The Methodology of HPM Measurement: Using ...

The Methodology of HPM Measurement: Using Examples from Fortune 500 Companies 1st Annual Health & Productivity Management Congress International Presentation July 31, 2007 Harris Allen, PhD Lecturer, Yale School of Medicine Principal, Harris Allen Group

Harris Allen Group, LLC 1

Focus Illustrated by a Question All things considered, how would you say health care expenses are looked upon at your organization – as a cost OR as an investment?

Exclusively as a COST 1

More as a COST 2

As much a More Exclusively COST as an as an as an INVESTMENT INVESTMENT INVESTMENT 4  5 3

Harris Allen Group, LLC

2

Results from a Recent U.S. Poll Employer Views of Health Care Spend 28.5%

Exclusively as a Cost

48.5%

More as a Cost As much a Cost as an Investment

18.5%

More as an Investment

Exclusively as an Investment

4.5%

N = a convenience sample of 79 human resource representatives from 76 companies participating in “Secrets to Healthier Workforce” Webinar, 8/05

0%

Conclusion In a pattern that is still widely held, these purchasers were rated as much more cost- than investment-oriented Harris Allen Group, LLC 3

Health and Productivity Management The Vision •

Value proposition Strategic investment in personal and environmental factors that ameliorate the impact of health on individual performance more than pays for itself

•

The “win-win” of HPM -- Employers: More productive employees & improved financial results -- Government & other non-employer purchasers: Improved social role performance & lower medical costs -- Employees / those insured: Better health and quality of life

Sources Allen & Sullivan: “Seeing the health in health care costs”, Harvard Business Review . February 2006, Allen & Sullivan: “Healthy human capital: An essential – and appreciable asset captures the eye of the c-suite” Health and Productivity Management. 5(2): 31-38, 2006

Harris Allen Group, LLC 4

Advancing this Vision in the Field Agenda for this Presentation I.

Develop the HPM business case for senior management

II. Discuss how measurement is being used to make this case, with illustrations provided by work in the field.

III. Conclude with some thoughts about portability of methods

Harris Allen Group, LLC

5

Presentation Agenda I. The HPM Business Case for Purchasers

6

Maximize the Value of Human Capital The New Strategic Imperative for Purchasers • Resurgent health care costs that defy efforts at cost control From 1999-2003, spending increased 39% for health insurance versus 14% for wages • Improving productivity: now a prerequisite in the marketplace -- Competition and the march toward greater globalization -- Congruence of public & private interests in better role performance -- Demographic changes: the aging baby boomer -- The changing nature of work itself

• Health: the largest unrealized source of competitive advantage -- Health: long under-appreciated as the “multiplier” of human capital -- Measurement breakthroughs that enable credible estimates of its value Harris Allen Group, LLC

7

The Case for HPM Three Keys for Engaging Purchasers •

The economic burden of illness Quantify the toll that poor health takes on organizational performance

•

Reduce this burden Identify promising areas for achieving reductions in this burden

•

Return on investment Programs with demonstrated efficacy for producing cost savings that exceed the costs of implementation

Harris Allen Group, LLC

8

Key #1: Economic Burden of Illness Quantifying the Total Impact of Health •

Direct costs -- Utilization and costs (group health & pharmaceutical) -- Work illnesses/injuries - Medical utilization (workers comp / disability)

•

Indirect costs -- Absenteeism: Time lost away from work -- Presenteeism: Impaired performance while at work -- Work illnesses / injuries: Substitute labor / turnover costs, lost wages

Conclusions • The total economic impact of health encompasses both direct & indirect costs. • While upward trend of direct costs is well known, indirect costs can be much larger Harris Allen Group, LLC

9

Documenting this Economic Burden Case Study: Dow Chemical Company • Global workforce: 43,000 Employees • Total Economic Impact (estimated): > $750m / yr -- Direct costs: $361m -- Indirect costs: $431m •

Senior management projection: -- Effective management of benefit costs could save $0.07/share by ‘08 -- Effective management of indirect costs would multiply this estimate

“Our predecessors inherently understood the correlation between employee health and corporate success. But we are now able to credibly quantify the impact of employee health on performance and to translate this to shareholder value. The numbers are helping bring the picture into clearer focus.” Andrew N. Liveris, President & CEO Harris Allen Group, LLC

10

Key #2: Reducing this Burden Target Areas for Intervention • The medical necessity / appropriateness of common procedures Up to 1/3 of all medical procedures performed in the U.S. may be of questionable benefit (RAND Health, 1995) •

Lifestyle-related health risks (e.g., obesity, smoking) -- Reduce the risk of those at high risk while keeping low risk employees at low risk -- As risks increase, costs increase and vice versa (Edington, 2003)

