It makes intuitive sense that when an employee is not at work because of an illness, injury or another issue, there is an impact on the company's productivity and, therefore, the bottom line. But what exactly is that impact? And, more to the point, how should companies mitigate that impact by keeping employees healthy and on the job?
While the questions appear easy, answering them is another matter. In order to fully understand the impact of health-related employee absences--and therefore the value of programs to promote health and productivity--companies need to use a variety of measures.
"The issue is why people are absent. One of the causes is often health status," says Dee W. Edington, director of the University of Michigan Health Management Research Center in Ann Arbor, Mich. "Either the person is sick or a family member is sick. So how do you influence health behavior and health status to reduce absenteeism? That leads to the question: What is the total value of health in the organization?"
Although there is an undeniable link between health and productivity, quantifying it can be difficult. As recent research has shown, to determine the costs associated with employee absenteeism, companies need more than a simple equation of salary earned and number of days absent. Nor can the cost be measured by the amount paid out in medical, disability or other claims.
Employee absences aren't cheap. A report, "How to Present the Business Case for Healthcare Quality to Employers," published two years ago, found that the estimated annual cost of workforce absences due to illness to be equivalent to $55 billion, assuming the cost of an absence is equal to the wage of the absent worker.
The report found the estimated cost is 35 percent higher ($74 billon) if one considers the spillover effect absences can have on the output of an entire team, through the impact of lost sales and overtime costs.
Sean Nicholson, associate professor in the Department of Policy Analysis and Management at Cornell University and one of the authors of the report, said employers need to translate employee absences into dollars--whether through their own studies or using multipliers available in current literature.
Once they estimate the cost of absence, companies can then weigh the cost of offering health and wellness programs. "The goal is trying to spend the 'efficient' amount of money on healthcare to the point that it no longer makes further improvement in your profitability," Nicholson says.
IMPORTANCE OF DATA BENCHMARKING
Companies cannot simply offer a menu of health programs and assume that they will improve employee health, reduce absenteeism and overall boost productivity overall. Data collection and benchmarking are critical in order to assess and compare actual results.
"Over the next decade, employers will face new, complex challenges in managing and improving the health and productivity of a drastically changing labor pool that is predicted to be the unhealthiest in generations," says Ron Finch, vice president of the Washington, D.C.-based National Business Group on Health.
"Escalating healthcare costs, an aging workforce, treatment- rather than preventive-care-focused delivery models and indifferent consumers all threaten the financial health and well-being of employers. The end result will be that senior management will demand credible and comprehensive solutions and interventions for health and productivity programs. To achieve this, integrated data from these programs are indicated."
NBGH's Council on Employee Health and Productivity, in collaboration with numerous sponsors, partners, Fortune 500 employers and their suppliers, has designed and implemented a program known as Employer Measures of Productivity, Absence and Quality, or EMPAQ.
EMPAQ allows employers and their suppliers to measure and evaluate the cost-effectiveness or quality in disability and absence management programs by using standardized definitions and metrics, which are supported by a common lexicon and platform for measurement through a training and certification program.
"Having a comprehensive and integrated approach to program measurement and evaluation, along with the right information to develop and implement solutions that support a company's workforce investment, is essential," adds Jim Curcio, EMPAQ project leader for NBGH.
BEYOND LOST WORKDAYS
Trying to quantify absenteeism, many employers start with the basics: Are employees on the job or not? Obviously, the more employees who are not on the job, the higher the number of lost workdays.
However, that is only one consideration. A broader workforce outcomes measure known as "labor force status" looks at the continuum of the employee population.
At one end of the continuum are those who are off work due to illness, injury or another cause. There is a middle group comprised of employees who are in various stages of returning to work after an illness or injury, including those who are covered by a disability management program such as early return-to-work, which provides transitional assignment or modified duties.
Next, there are the employees who are at work at their regular jobs but who for some reason--whether a health problem, family or personal issues, workplace stress or other cause--are not operating at their maximum productivity. For them, the issue is "presenteeism," meaning they are on the job but their output is reduced.
At the other end of the labor force status spectrum, there are workers who are considered healthy, fully functioning and productive.
With an understanding of the spectrum of labor force status, employers can then look at another work outcome, known as "worker role specific measures." These determine how employees' health status impacts their ability to fulfill work demands.
Using a return-to-work example, consider an employee who has been making $30 an hour. After an injury, the employee is brought back to work in a temporary assignment that is less physically demanding. That assignment would normally carry the wage of $15 an hour; however, the employee is being paid a full salary. The objective, then, would be to continually challenge that worker to increase the value of his or her contribution and to eventually return that employee to his or her regular job.
In addition to labor force status and worker role specific measures, other work outcomes and productivity gauges that should be taken into account include:
Equating employee absences with lost revenue, reduced profitability, higher costs for replacement workers and overtime, and so forth.
Evaluating an individual's health status role functioning--not just as it relates to work, but also how illness/injury affects the person at home and in the community, including his or her ability to perform activities of daily living.
By examining a variety of work outcomes and productivity measures, companies can more clearly see not only the negative economic impact of employee absences, but also the value of specific health and wellness services and interventions.
HEALTH AND WELLNESS
Most companies, especially large employers, offer a variety of programs ranging from intervening in cases of catastrophic illness or injury to managing chronic conditions, helping employees improve their heath, and promoting wellness and prevention.
To compare the costs of health-related absenteeism and the benefit of offering health and wellness programs, companies have traditionally looked at medical claims and pharmacy data. Edington, however, cautions that those reveal an incomplete picture.
He gives the examples of asthma, allergies, depression, migraines and irritable bowel syndrome, explaining that the impact of these conditions will not be adequately represented by medical claims and pharmacy data. However, data related to short-term disability and presenteeism more accurately reflect the costs and lost productivity associated with these conditions.
"You can imagine that stress drives absenteeism, as do family issues. There may not be an immediate healthcare cost--certainly not as high as costs associated with a heart attack," Edington explains. "Further, while only 3 percent of the average employee population has heart disease, there may be 30 percent who have back pain or allergies--conditions that drive disability and presenteeism, as well as those one- or two-day occurrences of absenteeism."
Even though it may be difficult to show an exact return-on-investment for health and productivity initiatives, many employers embrace the value of offering these programs, especially from a long-term strategic standpoint, given the aging of the workforce.
"Even if just one employee avoids or postpones a cardiac event, there is a significant savings--plus tremendous benefit to the individual, the person's family and also the employer," says Edwin Quick, a commissioner with the Carol Stream, Ill.-based Certification of Disability Management Specialists Commission. Quick is also leader of Employee Health and Productivity issues for General Electric Co. in Schenectady, N.Y.
Recognizing the value of wellness, Edington notes, requires a shift in thinking for employers that traditionally have "paid for sickness"--meaning shouldering all or some of the cost of medical claims.
"Companies want to continue to pay for sickness when it occurs, but also to pay for wellness," Edington says. "Companies will not be competitive in the world with unhealthy employees. They can only be competitive with healthy and productive people."
ROBERT HALL is a commissioner of the Certification of Disability Management Specialists Commission, principal of Presagia Inc., and director of the Work & Health Technologies Center at San Diego State University, where he teaches in the graduate Rehabilitation Counseling Program.
October 15, 2007
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