Wellness as Corporate Growth Strategy<br />Presented to: SZ Architects <br />23th March, 2009<br />GLOW – The New Age of Total Wellness Conference<br />Dr. PawelSuwinski<br />13th May, 2010<br />
The Claim – Need for New Business Model <br />2<br />Significant opportunity exists to reduce long term cost of health benefits by improving productivity through appropriate health management programmes. <br />Aligning employee health management with corporate strategic plans creates competitive advantage as healthier employee is more productive. <br />Traditional viewof corporate health as direct costs is hurting profitability, therefore new business model for managing employees health is needed. <br />Reality<br /><ul><li>Poor health = productivity loss
Indirect cost are twice more expensive than direct medical costs
Engaged</li></li></ul><li>The Situation – Companies are Paying for Poor Health <br />3<br /><ul><li>Employers continue to increase spending on healthcare benefits by addressing symptoms rather than the causes of poor health.
Corporate healthcare management programmes are retrospective and fragmented in nature causing further financial outlays due to productivity loss.
As a Result, The cost of poor health is driving corporate profits down. In the long run, the economy is not going to be sustainable.
Despite growing expenditure on employees’ healthcare, the workforce is not getting healthier. There is no correlation between healthcare expenditure and productivity.
On average, business share of total nations’ (US) health expenditures is 25%
Up to 50% of corporate revenues is spent on managing employees’ ill health as direct and indirect costs and is rising.
Productivity costs due to poor health estimated at twice direct costs
50% of medical costs are preventable by lifestyle adjustments
75% of all medical costs are caused by chronic diseases best prevented and treated by lifestyle adjustments </li></li></ul><li>The Big Picture - The Economy of Disaster<br /><ul><li>The cost of employees' healthcare dangerously eats up into corporate profits. In the long run, the economy is not going to be sustainable.
The pool of productive workforce is decreasing: work starting age is moving up, the retirement age stays the same.
There is more outflows from GDP on healthcare than inflows: The age of chronic and debilitating diseased is moving downwards. </li></ul>4<br />
Demands of present day work affect negatively the health of the workforce - Stress</li></li></ul><li>How did it Happen?<br />We live Longer<br />We live Unhealthier<br />Obesity<br />Habits<br />We live Unhappier<br />Depression<br />7<br />
Wellness to the Rescue<br />50% Percent of all diseases can be avoided and prevented by lifestyle changes<br />Only 31% of healthcare expenditure in organisation is spent on direct medical costs<br />69% of medical costs are due to productivity loss<br />50% of all medical costs can be saved with integrated and comprehensive health management. <br />9<br />
The Anatomy of Corporate Healthcare Costs: by Visibility<br />10<br />Source: An Unhealthy America: The Economic Burden of Chronic Disease, The Milken Institute Center for Health Economics<br />75% caused by Chronic Diseases that are preventable<br />Source: Integrated Benefits Institute, 2002<br />
The Anatomy of Employers’ Medical Cost<br />11<br />Source: Hemp, P. (2004). Presenteeism: At Work—But Out of It. Harvard Business Review, 82(10), 49-58. <br />Only a small portion of total health care costs are direct: medical, pharmaceutical, and worker’s compensation (STD and LTD)<br />The majority of health related costs faced by organizations are indirect, e.g. presenteeism (being at work, but not being fully functional), absenteeism. <br />Presenteeism and absenteeism are used to measure productivity losses that are related to personal and family health problems, stress, unhappiness. These can cost employers $1685 per employee per year, or $225.8 billion annually (US 2004).<br />
Cost of Presenteeism & Absenteeism in US<br />12<br />
The Anatomy of corporate healthcare Costs: by Aetiology/Causes<br />13<br />
Cost of Absenteeism<br />14<br />Mean productivity loss for those at low risk and those at risk. All differences were significant based on independent samples t tests, P < 0.001.<br />Journal of Occupational & Environmental Medicine. 51(3):283-295, March 2009.<br />DOI: 10.1097/JOM.0b013e31819eaac0<br />Percentage with high absenteeism rates.<br />The Impact of Behavioral Health Risks on Worker Absenteeism.<br />Journal of Occupational & Environmental Medicine. 43(4):347-354, April 2001.<br />
The anatomy of corporate healthcare Costs: Risk Factors<br />15<br />Days of Absence<br />Worker’s Comp<br />STD Claims<br />Medical Cost by age and Risk<br />Source: University of Michigan Health Management Research Center<br />
The anatomy of corporate healthcare Costs: Risk Factors<br />16<br />Total Medical Cost by Risk Costs and Age <br />Excess Cost incurred due to present 5+ risk factors<br />Excess Cost incurred due to present 3 - 5 risk factors<br />Base Cost – possible actual cost of health when CHM is implemented<br />When the cost excess, from risk factors, is consolidated the potential savings are visible as the stacked red and green columns on top of Blue column. The Blue Column represent the actual cost of corporate medical coverage, which is unavoidable. It represents only between 16% - 20% of the total medical cost. By using CHM organisations could obtain up to 80% of savings.<br />Edington. AJHP. 15(5):341-249,2001. & University of Michigan Health Management Research Center – Presented by Michael Kelly<br />Director Health & Wellness Services ,HealthCheck360°, 23/07/2009<br />
