Synergies at Work: Realizing the Full Value of Health Investments

According to new research funded and published by the National Pharmaceutical Council, health benefits decisions based on the full value of improved health, including improvements in workforce productivity, lost time and medical costs, are essential in helping employers to select the best options for their health investments. Defining value for employers in this way could substantially transform the provision of health care benefits in the U.S. health care system.

The study, Synergies at Work: Realizing the Full Value of Health Investments, stresses what employers need in health care decision making, provides a framework for evaluating health-related investments, and supplements the analysis with case studies featuring eight employers. The paper was written by A. Mark Fendrick, MD, co-director of the University of Michigan Center for Value-Based Insurance Design (V-BID Center), and Thomas Parry, PhD, president, and Kimberly Jinnett, PhD, research director, both of the Integrated Benefits Institute (IBI).

“Employers can contribute greatly to the transformation of the health system by focusing on value and not simply on financing and who pays,” said Dr. Fendrick, who also authored the Value-Based Insurance Design Landscape Digest. “It is imperative that we move beyond the current paradigm of exclusively measuring medical offsets, and include measurement of the effects in increased productivity that accompanies improvements in health.”

For employers, and to a great extent the broader health care consumer population, impacts of health investments are traditionally measured in terms of medical costs and offsets alone.  This approach ignores value and potential return on investment from health-related productivity increases (including reductions in health-related work absence and disability and improved job performance) and enhanced quality of life for employees and their families. For employers, recognition of the additional human capital value of their health investments would help support initiatives to improve employee health and productivity.

With the more limited, traditional approach, employers generally undervalue the impact of improved health outcomes to businesses and their employees. According to IBI’s research-based modeling tool, the Full Cost Estimator, for a 10,000-life sample employer in the health care services sector, medical care costs amount to less than 30% of all health-related costs for workers. The remainder stems from wage-replacement payments and lost productivity from absence or reduced job performance from ill health. At the same time, IBI surveys of chief financial officers demonstrate potential acceptance for considering the human capital impacts of workforce health, but most employers have not developed actionable data on these non-medical costs.

“Including a measure of the economic benefits of good health that reflects the true costs of ill health and the full savings from health improvement would immediately allow decision-makers and payers to make better choices as to how much to invest in health care, prevention and wellness, as well as how to determine the specific services in which to invest,” said Dr. Parry.

The study notes that employers face challenges in gathering the right information needed to make decisions. To fully assess the impact of ill health and health-related interventions, employers need to incorporate evidence beyond medical claims data, such as intervention results, incidence and duration of workplace absence and disability, and validated self-report surveys, among other data.

“In today’s health care and economic environment, it is now more important than ever to understand the impact of health care decisions on workforce productivity,” said NPC President Dan Leonard. “This framework for evaluating health investments provides a useful tool to help employers and others invest wisely in health.”

Synergies at Work was released February 28 at the IBI/NBCH Health and Productivity Forum. Electronic copies are available online at http://www.npcnow.org/publication/synergies-work-realizing-full-value-health-investment; print copies can be ordered from NPC at [email protected].