The Business Case For Health and Productivity Management—ROI Plus

1. June 11, 2003 The Business Case For Health and Productivity Management—ROI Plus Debra Gold, MBAMercer Human Resource Consulting Chicago

2. “Healthy Citizens Lead to a Healthy Economy”

3. Who Said That? • George Bush–State of the Union, 2003 • Uwe Reinhardt–Health Policy Speech, 1998 • C. Everett Koop–Surgeon General, 1983 • Adam Smith–Wealth of Nations, 200 years ago

4. “Healthy Citizens Lead to a Healthy Economy” Adam Smith–Wealth of Nations, 200 years ago

5. So, How Does This Apply to Us? • Healthy people cost less • Healthy people are more productive • Healthy people add more to the bottom line

6. A Framework for Cost Management—Many Focus on the Basics Analysis and diagnosis • Business and HR priorities • Enrollment, costs, and demographics • Cost drivers and savings opportunities Advanced strategies (moving ahead of the market) Basic strategies (keeping up with the market) Achieve Best Price for Goods and Services Plan design Focus on high cost areas Maintain health Funding Contributions Vendors Promote consumer accountability

7. What Are We Doing to Keep People Healthy? Simply providing health care coverage is not the same as promoting optimal health and well-being

8. 15% members = 85% cost 85% members = 15% cost Employers Need to Address the Entire Care Continuum Well No Disease At Risk Obesity High Cholesterol Acute Illness/Discretionary Care Doctor Visits Emergency Visits Chronic Illness DiabetesCoronaryHeart Disease Catastrophic Head Injury Cancer • Prevention • Screenings • Promotion - fitness - education - nutrition • Health risk assessment • Targeted risk reduction programs • Risk modeling • Nurse advice line • Decision support • Web tools • Consumer directed plans • Diseasemanagement • Incentive design • Self managementtraining • Case management • Predictive modeling Disabling Conditions

9. Moderate Risk High Risk Acute Conditions Chronic Disease Catastrophic Illness Well Objectives of Population Health Management Improve workforce health to manage costs and improve productivity Keep healthy people healthy Identify and reduce health risks to avoid and/or delay illness and disease Support consumers when making health care decisions • Manage chronic conditions to avoid costly complications • Coordinate care for highly complex patients to optimize outcomes and improve quality of life

10. This Sounds So Logical, But... • Where do we start? • Can we do this with our carrier? • Who else provides these services? • What are employers doing? • Is there really an Return on Investment (ROI)? • What makes this work? • Are there any other benefits?

11. HIV Prematurity Cerebrovascular diseases Hypertension Headache Bone and joint Infertility Diabetes Breast cancer Medical dollars Drug dollars Arthritis Depression Ischemic heart disease Lower back pain Trauma Pregnancy Self-care $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 Where Do We Start?–Not CHF

12. Benign prostatic hyperplasia Other malignancies Bone and joint Colorectal cancer Breast cancer Depression Diabetes Cerebrovascular diseases Hypertension Medical dollars Drug dollars Lung cancer COPD Arthritis Lower back pain Trauma Ischemic heart disease Self care $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 This Client is Different

13. Can We Do This With Our Carrier? • Carriers are in different stages of development • Most are focusing on a few specific diseases and high acuity only • Some carriers see the need to broaden their reach across the entire spectrum • While carriers have all the data, it often lives in silos; programs are not integrated

14. Large Retailer Bi-modal demographics High prevalence of costly, chronic diseases Carrier hadn’t delivered disease management in a PPO Worked jointly to develop product, data flows, reporting First year ROI 2.1:1 Adding additional programs Government Contractor Long-tenured employees Various wellness programs throughout the company Data revealed troubling trends Needed the full continuum of services Carrier beginning to develop products/strategic alliances Pushed carrier who now offers a spectrum of services + ROI There Are Some Successes

15. Boutiques Still over 100 vendors Darwinism occurring Key vendors provide ROI Best have needed attributes Pharmacy Benefit Managers Most still “brochure ware” Some developing Algorithms use prescription drugs only Often not as behaviorally-focused Who Else Provides These Services?

