Presented to: SZ Architects

23th March, 2009

GLOW – The New Age of Total Wellness Conference

Wellness as Corporate Growth Strategy

Dr. Pawel Suwinski

13th May, 2010

Focused on

Direct Costs

Focused

on

Health

Focused on

Wellness

The Claim – Need for New Business Model

2

Significant opportunity exists to reduce long term cost of health benefits by improving productivity through appropriate health management programmes.

Aligning employee health management with corporate strategic plans creates competitive advantage as healthier employee is more productive.

Traditional view of corporate health as direct costs is hurting profitability, therefore new business model for managing employees health is needed.

Reality– Poor health = productivity loss– Indirect cost are twice more expensive than direct medical

costs– Global employees need to be:

• Healthy• Well trained• Engaged

The Situation – Companies are Paying for Poor Health

3

• Employers continue to increase spending on healthcare benefits by addressing symptoms rather than the causes of poor health.

• Corporate healthcare management programmes are retrospective and fragmented in nature causing further financial outlays due to productivity loss.

• As a Result, The cost of poor health is driving corporate profits down. In the long run, the economy is not going to be sustainable.

• Despite growing expenditure on employees’ healthcare, the workforce is not getting healthier. There is no correlation between healthcare expenditure and productivity.

• On average, business share of total nations’ (US) health expenditures is 25%

• Up to 50% of corporate revenues is spent on managing employees’ ill health as direct and indirect costs and is rising.

• Productivity costs due to poor health estimated at twice direct costs

• 50% of medical costs are preventable by lifestyle adjustments

• 75% of all medical costs are caused by chronic diseases best prevented and treated by lifestyle adjustments

4

The Big Picture - The Economy of Disaster

• The cost of employees' healthcare dangerously eats up into corporate profits. In the long run, the economy is not going to be sustainable.

• The pool of productive workforce is decreasing: work starting age is moving up, the retirement age stays the same.

• There is more outflows from GDP on healthcare than inflows: The age of chronic and debilitating diseased is moving downwards.

5

Why Wellness?

Healthcare Paradigm Change

6

Underlying contributing factors of the “Top 5”– Obesity– High blood pressure– High cholesterol– Smoking– Poor Diet

80% of our costs driven by 20% of employees – Heart disease – Diabetes– Depression– Cancer– Asthma

Causes of Poor Health:

• Ageing– Extended Professional Life

• Increased Chances of Chronic and Age related Diseases

• Changing Disease Patterns– Chronic– Lifestyle Induced

• Demands of present day work affect negatively the health of the workforce - Stress

7

How did it Happen?

– We live Longer

– We live Unhealthier• Obesity• Habits

– We live Unhappier• Depression

1996 20060%

5%

10%

15%

20%

25%

30%

35%

4.40%

14.00%13.40%

33.80%Obesity Prevalence in Malaysia & US I 0ver 10 years period

Malaysia US

2000 20090

0.5

1

1.5

2

2.5

012345678

Ageeing Statistics - Malaysia

Number of older People % of Total Population

Mill

ions

%

8

Is Wellness for Real?

9

Wellness to the Rescue

– 50% Percent of all diseases can be avoided and prevented by lifestyle changes

– Only 31% of healthcare expenditure in organisation is spent on direct medical costs

– 69% of medical costs are due to productivity loss

– 50% of all medical costs can be saved with integrated and comprehensive health management.

The Anatomy of Corporate Healthcare Costs: by Visibility

10

Medical Costs

Direct = 31%

Medical Costs

Workers Compensation

- Salary Continuation

Indirect = 69%

Lost Productivity:- Absenteeism - Presenteeism

Employee & Customer Dissatisfaction:- Turnover + Temporary Staffing- Poor Quality

Replacement Workers:- Training Interim Employee- Administrative re-work

75% caused by Chronic Diseases that are preventable

Source: Integrated Benefits Institute, 2002

Source: An Unhealthy America: The Economic Burden of Chronic Disease, The Milken Institute Center for Health Economics

The Anatomy of Employers’ Medical Cost

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Only a small portion of total health care costs are direct: medical, pharmaceutical, and worker’s compensation (STD and LTD)

The majority of health related costs faced by organizations are indirect, e.g. presenteeism (being at work, but not being fully functional), absenteeism.

Presenteeism and absenteeism are used to measure productivity losses that are related to personal and family health problems, stress, unhappiness. These can cost employers $1685 per employee per year, or $225.8 billion annually (US 2004).

Source: Hemp, P. (2004). Presenteeism: At Work—But Out of It. Harvard Business Review, 82(10), 49-58.

