The Transition from Health as Cost to Health as Business Value Thomas Parry, Ph.D. President...
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![Page 1: The Transition from Health as Cost to Health as Business Value Thomas Parry, Ph.D. President Integrated Benefits Institute.](https://reader036.fdocuments.us/reader036/viewer/2022062409/56649d815503460f94a661cb/html5/thumbnails/1.jpg)
The Transition from Health as Cost to Health as Business Value
Thomas Parry, Ph.D.PresidentIntegrated Benefits Institute
![Page 2: The Transition from Health as Cost to Health as Business Value Thomas Parry, Ph.D. President Integrated Benefits Institute.](https://reader036.fdocuments.us/reader036/viewer/2022062409/56649d815503460f94a661cb/html5/thumbnails/2.jpg)
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
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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
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Where employers started: healthcare as cost of doing business
Health Costs
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The first response: cost shifting
Health CostsPlan Design
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Moving upstream: getting on the front end of cost
Treatment
Health CostsPlan Design
Chronic Health
Conditions
Health Risks
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Moving downstream: incorporating outcomes
Treatment
Health CostsPlan Design
Chronic Health
Conditions
Health Risks
Work Absence/Disabilit
y
Work Performance
Lost Productivity
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Next: Encompassing a Broader View
Treatment
Health CostsPlan Design
Chronic Health
Conditions
Health Risks
Work Absence/Disabilit
y
Work Performance
Lost Productivity
EE Health Behaviors & Engagement
Corporate Culture & Structure
Business PerformanceWellbein
g
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Modeling What’s at Risk for Employers
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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.
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The economic impact of illness: case example
• 10,000 life hospital system
• Workforce
81% female
46% between 35-54
44% professionals, 20% service workers
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Distribution of costs for employees: healthcare as silo
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Distribution of costs for employees: adding payments to absent workers
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Distribution of costs for employees: adding absence lost productivity
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Distribution of costs for employees: including reduced performance
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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).
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The Opportunity Costs of Absence
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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
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Linking Healthcare to Productivity Outcomes
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Going Beyond Medical & Pharmacy to Absence and Presenteeism
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Co
st p
er 1
000
EE
s
Medical Pharmacy Absence lost prod Presenteeism lost prod
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Co-Morbidity and Lost Time
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The CFO’s View of Health
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MGM Mirage Case Study
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IBI Health & Productivity Snapshot Results
1.8 lost days per FTE/Year
6.2 lost days per FTE/Year
Lost worktime = 8 days per FTE/Year or $2,598 per FTE/Year in Lost Productivity
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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
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The Bottom Line
Savings $15.0 MM Wall-Street Multiple 10.7X Outstanding Shares 284.3 M Gain in Stock Price $ .56/share Principal Owner (56%) $90 MM
One Day of Productivity Improvement
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IBI Research: Making Health the CFO’s Business
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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
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Health’s Link to Financial Performance
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What’s “Very Important” to Workforce Productivity
Health
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Strength of Health Culture
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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
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Linking Health & Financial Performance: Putting Results in the CFO’s Terms
• Healthcare costs
• Sick days
• Turnover
• “Opportunity costs”
• Absence payments
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CFOs Desire Broad Health Information … But Often It’s Not Available
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The Challenge of “Big Data” to
Employers
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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
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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
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The Temporal DimensionLeading 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
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Thinking about Metrics as Hierarchies
Dashboard metrics
Component metrics
Contributing metrics