July 2007

Poor employee health a costly problem

A large multi-employer study shows that the full costs of poor health dwarf those of direct medical spending alone. The study shows that musculoskeletal problems, depression, fatigue and other workplace health conditions are significant contributors to healthcare costs.

The study, which appears in the July issue of the Journal of Occupational and Environmental Medicine (JOEM), suggests that U.S. employers may be significantly underestimating the overall costs of poor employee health, while failing to fully assess the diseases and health conditions that drive these costs.

Researchers found that “full cost” measures — that is, those that include health-related lost productivity costs along with direct medical spending — were four times greater than measures of direct medical spending alone at the four U.S. companies that participated in the study.

 “The real eye-opener in this study is just how big of an impact employee health has on the bottom line when both direct medical spending and productivity costs are combined,” said Ronald Loeppke, MD, MPH, one of the lead researchers. “In a widening global economy and with new pressure to be competitive, American businesses clearly need to revisit how they are measuring productivity.”

To gauge fully health-related productivity costs, researchers measured direct medical and pharmacy spending along with calculations of the monetary value of lost productivity when employees are absent or working at impaired levels (known as “presenteeism”).

The study notes that employers have not historically assessed costs in this way, preferring instead a “siloed” approach that seeks to manage single health-cost categories, such as medical visits or pharmaceuticals, through benefit-package design.

The four corporations that participated in the study include an industrial chemical manufacturer, a computer hardware manufacturer and two telecommunications and technology companies. More than 15,000 employees participated.

Researchers compared pharmacy and medical claims data to employee self- report productivity and health information collected through the Health and Work Performance Questionnaire (HPQ), developed by Ronald Kessler, PhD, and the World Health Organization as a part of the Global Burden of Disease Initiative. Information collected on employer business measures was combined with this database to model health-related lost productivity. Kessler is one of the authors of the JOEM study.

Accounting for medical costs plus both absenteeism and presenteeism represents a truer picture of the full cost that companies bear because of poor employee health.

For example: Using traditional “siloed” measures, the annual medical and drug costs of back and neck pain per 1,000 employees in studied companies is nearly $170,000. But when using a full-cost methodology that includes productivity measures, the figure rises to well over $500,000. Researchers noted that musculoskeletal problems are far and away the most expensive medical conditions for employers when considered in terms of full costs.

Researchers found that the four companies spent $2,375,115 on medical pharmacy claims for the conditions measured in the study. Productivity costs were calculated to be $10,307,057, more than four times greater than the medical and pharmacy claims costs.

Using the traditional view of assessing medical and drug costs alone, the study found that the top 10 health conditions driving costs in the studied companies were:

1. Cancer (other than skin cancer),
2. Back/neck pain,
3. Coronary heart disease,
4. Chronic pain,
5. High cholesterol,
6. GERD,
7. Diabetes,
8. Sleeping problems,
9. Hypertensionm and
10. Arthritis.

But when productivity costs were added using the HPQ assessment method, the top 10 cost-driving health conditions shifted to:

1. Musculoskeletal conditions,
2. Depression,
3. Fatigue,
4. Chronic pain,
5. Sleeping problems,
6. High cholesterol,
7. Arthritis,
8. Hypertension,
9. Obesity, and
10. Anxiety.

“The obvious conclusion is that companies who take the traditional siloed view are not getting the full story of their true health costs,” Loeppke said.

The American College of Occupational and Environmental Medicine (ACOEM) and the Integrated Benefits Institute (IBI), which helped organize the study, have both launched efforts that encourage employers to embrace the full-cost view of workplace health.

Many major corporations have already put health and productivity concepts into practice, with positive results.

Organizations coordinating the study include the American College of Occupational and Environmental Medicine, the Integrated Benefits Institute, Matria Healthcare, Inc., and the Harvard Medical School. Funding was provided by the National Pharmaceutical Council.

Source: National Pharmaceutical Council

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