The Productivity Costs of Low Prevalence Diseases -- Expanding the View beyond Healthcare -- Thomas Parry, Ph.D. President Integrated Benefits Institute

New Employer Realities ACA: from implementation tactics to healthcare strategy Show the C-suite the value of improved workforce health Dead end: attempting to control claims costs in separate program silos Looking for best strategies to improve workforce health, reduce lost time and enhance productivity and impact business Limited data, time and dollars

Today’s Agenda Where are employers headed in health benefit design? How broadly do they need to think to have the “value” conversation? Can CFOs get anything more than healthcare cost? How can employers address the productivity loss of low prevalence, high-cost chronic health conditions?

Where Employers Started: Health as Cost of Doing Business Health Costs

Where Employers Started: Cost Shifting Health CostsPlan Design

Trying to Get on the Front End of Cost Treatment Health CostsPlan Design Chronic Health Conditions Health Risks

Including Business-Relevant Outcomes Treatment Health CostsPlan Design Chronic Health Conditions Health Risks Work Absence/Disability Work Performance Lost Productivity

Encompassing the Broadest View of Health Treatment Health CostsPlan Design Chronic Health Conditions Health Risks Work Absence/Disability Work Performance Lost Productivity EE Health Behaviors & Engagement Corporate Culture & Structure Business Performance Wellbeing

The True Costs of Health 10,000 life hospital system 81% female 46% between % professionals

Distribution of Costs (Employees Only)

Translating Lost Time into Lost Productivity Degree of difficulty in replacing workers Time-value of output Degree of working in teams ** Source: Sean Nicholson, Mark Pauly, et al., "Measuring the Effects of Work Loss on Productivity with Team Production," Health Economics 15: (2006).

The Opportunity Costs of Absence

Can CFO’s Get It?

MGM Mirage Case Study

IBI Health & Productivity Snapshot Results 1.8 lost days per FTE/Year 6.2 lost days per FTE/Year Lost worktime = 8 days per FTE/Year or $2,598 per FTE/Year in Lost Productivity

Lost-Time Improvement’s Impact on EBIDTA Reducing 1 lost day/FTE = $15 MM to EBIDTA* from Productivity Gains *Earnings before Interest, Depreciation, Taxes and Amortization

The Bottom Line Savings $15.0 MM Wall-Street Multiple 10.7X Outstanding Shares M Gain in Stock Price $.56/share Principal Owner (56%) $90 MM One Day of Productivity Improvement

Going Beyond the Medical and Pharmacy View

Health Conditions Evaluated Urinary and bladder conditions Diabetes Ulcers Cancer Skin cancer Coronary artery disease COPD Osteoporosis Congestive heart failure Rheumatoid arthritis Viral hepatitis

Short-Term Lost Time Costs Ave. STD costs = $4,800

When Does Short-Term Become Long Term? % reaching maximum STD benefits Ave. conversion rate = 4.8%

The Cost of Long-Term Absence

The Whole Picture of Lost Time $27,837 $21,812 $19,956 $19,179 $15,678 $14,146 $13,164 $11,782 $11,356 $8,818 $5,867 Ave. total costs = $12,200

What’s Important Depends on Where You Look Prevalence Urinary & bladder Diabetes Ulcer Cancer Skin cancer Coronary artery disease COPD Osteoporosis Congestive heart failure Rheumatoid arthritis Viral hepatitis

What’s Important Depends on Where You Look PrevalenceSTD Cost Urinary & bladderCancer DiabetesViral hepatitis UlcerRheumatoid arthritis CancerCongestive heart failure Skin cancerOsteoporosis Coronary artery disease COPD Diabetes OsteoporosisUlcer Congestive heart failure Skin cancer Rheumatoid arthritisCOPD Viral hepatitisUrinary & bladder

What’s Important Depends on Where You Look PrevalenceSTD CostLTD Cost Urinary & bladderCancerRheumatoid arthritis DiabetesViral hepatitisDiabetes UlcerRheumatoid arthritisCoronary artery disease CancerCongestive heart failure Osteoporosis Skin cancerOsteoporosisViral hepatitis Coronary artery disease Congestive heart failure COPD DiabetesCOPD OsteoporosisUlcerUrinary & bladder Congestive heart failure Skin cancer Rheumatoid arthritisCOPDCancer Viral hepatitisUrinary & bladderUlcer

What’s Important Depends on Where You Look PrevalenceSTD CostLTD CostTotal Cost Urinary & bladderCancerRheumatoid arthritis DiabetesViral hepatitisDiabetesViral hepatitis UlcerRheumatoid arthritisCoronary artery diseaseCongestive heart failure CancerCongestive heart failure OsteoporosisCancer Skin cancerOsteoporosisViral hepatitisDiabetes Coronary artery disease Congestive heart failureOsteoporosis COPD DiabetesCOPDCoronary artery disease OsteoporosisUlcerUrinary & bladderCOPD Congestive heart failure Skin cancer Ulcer Rheumatoid arthritisCOPDCancerSkin cancer Viral hepatitisUrinary & bladderUlcerUrinary & bladder

The Challenge of Population Health Data

Workforce Key Health Dimensions*  Financial (cost)  Program participation  Biometric screening  Health risks  Utilization  Preventive care  Chronic conditions  Lost worktime  Lost productivity  Employee engagement * Thomas Parry and Bruce Sherman, A Pragmatic Approach for Employers to Improve Measurement in Workforce Health and Productivity, Population Health Management, Vol. 15, No. 2, 2012

Dimensions & Dashboard Metrics DimensionSummary Metric Financial Program cost/EE Program participation EEs participating/All EEs Biometrics EEs reaching target/All EEs Health risks # of health risks/EE Utilization # EEs getting care/All EEs Preventive care # EEs getting screened/All EEs Chronic conditions # EEs w/ chronic conditions/All EEs Lost worktime # of lost workdays/EE Lost productivity Lost productivity $/EE Employee engagement Engagement score/EE

The Temporal Dimension Leading indicators Health risks Biometrics Chronic condition prevalence Treatment indicators Preventive care EE engagement Health services utilization Program participation Lagging indicators Financial Lost worktime Lost productivity

Thinking about Metrics as Hierarchically Dashboard metrics Component metrics Contributing metrics

Key ER Issues & IBI Resources Key employer issues  Narrow networks  ERs as advocates for prevention and adherence  Value-based designs  High deductible plans IBI available resources  A Broader Reach for Pharmacy Plan Design  Synergies at Work – Realizing the Full Value of Health Investments  Consumer-Directed Health Plans – Challenges to Managing Healthy and Productivity  Avoiding the Traps of Consumer-Driven Health Strategies – How Cummins and Kraft Foods Approach Health, Performance and Productivity

Guidance for Employers Work with your health plan/TPA to profile the medical & pharmacy costs for the full range of your workforce’s health conditions Ask your disability insurer/TPA to provide incidence, costs and duration in their reports for these conditions Bring the lost productivity discussion into internal conversations based on how your organization typically responds to long-term absence, and estimate reasonable costs for those responses Develop a plan to integrate data at the employee level across all health-related programs

For more information: Thomas Parry, Ph.D