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© Copyright 2000 Rogers Media. The following article first appeared in the December 2000 edition of
BENEFITS CANADA magazine.
Raising the value of corporate health
A growing body of research helps plan sponsors make a business case for investing in employees'
health. The next step is CEO buy-in.
By Chris Bonnett
The argument for and against the employer's role in healthcare seems to always begin and end with money.
Common questions that are asked of workplace health advocates include: What's the program cost? What's the
payback? And more frequently these days, what's the cost of not doing anything at all? A singular focus on
cost, however, means that plan sponsors may miss the big picture.
Health is an investment, one that delivers meaningful returns to the organization over time. This is no
longer an idealistic vision, or an impossible business case to make. The tools, corporate case studies and
templates, that many employers think still need to be discovered, are in fact already available as more
plan sponsors are making a strong business case for wellness in the workplace.
The challenge for employers is to get the message right with an effective combination of leadership,
creative vision, committed players, as well as an implementation plan that includes program evaluation.
Success in any organization today is dependent on high-quality thinking. Plan sponsors need to balance
business demands for innovation and competitiveness, with a plan and actions that sustain a human resource
advantage over the long term. Certainly healthcare cost matters, and we know this issue isn't going away.
But return on investment is a more appropriate measure, since it considers not only what the organization
spent, but what it gained from that spending.
The fact is that health is a significant expenditure. Yet, ironically with all the focus on the bottom-line
of programs, expenses usually sit unmanaged in organizational silos.
Reports by KPMG (now Watson Wyatt), Statistics Canada and the Canadian Institute for Health Information (in
the 1999 Maclean's Health Report) indicate employer-sponsored benefits, on average, account for 13%
of an organization's total payroll. Meanwhile, absenteeism costs 3% of total payroll expenditures, with the
average level of absenteeism at 7.8 days per employee per year.
Tax waste is another problem. "It is often estimated that as much as 40% of healthcare funding is used in
inappropriate or unnecessary ways," says Dr. John Millar, vice-president of the Canadian Institute for
Health Information, quoted in the 1999 Maclean's Health Report.
Up until recently, Canadian employers could take comfort knowing that most catastrophic health obligations
were in the hands of government. But it is becoming apparent today that many of the tax dollars that pay
for healthcare (over $80 billion this year) are used in duplicate or ineffective services such as tests and
x-rays that do not alter the health status of individuals.
Organizations, of course, contribute a portion of those taxes, as well as several billion dollars in
various private benefits programs.
On top of this, the working wounded--or employees who are not functioning at full capacity due to unmanaged
physical or mental health ailments but still show up for work--averaged 11.5% of payroll.
This is based on a study of 564 bank call centre workers (published in the Journal of Occupational &
Environmental Medicine) using a measurement tool known as the Worker Productivity Index reveals that
although productivity losses averaged over four hours per worker a week, the rates were much worse for
certain health conditions. Over 13 hours per week were lost for mental health conditions and 16 hours were
lost to a number of digestive system failures. Add these health-related costs up and you get over 27% of
payroll at stake, even without including Workers' Compensation.
In addition, many studies conclude that stress and depression are associated with physical ailments.
Clearly, effective organizational solutions must address the entire person and the whole of the workplace.
Surprisingly, not many organizations have compiled, let alone evaluated, their cost obligations, according
to the Conference Board of Canada. Employers rarely know how much is spent on healthcare, and even those
who collect the numbers have little confidence in their accuracy or completeness.
One undisputed fact is that health expenditures are rising. The per capita health costs of seniors are over
three times that of people age 45 to 64, and the number of seniors will grow by 20% to 50% of the
population in the next 20 years, according to the Canadian Medical Association (CMA).
Meanwhile, the OECD projects that if the cost of healthcare grew just 1% faster than real gross domestic
product (GDP), public health costs in Canada would double to almost 14% of GDP over the next 30 years. A
1997 report by Brogan Inc. reveals the annual cost per claimant jumps dramatically with each decade of
additional life. It's clear that upward and accelerating pressures on costs will be with us for some time.
The CMA report noted the importance of cost management, but it emphasizes that a host of other issues in
the healthcare world must also be better managed. These include the adoption of technology, labour force
mobility and flexibility and consumer demand management, to name a few.
The fiscal picture isn't going to get any healthier in the future. In addition to these specific cost
pressures, there are a number of other concerns on the horizon. They include:
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Demographic factors and rampant consumerism.
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New Canadian Institute of Chartered Accountants post-retirement benefit accounting rules.
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Lagging government health policy and programs.
