

Common Strategies

Disease Management• Targets high cost/high utilizers in selective disease

conditions.

• Targets individuals who have predisposing factors.

• Integrates lifestyle management and evidenced-based practices.

• May include incentives for both patient and provider (e.g., Bridges to Excellence)

• Adherence management. Every 20% improvement = $1,074 average in net savings for diabetes.

Common Strategies

Programming is Communicating!• Leveraging formal and informal

communication channels• Promoting your brand!• Your program is not a screen!• Getting into the home!• Using user-generated content-efficacy• Affinity social networks

Get Your Bearings!Benchmark Your Population

“Promising Practices” Benchmarking Study

1. Align features and incentives with the organization’s core mission, goals, operations, and administrative structures;

2. Operate at multiple levels. 3. Target the most important health care issues.4. Tailor components to needs of individuals.5. Achieve high rates of engagement and participation, — short and long term.6. Achieve successful health outcomes, cost savings, and additional organizational

objectives.7. Evaluate based upon clear definitions of success— scorecards and metrics.

Adapted from: Goetzel RZ, Shechter D, Ozminkowski RJ, et al. Promising practices in employer health and productivity management efforts: findings from a benchmarking study. J Occup Environ Med. 2007;49:111–130.