Health Management to Improve Employee Productivity

Posted September 25th, 2012 by Erin Carnish

It’s a simple but potentially paradigm-shifting reality for senior business leaders: Healthy employees lead to healthy business metrics.

Today many employers are turning to health management vendors and consultants to create and deliver a continuum of health and wellness. These programs are designed to reduce lifestyle-related health risks and the negative impact of chronic disease in their workplace. To establish the value of these programs, the health management industry has built a substantial body of evidence that demonstrates health and wellness programs do help businesses save on employee medical costs.

The reality is, for many business leaders outside of the C-level, a metric such as medical cost savings per employee is not widely known, let alone a business performance metric they are measured and incented against. Instead, many leaders measure the success of their business against key performance metrics like shareholder value, earnings multiples, revenue, gross margin and customer satisfaction. Consequently, business leaders may not champion employee health management programs because the reduction of employee medical costs is not a business objective for them. It’s time to think differently about how we demonstrate value depending on the stakeholder. Showing that health management programs have a direct impact on a business’s performance metrics not only holds the promise of creating more demand for these programs but also generates more acceptance for these programs.

Health Risks Linked to Productivity Loss

According to a recent Optum/GfK study, 89 percent of employers surveyed say that offering a wellness program is important to maximizing employee productivity. This comes as no surprise, given that a sizeable portion of the health management literature has demonstrated that as health risks increase, productivity decreases.

Researchers have found that health-related productivity loss costs employers substantially more than medical and pharmacy costs. Employee health problems lead to approximately 41 minutes of absence and 2 hours and 29 minutes of lost productivity each week, according to a study in the March 2006 issue of the Journal of Occupational and Environmental Medicine (JOEM). In any given workweek, that amounted to more time spent impaired while at work than being absent from the job, according to the study.

Other studies have explored how specific health risk factors such as cigarette and alcohol use, in addition to life and job dissatisfaction, have diminished productivity at great cost to employers.

Researchers have also underlined obesity as a major driver of absenteeism and contributor to increased productivity costs for employers, totaling an estimated $11.7 billion annually in the United States, according to a January 2011 study in JOEM.

The Value of Health Interventions

Health risk factors clearly lead to diminished productivity, and health management programs provide a key opportunity to increase employee productivity, while also decreasing medical spend per employee. However, the effect these programs have on key industry-specific business metrics is limited and more forward-looking research is needed to uncover the full return on investment potential.

Existing research shows that companies with top-tier health management programs reap considerable productivity-related returns. In fact, for every $1 spent on health management programs, absenteeism costs fell by about $2.73, according to a study by Harvard University published in Health Affairs in 2010. Firms with the most effective health and productivity programs saw 1.8 fewer days of absenteeism and lower levels of presenteeism and turnover, according to a report published by Towers Watson.

Firms with the most effective health and productivity programs are not only linked to higher work force productivity and lower rates of work loss, but also stronger business performance than their competitors. These firms experienced 28 percent higher shareholder returns and 11 percent higher revenue per employee—a difference of $132,000 in industry-adjusted revenue per employee, according to yet another report published by Towers Watson & National Business Group on Health.

Key Insights:

The above review of peer-reviewed studies and business publications demonstrates several key takeaways for business leaders:

  1. The prevalence of health risk factors in an employee population along with the implementation of comprehensive health management programs can have a substantial impact on both medical costs and employee productivity.
  2. To fully estimate the benefits of health management interventions, new research connecting the programs’ benefits to key business operating metrics is required. Current literature reviewed falls short on demonstrating the full extent to which such programs can influence key business performance metrics.
  3. To generate wider acceptance of health management programs among operational line managers within organizations, decision makers should consider other ways of communicating and connecting value beyond the C-suite-focused medical cost savings metric.

This article was featured in the Fall 2012 issue of Ignite magazine.