•

The course of chronic medical conditions (e.g., depression, asthma) Many experts agree that up to 50% of all health care conditions may be modifiable via health interventions now available in the marketplace (Partnership for Prevention, 2004) Harris Allen Group, LLC

11

Key #3: Return on Investment Health Management Programs • Blossoming variety of programs now available, including: -- Mixed disease models (e.g., Metabolic Syndrome) -- Customized blends (e.g, psychotherapy & drug therapy for depression) •

ROI results to date reflect the evolution of the field -- Aldana (2001): ROI of 3.5 to 1 (average for 70 studies) -- Chapman (2003): ROI of 5.93 to 1 (average for 42 studies) -- Goetzel et al. (2005): mixed results (44 studies)

•

For many organizations, the “case” is now good enough -- Savings from reduced presenteeism have yet to be incorporated -- While the evidence is not all in, the handwriting is on the wall -- Public & private sector purchasers are increasingly pushing forward Harris Allen Group, LLC

12

Presentation Agenda

II. Measurement: Charting the Course for Making the Business Case

13

Conceptual Model Being Used to Make the Business Case Implicit in Many Current Studies Health

Productivity Loss

Controls (Statistical)

Harris Allen Group, LLC

14

As Purchaser Requirements Become More Demanding … Conceptual Model is Becoming More Methodologically Precise Treatment Group Health Practices Health Outcomes

at Baseline

Health at Baseline

Control Group

 in Health Practices

Productivity Loss at

Health Practices at Baseline

Productivity Loss Outcomes

Baseline

Health Outcomes

Health at Baseline  in Health Practices

Controls (Statistical)

Intervention

Productivity Loss at Baseline

Productivity Loss Outcomes

Controls (Statistical)

Harris Allen Group, LLC

15

Populating this Model Data and Sources •

Claims

Group health databases Workers comp & disability databases Pharmaceutical databases

•

Company records

Absenteeism Payroll / personnel “Objective” productivity / widget counts

•

Self-report

Focus groups / cognitive testing Qualitative interviews Surveys (electronic; phone; paper & pencil) Objective

Since measurement error is invariably an issue, “triangulate” using as many different sources and types of data as resources allow. Harris Allen Group, LLC

16

Laying the Groundwork for Measurement - 1 Correlations from an In-house Normative Database

Meaning of High score

Presenteeism

Physical Health (+)

Mental Health (+)

(-)

-.36

-.30

Absenteeism

(-)

-.23

-.14

Accidents / injuries

(-)

-.12

-.04

(Lost Functional Capacity)

Lesson While health and productivity are associated, they are far from perfectly correlated. Measuring health does not mean you’ve measured productivity; both need to be assessed. Harris Allen Group, LLC

17

Laying the Groundwork for Measurement - 2 Presenteeism and Absenteeism as a function of Work Injuries 40

80

60

Overall Work Effectiveness (% Limited)

25 40

Controllable Absenteeism (# of hrs)

10 20

-5

None

>=1

0

Self-reported Accidents Lesson As evidenced by the strong associations between work injuries and presenteeism/ absenteeism, the different dimensions – though separate -- feed on one another. Adapted: Allen & Bunn, Journal of Occupational & Environmental Medicine, 2003, 47(7), 926-940

Harris Allen Group, LLC

18

Percent reduced Percent increased

Laying the Groundwork for Measurement - 3 Productivity Loss by Change In Number of Risks 2.0 1.0 0.0 -1.0 -2.0 -3.0 -4.0 -5.0 -6.0 2

1

0

Risks Reduced

1

2

Risks Increased

Lesson The finding that change in productivity follows change in risks means that productivity can be affected by health-related factors well before the filing of claims. Source: Burton, Chen, Schulz, Edington, Journal of Occupational & Environmental Medicine, 2005: 47(8), 769-777

19

Laying the Groundwork for Measurement - 4 Addressing the Doubts about Self-reports • Those unfamiliar w/ surveys are prone to suspect the accuracy

of self-reports, especially with respect to presenteeism • Can address this by examining presenteeism self-reports in relation to measures widely treated as indicative of productivity loss • Test association of self-reports with wide variety of adverse events when assessed retrospectively, concurrently and prospectively • Measures of adverse events (e.g., workers comp episodes) serving as criterion variables for this analysis of validity Harris Allen Group, LLC 20

The Validity of Self-Reports Self-Reported Work Limitations & Subsequent Adverse Events Absentee hours

≥1 WC claim

≥1 STD claim

> Median medical dollars

> Median prescription dollars

Numerical entries are odds ratios comparing those reporting limitations vs. those who did not; *=p