The Productivity Costs of Low Prevalence Diseases

-- Expanding the View beyond Healthcare --

Thomas Parry, Ph.D.PresidentIntegrated Benefits Institute

New Employer Realities• ACA: from implementation tactics to healthcare

strategy

• Show the C-suite the value of improved workforce health

• 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 and impact business

• Limited data, time and dollars

Today’s Agenda

• Where are employers headed in health benefit design?

• How broadly do they need to think to have the “value” conversation?

• Can CFOs get anything more than healthcare cost?

• How can employers address the productivity loss of low prevalence, high-cost chronic health conditions?

Where Employers Started: Health as Cost of Doing Business

Health Costs

Where Employers Started: Cost Shifting

Health CostsPlan Design

Trying to Get on the Front End of Cost

Treatment

Health CostsPlan Design

Chronic Health

Conditions

Health Risks

Including Business-Relevant Outcomes

Treatment

Health CostsPlan Design

Chronic Health

Conditions

Health Risks

Work Absence/Disabilit

y

Work Performance

Lost Productivity

Encompassing the Broadest View of Health

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

The True Costs of Health

• 10,000 life hospital system

• 81% female

• 46% between 35-54

• 44% professionals

Distribution of Costs (Employees Only)

Distribution of Costs (Employees Only)

Distribution of Costs (Employees Only)

Distribution of Costs (Employees Only)

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).

The Opportunity Costs of Absence

Can CFO’s Get It?

MGM Mirage Case Study

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

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

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

Going Beyond the Medical and Pharmacy View

Health Conditions Evaluated• Urinary and bladder conditions• Diabetes• Ulcers• Cancer• Skin cancer• Coronary artery disease• COPD• Osteoporosis• Congestive heart failure• Rheumatoid arthritis• Viral hepatitis

Short-Term Lost Time Costs

Ave. STD costs = $4,800

When Does Short-Term Become Long Term?

% reaching maximum STD benefits

Ave. conversion rate = 4.8%

The Cost of Long-Term Absence

The Whole Picture of Lost Time

$27,837

$21,812

$19,956$19,17

9$15,678$14,14

6$13,164$11,78

2$11,356$8,81

8$5,867

Ave. total costs = $12,200

What’s Important Depends on Where You LookPrevalence

Urinary & bladder

Diabetes

Ulcer

Cancer

Skin cancer

Coronary artery disease

COPD

Osteoporosis

Congestive heart failure

Rheumatoid arthritis

Viral hepatitis

What’s Important Depends on Where You LookPrevalence STD Cost

Urinary & bladder Cancer

Diabetes Viral hepatitis

Ulcer Rheumatoid arthritis

Cancer Congestive heart failure

Skin cancer Osteoporosis

Coronary artery disease

Coronary artery disease

COPD Diabetes

Osteoporosis Ulcer

Congestive heart failure

Skin cancer

Rheumatoid arthritis COPD

Viral hepatitis Urinary & bladder

What’s Important Depends on Where You LookPrevalence STD Cost LTD Cost

Urinary & bladder Cancer Rheumatoid arthritis

Diabetes Viral hepatitis Diabetes

Ulcer Rheumatoid arthritis Coronary artery disease

Cancer Congestive heart failure

Osteoporosis

Skin cancer Osteoporosis Viral hepatitis

Coronary artery disease

Coronary artery disease

Congestive heart failure

COPD Diabetes COPD

Osteoporosis Ulcer Urinary & bladder

Congestive heart failure

Skin cancer Skin cancer

Rheumatoid arthritis COPD Cancer

Viral hepatitis Urinary & bladder Ulcer

What’s Important Depends on Where You LookPrevalence STD Cost LTD Cost Total Cost

Urinary & bladder Cancer Rheumatoid arthritis Rheumatoid arthritis

Diabetes Viral hepatitis Diabetes Viral hepatitis

Ulcer Rheumatoid arthritis Coronary artery disease Congestive heart failure

Cancer Congestive heart failure

Osteoporosis Cancer

Skin cancer Osteoporosis Viral hepatitis Diabetes

Coronary artery disease

Coronary artery disease

Congestive heart failure Osteoporosis

COPD Diabetes COPD Coronary artery disease

Osteoporosis Ulcer Urinary & bladder COPD

Congestive heart failure

Skin cancer Skin cancer Ulcer

Rheumatoid arthritis COPD Cancer Skin cancer

Viral hepatitis Urinary & bladder Ulcer Urinary & bladder

The Challenge of Population Health Data

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

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

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

Thinking about Metrics as Hierarchically

Dashboard metrics

Component metrics

Contributing metrics

Key ER Issues & IBI Resources• Key employer issues

Narrow networks ERs as advocates for prevention and adherence Value-based designs High deductible plans

• IBI available resources A Broader Reach for Pharmacy Plan Design Synergies at Work – Realizing the Full Value of Health Investments Consumer-Directed Health Plans – Challenges to Managing Healthy and

Productivity Avoiding the Traps of Consumer-Driven Health Strategies – How Cummins

and Kraft Foods Approach Health, Performance and Productivity

Guidance for Employers• Work with your health plan/TPA to profile the

medical & pharmacy costs for the full range of your workforce’s health conditions

• Ask your disability insurer/TPA to provide incidence, costs and duration in their reports for these conditions

• Bring the lost productivity discussion into internal conversations based on how your organization typically responds to long-term absence, and estimate reasonable costs for those responses

• Develop a plan to integrate data at the employee level across all health-related programs

For more information:

Thomas Parry, Ph.D.tparry@ibiweb.org415-222-7282