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Three Key Choices for Health Management

May 13, 2008
Related Topics: Benefit Design and Communication, Health and Wellness, Featured Article, Compensation
Managing the health of the workforce has grown from an occasional investment by large employers to something that most employers are at least considering, with the number of organizations actually doing something about it growing daily. Employers that have made the right investments and measured the right gains have achieved significant, often dramatic labor savings and other financial increases. But if they don’t make the right choices, employers run a significant risk of missing these opportunities.

    Here are three missteps that put employers on the wrong track:

  1. Failing to focus on the most promising health challenges and employees.

  2. Failing to choose the most complete set of financial gains to measure in planning, implementing and evaluating investments.

  3. Failing to choose the best providers and interventions for the health management effort.

    Missing any one of these three points can scuttle the employer’s prospects from the outset.

    Selecting the best problems to solve
Employers have often begun their workforce health management investments with a single solution—perhaps a work-site wellness promotion or an on-site fitness facility. When these have been offered, employee participation has often been low and frequently has involved employees who are already fairly well and fit. They enjoy being able to work out on company time or use a full-service facility that doesn’t cost them anything.

    Coors Brewing Co. has offered work-site wellness programs for decades, with modest early savings through health care cost reductions. Work-site wellness can reduce the incidence and prevalence of chronic disease in the workforce, which is the biggest cause of health care costs, but it often takes years, even decades, for significant reductions to be achieved that way.

    Other employers have purchased disease management programs from specialized suppliers, knowing that chronic conditions such as diabetes and heart disease account for roughly three-quarters of their current health care insurance costs. But health care costs represent only one-quarter, on average, of the total savings realized by employers who have looked further into which problems and gains to include. Failing to identify and address more common causes of these two drains on workforce productivity can mean missing out on far greater financial gains.

    Greater savings could be had by tackling the causes of absenteeism and "presenteeism," in which workers come to work but are barely engaged. If employers were to look at what is behind both these issues, they would find that the reasons are usually not chronic diseases, which are relatively rare in workforce populations.

   Once employers examine the full array of unhealthy behaviors and conditions affecting their workforces, and the full array of ways they affect labor costs and workforce performance, they will usually address a set of problems very different from chronic illnesses. The list includes smoking, sleep deprivation, poor diet, physical inactivity, obesity, emotional problems, allergies, chronic pain and high but "pre-disease" levels of blood pressure, glucose or cholesterol. These tend to affect far more employees than do any chronic diseases, and when corrected, deliver far more improvement in productivity and performance. By tackling these problems, employers achieve greater financial gains than they would have with disease management.

Selecting the best gains to measure
   To most effectively and efficiently address workforce health management, employers need to determine the full range of health effects on employee costs and performance. While health care, workers’ compensation and disability costs are routinely measured, chances are that productivity and performance are not. Fortunately, there are at least half a dozen thoroughly tested methods for at least estimating the impact of employee health on productivity and performance. The improvements achieved through workplace programs can be captured by repeating these health and performance surveys.

    By measuring health-related absence and turnover among employees, employers can get hard data to use in addition to their estimates of presenteeism, impaired productivity and underperformance while at work. Dow Chemical Co., for example, used measures of absenteeism and estimates of presenteeism among its employees and calculated that as little as a 1 percent decline in health risks among its workforce would pay for the costs of health management efforts. Everything above that would be pure profit.

    Choosing the right gains to measure also means selecting the best time frame for measurement. GlaxoSmithKline followed a cohort of more than 6,000 employees in its Contract for Wellness program. It found that while the first year’s net gains were only $233 per participant, such gains rose to $375 in the second year, then leaped to $944 in the third year and $950 in the fourth year. These savings were measured via health care, workers’ compensation, disability and absence data. They did not count regained productivity through reduced presenteeism, which would probably have doubled the total gains measured.

Choosing the best interventions
   One of the other reasons that disease management has often delivered disappointing results is that it tends to involve expensive care. In one Medicare demonstration project, the fees charged by the 15 disease management suppliers involved ranged from $80 to $444 per patient per month, or $960 to $5,328 per year! No wonder only two of these suppliers managed to achieve the cost-savings minimum that Medicare had set as a standard.

    When nearly all employees are potential participants, and all their health problems are potential targets for correction, it makes sense to keep down the costs per participant, since the average gains in total workforce health management are often significantly lower per participant than with disease management. The costs of interventions need to be matched to the risk/reward potential of individual participants. Moreover, the lower the average cost of interventions per participant, the more likely it is that the employer will be able to offer incentives that will promote high levels of workforce participation. With incentives, participation can be 90 percent or more, rather than the more common 5 percent to 20 percent without incentives.

    The more employees who participate, the more employers can use methods such as team competitions and peer support communities to motivate and reinforce worker participation—in addition to any incentives they offer. It is the continuous and committed participation of as many employees as possible that will usually determine how great the financial gains are. While narrowly focused strategies may yield ROI levels of $2 to $3 for every dollar invested, more broadly focused alternatives often yield ROI levels of $5 to $8. Having more participants means greater ROI, optimizing net financial gains for the employer.

    By combining the best methods for selecting workforce health management problems with the best methods for measuring them and the best methods for achieving them, employers can dramatically improve their probability of succeeding, and realizing the financial gains available. The best approaches to each of these challenges work together to make the whole better than the sum of its parts, and ensure that employers won’t miss out when they venture into this increasingly essential element of strategic workforce management.

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