16. Key Attributes of Successful Boutique Vendors Vendor Requirements • Effective participant identification, stratification, recruitment and enrollment • Multi-disciplinary program interventions for both provider and member–guidelines and self management • Strong technology infrastructure to drive program operations • Employer-specific program tracking and reporting • Effective contracting to provide return on investment • Successful implementation and employer-focused integration strategy

17. What Are Employers Doing? Source: 2002 Mercer/Foster Higgins National Survey of Employer Sponsored Health Plans

18. What Are Employers Doing? - Increase in E-health Websites

19. What Are Employers Doing?—Disease Management Employer with >20,000 employees Source: 2002 Mercer/Foster Higgins National Survey of Employer Sponsored Health Plans

20. Is There Really an ROI?

21. Elements of Employer ROI in Disease Management Contracting • Operations • Identification, outreach and enrollment processes • Stratification; what is done in each strata • Clinical and behavioral processes • Reassessment, continued enrollment and drop out • Prevalence/Cost • Reasonableness of algorithms • Hierarchy • Exclusions • Comorbidity • Medical and Rx; person-centric

22. Elements of Employer ROI in Disease Management Contracting • Gross Savings • Medical and Rx (offset) total • Per enrollee, per diseased population • Regression to mean • Productivity/absence • ROI methodology (three years) • Risk guarantees • Fees • PEPM, PDPM, Per enrollee/participant

23. ROI Can Be Complicated • Employers need results that address business issues • True ROI, not regression toward the mean • Pre/post versus control group; business results may not pass academic rigor • The industry needs common methodology • Proxies can accommodate where actual data are unavailable • Direct medical savings, plus productivity, clinical results and satisfaction • Performance guarantees that stand behind commitments

24. What Makes This Work? • Data Sources for Triage • HRA • Predictive Model - Medical/Rx • Nurseline • Website • Chronic Illness/Disabling Conditions • Low Med High • Self Management • Guideline Adherence • Risk • Reduction • Low Med High • Lifestyle Modification • Behavior Change • Complex Care • Management • Care Coordination Integration Plan Design/Incentives Communications/Information/Branding Senior Management Support Evaluation and Monitoring

25. Are There Any Other Benefits? Medical Expenses Sick Days STD + LTD Workers’ Comp Lost Productivity at Work + + + + Total Cost Burden = Intervention Savings - ROI Intervention Expenses + Net Savings =

26. Actives Current Impact of Actionable Health Conditions (5 Year Total: $338 million) $70,000,000 LostProductivity Lost Time $60,000,000 Medical $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 Asthma Hyper-tension Discretionary Care Diabetes Trauma Low Back Pain CHF Heart Disease Other Actionable Conditions Pregnancy Arthritis Breast Cancer COPD Depression Are There Any Other Benefits? Large Manufacturer Measured Health and Absence

27. Health Management Absence Management Catastrophic Case Management • Environment • Internal • External Chronic Disease Disease Management Acute Illness Decision Support Health Status At Risk HRA/Risk Reduction Well Prevention Polices &Procedures Behavior Change Plan Design Communication Analysis HPA EIM Other Benefits Suggest Linking HPM and Absence Management

28. $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Risk Reduction Chronic Disease Mgmt. Improved Self-Care High Cost Case Mgt. Lost Productivity $13,837 $6,570 $0 $3,722 Lost Time $0 $1,755 $0 $775 Medical $2,210 $5,399 $816 $2,967 Are There Any Other Benefits?Savings Opportunity Can Be Great Actives Estimated 5-Year Savings by Intervention Area ($000s) Total: $38.1 million

29. Closing Thoughts • Simply providing health care coverage is not the same as promoting optimal health and well-being • “Its not about health benefits, its about a healthy workforce” • Proven programs yield savings and ROI

30. Closing Thoughtscontinued • An effective health and productivity management strategy: • Combines benefit design with health promotion, disease prevention, self-care management, and disease management • Integrates with prescription drug management and absence management strategies • Uses behavioral change theory in communications and interventions to maximize results

31. An effective health and productivity management strategy COMMUNICATION Policies & Procedures Medical and Disability Benefit Design Demand Management Health Promotion Employee health becomes an asset for a highly productive work environment. Absence Management Rx Behavioral & Physical Health Disease Management An Integrated Approach