Health and Productivity Management: Investing in National Health and Competitiveness Healthy Lifestyle Forum | Moscow, Russia | 9 December 2013 Sean Sullivan, JD President & CEO Institute for Health and Productivity Management

Productivity – the Driving Force in Economic Progress Productivity drives the wealth, competitiveness and living standards of nations Keys to national, corporate and individual productivity are: – investment in developing a nation’s key resources – allocation of those resources to their most productive uses – effective management of those resources to produce competitive goods and services most efficiently

Evolution of Productivity and Economic Progress Economics historically identifies three kinds of resources behind productivity – Land/Labor/Capital Land and Labor were most important in the Agricultural Era Industrial Era made Capital the most important resource for productivity – Financial capital to develop large industrial enterprises – Physical capital of factories and machinery to produce goods – Mass production made individual labor less valuable

Evolution of Productivity (Con’t) Now the leading nations’ economies are moving into the “Post-Industrial” Era – or what Peter Drucker called the age of the “knowledge worker” – Financial and physical capital remain important (and so does land in rich natural resource economies like Russia) – But the value of financial and physical capital is in the form of new and improved technologies – of “innovation” Development and application of new technologies depends heavily on relatively scarce, highly skilled “labor” – now seen as human capital

New Era of Human Capital Economists have identified the components of human capital value – Knowledge and skills – “intellectual” capital – Tools – physical capital to work with – Motivation – “psychological” capital But an additional component that affects the productivity of all the others has been neglected until now -- and that is HEALTH People can be highly trained and skilled, equipped with the best tools, and strongly motivated – But unless they are healthy – or well – they will not be productive

Health is Wealth – the New Economic Imperative Management of human capital “assets” – including health – is a key to business and national economic performance – Training and education, new technologies and financial incentives and rewards remain important – But investing in better worker health is the new competitive advantage for companies and nations Health and Productivity Management – HPM – is the new model for systematically improving worker health to improve productivity – New tools enable us to measure the return on investments in health

HPM – the New Economic Value Model for Health Management requires measurement – “you cannot manage what you cannot measure” (Peter Drucker) Health and Productivity Management includes: – Collecting data on all health-related costs – medical spending as well as the economic cost of lost productivity – Targeting health investments on the most important health issues Reducing current costs of illness with disease management Controlling future costs by avoiding them with workplace wellness and prevention programs

Worker Health is an Asset – Not a Cost Issue is not the cost of keeping workers healthy – real issue is the cost of having unhealthy workers This cost is 2 to 3 times greater than the cost of medical care – in lost work time, but even more in the cost of “presenteeism” or lost productivity while at work – Physically/Mentally/Socially Landmark study from The Dow Chemical Company shows this cost of presenteeism to be enormous –2/3 of the total cost burden of chronic disease and about 7 percent of total labor costs

9 Medical, absence and work impairment costs associated with self- reported “primary” chronic conditions among Dow employees TOTAL COST OF CHRONIC HEALTH CONDITIONS AT DOW CHEMICAL Source: J. Collins, C. Baase, et al.. Journal for Occupational and Environmental Medicine, 6/05

The Impact of Lifestyle on Health Majority of chronic disease – or NCDs as defined by the World Health Organization – is preventable through healthy lifestyle behavior change – Five major behaviors affecting health Physical activity Nutrition Sleep Smoking Substance abuse #1 health issue related to lifestyle behaviors globally is the “metabolic syndrome” of risk factors connected with Type 2 Diabetes, obesity and cardiovascular disease

Worksite Wellness and the Metabolic Syndrome Worksite wellness programs have shown success in reducing the health risk factors of the metabolic syndrome – preventing future disease and reducing the lost productivity cost of presenteeism Institute for Health and Productivity Management has conducted multiple pilot programs that have done this for populations of workers by focusing on – Physical activity – Nutrition – Motivation – Peer support

Risk Factor Reduction City of Phoenix Eliminated risk factors –65% (212 / 328) –2.08 risk factors eliminated per participant Improved risk factors (not to goal) –32% (107 / 328) –3.84 risk factors improved but not to goal Eliminating 2 risk factors saves between $2300 and $2800 in medical costs annually

13 Productivity Gain – THE CITY OF PHOENIX All valid participants who took both WLQ surveys, regardless of risk factor changes 24.1% 13.3% 25.9% 28.2% 6.8% 18.6% 10.5% 11.1% 14.1% 3.7% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Time ScalePhysical ScaleOutput ScaleMental-Interpersonal Scale WLQ Productivity Loss Score Before MHIAfter MHI

HPM – Model for National Health and Competitiveness Worker health is a key component of human capital for national growth and competitiveness in the global economy Health as human capital has an economic asset value and is a driver of productivity gains in the work force Health can be systematically improved at the work site – and prevent future chronic disease Proven model for doing this is Health and Productivity Management – a national strategy for health, economic growth and competitiveness

The HPM Value Chain ™ Design benefits and programs To provide incentives To change behavior To reduce risks To improve health Which will impact medical costs and disabilities And improve functionality Which translates into enhanced worker productivity OUTCOME Improved corporate financial performance OUTCOME Improved corporate financial performance

Sean Sullivan, JD President & CEO Institute for Health and Productivity Management P: (00) E: THANK YOU