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Drug-related pressures that are expected to arise from the Human Genome Project and the development of
direct-to-consumer prescription advertising.
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Pressure for new employer-paid benefits, including home and long-term care.
Consumerism in healthcare services means customer service, autonomy in decision-making, accountability,
process quality and outcomes management. The employer market requires highly customized group benefits
plans, but individuals, either alone or in special interest groups, present an even more divergent and
fragmented set of demands. The challenge for plan sponsors will be to take a constructive approach that
looks beyond their own turf to other industries and even countries.
Terry Sullivan, president of the Institute for Work and Health, convincingly argues the real workplace
drivers of health and illness are: technological change; organizational and management practices; job
structure and design; as well as individual characteristics and behaviour.
This presents an interesting framework in which to consider the factors influencing poor health. While this
may come as a surprise to many plan sponsors, these drivers may in fact be organizational in nature.
In other words, health status is not driven by the health system. Looking at the big picture, it's evident
that social structures such as the education system, environmental practices and community support services
can all affect health even more than our medical professionals, medications and institutions.
Many employers don't think about their role in the health system. This is reasonable, considering most
organizations are focused on running their core businesses. On the other hand, based on the insights
already outlined, perhaps plan sponsors should be more concerned about their role in creating health, and
avoiding unnecessary illness among their employees.
On a corporate level, organizational practices can help employees far more than having the best drug plan
or the richest disability benefits. Numerous studies and practical applications illustrate that factors
such as individual job suitability, control and autonomy, conflict with peers or supervisors and rewards
relative to workload have a significant impact on mental and physical health, and are controllable by
employers. The Institute for Work and Health has published considerable research that warrants looking
closely at all of these organizational health cost drivers.
Plan sponsors and benefits specialists are learning that simply controlling direct health costs doesn't
mean they are really managing the total health bill. Health Canada's 1997 Burden of Illness study
reported that the indirect costs of poor health were twice the combined direct costs of both public and
private payers at that time.
The reality for Canadian employers is that poor human resources management practices, along with a failure
to integrate cost sources across budget centres, increases or disguises the real cost of labour. Solutions
are often well-hidden, tied up in procedures, traditions and turf wars, but the outcome is the same--higher
costs and lower health status.
Managing direct costs is necessary. Managing indirect costs is even better. But neither effort is enough to
make real improvements in productivity and other business markers of sustainable success. To achieve these
goals, employers must start looking at health as a worthy investment in employees, and essential to their
business success.
Chris Bonnett is president of Toronto-based H3 Consulting. bonnett@sympatico.ca.
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Strategies for successful healthcare management
Over the last couple of years, there have been some innovative and effective approaches to examining
employee well-being and tying it to business success. From these case studies and other research, it is
possible to identify the essential features of successful investments in managing the health of a company's
human resources.
B.C.-based Telus has developed a human resources health strategy based on quality management systems. Telus
first developed its overall business strategy and then proceeded to identify and resolve the health-related
issues that stem from the strategy.
Workplace health issues are identified early on and solutions are aligned with business needs. Good absence
statistics and health management have helped reduce absences by 25%. In addition, a flu immunization
program has reduced the portion of absences exceeding five days by about 30%
Here are a few other strategies that other organizations have found sucessful:
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Executive leadership initiates and helps sustain change. Most organizations need a combination of
top-down and bottom-up approaches to drive health management strategies. The argument is basic in
concept, but much more complex in execution: mental and physical health create a sustainable
competitive advantage and is a key driver of business success.
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Integrated information and dismantling financial silos allow a complete assessment of healthcare costs.
Think how many people and departments in most large organizations (and their unions) have a hand in
managing absence and disability. Ideally, one outcome will be to consolidate responsibility for
managing the health indicators of the organization.
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Prioritize change management using proven employee behaviour drivers. This begins with a needs
assessment and focuses on balancing control and demand, as well as effort and reward as perceived by
employees.
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Develop practical plans and clear objectives using data from various sources to know what works and
why. This requires a built-in program and policy evaluation mechanism, something that is lacking in
most planning exercises.
A realistic, well-managed, long-term investment in an integrated healthcare strategy can create a healthier
work environment and drive business success. There is indeed a relationship between employee health and
employee satisfaction that generates gains in customer loyalty, revenue, profitability and productivity.
However, this requires employers to move beyond a cost-only focus to consider the needs and impact of the
entire organization, assess both physical and mental health indicators, demonstrate gains to executives and
communicate to employees the value of their work. This is not easy, but the tools and expertise are out
there. The challenge is to stay focused on the future, while delivering better health and improved
performance one step at a time.
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