Show Me the Money <br />17<br />For every Ringgit Malaysia lost to total medical costs more than 50sen (50%) could be easily prevented (recovered) by wellness interventions. <br />Currently, the average employee’s direct medical cost is around RM 1,200.00/year and this constitute the 30% of the total medical costs. RM 2,800.00 is lost to indirect medical costs in the form of loss productivity caused by presenteeism and absenteeism. <br />The total savings achieved by implementing corporate health management programme will amount to at least RM 2,000.00/employee/year. <br />
Wellness Concept & Functional Market Segmentation<br />Wellness can be defined as physical state of good health as well as the mental ability to enjoy and appreciate being healthy and fit. It is an active process of becoming aware of and making choices toward a more rewarding and fulfilling life. Process means that improvement is always possible. Aware means that we are continuously seeking more information about how we can improve. Choices mean that we consider a variety of options and select those in our best interest. Success is determined by each individual to be their collection of life accomplishments. <br />PHYSICAL WELLNESS: perception and expectation of physical health.<br />SPIRITUAL WELLNESS: positive perception of meaning and purpose in life.<br />SOCIAL WELLNESS: perception of having support available from family, friends, or co-workers in times of need and a perception of being a valued support provider.<br />EMOTIONAL WELLNESS: possession of a secure self-identity and a positive sense of self-regard; also the ability to cope with and/or improve unpleasant mood states.<br />INTELLECTUAL WELLNESS: perception of being internally energized by an optimal amount of intellectually stimulating activity.<br />ENVIRONMENTAL WELLNESS: positive perception of the environment that one works and lives in.<br />21<br />
22<br />Medical/Hospital Management<br />How Wellness Works<br />HRA and Lifestyle changes to prevent risk factors<br />Wellness<br />HRA and Lifestyle adjustments to prevent progression of risk factors to disease<br />Catastrophic<br />30%<br />3%<br />Lifestyle adjustments to augment medical treatment in order to arrest/delay disease progression<br />High Risk<br />50%<br />17%<br />People<br />$$$<br />Lifestyle adjustments to augment medical treatment to <br />facilitate fast recuperation<br />40%<br />Moderate Risk<br />17%<br />Wellness programmes reduce medical costs by preventing the occurrence of poor health that negatively impact productivity. <br />HRA is the single most important tool used in wellness programmes to determine the pre-existing conditions that make person vulnerable to poor health.<br />40%<br />3%<br />Healthy / Low Risk<br />Illness<br />
Integrated Health Management – Break The Chain<br />24<br />Turn health into a viable business strategy by investing in your most valuable assets through Integrated Health Management (IHM).<br />Spending on employee health should be a long term investment that will support he corporate growth.<br />To fully capitalise on the strategy and achieve best possible outcomes the organisation should:<br /><ul><li>Make the IHM a corporate strategy with full senior management commitment
Higher professional Health Management Organisation to manage the programme
Monitor closely outcomes to determine gaps in achieving objectives</li></ul>The IHM should have the following characteristics:<br /><ul><li>Comprehensive (Illness + Wellness focus)
Present Best Practices in Providing Corporate Wellness Programmes<br />26<br />Association Between Nine Quality Components and Superior Worksite Health Management Program Results.<br />Terry, Paul; Seaverson, Erin; Grossmeier, Jessica; Anderson, David<br />Journal of Occupational & Environmental Medicine. 50(6):633-641, June 2008.<br />DOI: 10.1097/JOM.0b013e31817e7c1c<br />Fig. 1. Percentages of organizations that implemented program components by practice.<br />
Lower administrative costs</li></ul>Higher brand awareness<br />Ready obtainable health information<br /><ul><li>The market (customers) rewards companies with healthy work practices and social and ecological consciousness.
Ready obtainable health information on the health status of each employee or the entire organisation
Predictive and Preemptive health management further reducing health expenditure
Possible savings on insurance premiums on the healthy and light risk employee population: no pooling of costs</li></li></ul><li>Conclusion – Imagine That<br /> By implementing Comprehensive Health Management that include Wellness Programmes the organisation will create work environment in which people are healthy and motivated; productivity and profitability will increase. <br />The dream becomes reality<br />Employees coming to work an hour earlier <br />Taking short yoga, Tai-Chi, and meditation breaks to reduce stress<br />Enjoying organic food, fresh fruits and juices<br />Employees loving their job and the place they work<br />CEO and CFO are on long vacation<br />Your company is featured at the top of Fortune 100 list<br /> <br />29<br />
In Pursuit of Healthy Business Model - Definitions <br />30<br />Healthy Business Model is achieved when high profitability is associated with sustainability<br />Healthy Business Model = High Profitability + Sustainability<br />Profitability is the function of Lower Costs and High Productivity<br />Profitability = Costs X Productivity<br />Sustainability is the measure of maintainability<br />Sustainability = Loyalty X Durability<br />Healthy Business Model = ( Costs X Productivity) + ( Loyalty X Durability)<br />
Healthy Employee is a Competitive Business Advantage<br />31<br />The most essential and valuable assets (resources) of 21st century organisation, in knowledge economy, are employees.<br />In order to support healthy business model, employees need to have relevant skills, good health, and caring environment that fosters high loyalty and professional creativity/motivation. <br />Desirable Human Capital for Healthy Business Model<br /> (Relevant Skills X High Creativity/Motivation) + (High Loyalty X Good Health)<br />Employees’ Good Health is the central and essential quality that determines level of productivity <br />