The Business Value of a Healthy Workforce: Should Employers Pay or Play?

1. The Business Value of a Healthy Workforce --Should employers pay or play? -- Thomas Parry, Ph.D. President Integrated Benefits Institute

2. Todays agenda • The old vs. the new model of health • What’s really at risk for employers? • What’s the evidence say? • Can we convince the CFO? • Oh, yeah, what about the data? • What does it mean for employers to pay or play?

3. New Employer Realities Show the C-suite the value of improved workforce health Healthcare reform: the value of a healthy workforce or the cost of healthcare? Dead end: attempting to control claims costs in separate program silos Looking for best strategies to improve workforce health, reduce lost time and enhance productivity Limited data, time and dollars

4. The Old Model of Health Plan Design Medical Treatment Claims Costs

5. The New Model of Health Health Behaviors Business Impacts Health Risks Work Absence Health Conditions Plan Design Work Performance Medical Treatment Claims Costs

6. What’s at Risk for Employers?

7. The True Costs of Health • 10,000 life manufacturing company • 70% male • 25% of employees 55 years or older • 62% skilled/semi-skilled laborers

8. Health Costs – The “Traditional” View

9. Health Costs – The “Integrated” View

10. Health Costs – Adding Absence

11. Health Costs – Adding Lost Productivity

12. 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).

13. Full Cost Components 28% 48% 16%

14. Linking Healthcare to Productivity Outcomes

15. Going Beyond Medical & Pharmacy to Absence and Presenteeism

16. Co-Morbidity and Lost Time

17. Top 10 Health Conditions by Category

18. Impact of Co-Morbid Conditions on Lost Time

19. The CFO’s View of Health

20. MGM Mirage Case Study

21. IBI Health & Productivity Snapshot Results 1.8 lost days per FTE/Year Lost worktime = 8 days per FTE/Year or $2,598 per FTE/Year in Lost Productivity 6.2 lost days per FTE/Year

22. 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

23. The Bottom Line One Day of Productivity Improvement 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

24. IBI Research: Making Health the CFO’s Business

25. 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 CFOs suggest ways to measure productivity

26. Health’s Link to Financial Performance

27. What’s “Very Important” to Workforce Productivity Health

28. Strength of Health Culture

29. If You Work 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

30. Linking Health & Financial Performance: Putting Results in the CFO’s Terms Healthcare costs Sick days Turnover “Opportunity costs” Absence payments

31. Broad Information is Useful

32. … But Not Very Available

33. The Challenge of “Big Data” to Employers

34. The Three Key Data Questions for Employers What – What is the total health experience of the population of my employees? Where – Where in the organization are results coming from and what needs our attention? How – how can I take action to improve my results?

35. 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

36. Dimensions & Dashboard Metrics

37. 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

38. Thinking about Metrics as Hierarchies Dashboard metrics Component metrics Contributing metrics

39. Dimension: Lost Work Time

40. Dimension: Lost Work Time

41. Dimension: Lost Work Time

42. Dimension: Lost Work Time

43. For more information:Thomas Parrytparry@ibiweb.org415-222-7282