Cost of Presenteeism & Absenteeism in US

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Migraine434,385

Arthritis865,530

Chronic Lower Back Pain858,825

Allergies1,809,945Asthma

259,740

Acid Reflux Disease582,660

Dermatitis610,740

Flu607,005

Depression786,600

Cost of Presenteism in USD p/a in 2006

13

The Anatomy of corporate healthcare Costs: by Aetiology/Causes

Medical32%

Inactivity15%Poor Diet

11%

Obesity12%

Tobacco 30%

Causes of Diseases

Personal Illness35%

Family Issues21%

Entitlement14%

Stress12%

Personal Needs18%

Causes of Absenteeism

Migraine12.0%

Arthritis19.7%

Chronic Lower Back Pain

21.3%

Allergies59.8%Asthma

6.8%

Acid Reflux Disease15.6%

Dermatitis16.1%

Flu17.5%

Depression13.9%

Causes of Presenteeism

Cost of Absenteeism

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Mean productivity loss for those at low risk and those at risk. All differences were significant based on independent samples t tests, P < 0.001.

Journal of Occupational & Environmental Medicine. 51(3):283-295, March 2009.DOI: 10.1097/JOM.0b013e31819eaac0

The Impact of Behavioral Health Risks on Worker Absenteeism.Journal of Occupational & Environmental Medicine. 43(4):347-354, April 2001.

Percentage with high absenteeism rates.

The anatomy of corporate healthcare Costs: Risk Factors

15

Days of Absence Worker’s Comp STD Claims

Medical Cost by age and Risk

Source: University of Michigan Health Management Research Center

The anatomy of corporate healthcare Costs: Risk Factors

16

<35 35-44 45-54 55-64 65+0

5,000

10,000

15,000

20,000

25,000

1,247 1,515 1,920

3,3

66

4,3

192,025

2,741

3,6

01

5,4

45

7,2

68

3,4

32

4,1

30

6,6

64

9,2

21

10

,09

5

5+ risks

3-5 risks

0-2 risks

When the cost excess, from risk factors, is consolidated the potential savings are visible as the stacked red and green columns on top of Blue column. The Blue Column represent the actual cost of corporate medical coverage, which is unavoidable. It represents only between 16% - 20% of the total medical cost. By using CHM organisations could obtain up to 80% of savings.

Excess Cost incurred due to present 5+ risk factors

Excess Cost incurred due to present 3 - 5 risk factors

Base Cost – possible actual cost of health when CHM is implemented

Total Medical Cost by Risk Costs and Age

Edington. AJHP. 15(5):341-249,2001. & University of Michigan Health Management Research Center – Presented by Michael KellyDirector Health & Wellness Services ,HealthCheck360°, 23/07/2009

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Show Me the Money

For every Ringgit Malaysia lost to total medical costs more than 50sen (50%) could be easily prevented (recovered) by wellness interventions.

Currently, the average employee’s direct medical cost is around RM 1,200.00/year and this constitute the 30% of the total medical costs. RM 2,800.00 is lost to indirect medical costs in the form of loss productivity caused by presenteeism and absenteeism.

The total savings achieved by implementing corporate health management programme will amount to at least RM 2,000.00/employee/year.

Possible Corporate Medical Cost Attribution in Malaysia

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69%31%

24%6%

1%

63% 6%

Indirect Costs = RM2,760 Direct Costs = RM1,240

Presenteeism = RM2,520

Absenteeism = RM240

LTD = RM40STD = RM240

Medical Costs = RM960

Total Employee Health Benefits = RM4,000

Possible Corporate Medical Cost Attribution in Malaysia

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69%31%

24%6%

1%

63% 6%

Total Employee Health Benefits = RM4,000

Indirect Costs = RM2,760 Direct Costs = RM1,240

Presenteeism = RM2,520

Absenteeism = RM240

LTD = RM40STD = RM240

Medical Costs = RM960

50% Savings = RM2,000

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How Wellness Works

Wellness Concept & Functional Market Segmentation

Wellness can be defined as physical state of good health as well as the mental ability to enjoy and appreciate being healthy and fit. It is an active process of becoming aware of and making choices toward a more rewarding and fulfilling life. Process means that improvement is always possible. Aware means that we are continuously seeking more information about how we can improve. Choices mean that we consider a variety of options and select those in our best interest. Success is determined by each individual to be their collection of life accomplishments.

PHYSICAL WELLNESS: perception and expectation of physical health.

SPIRITUAL WELLNESS: positive perception of meaning and purpose in life.

SOCIAL WELLNESS: perception of having support available from family, friends, or co-workers in times of need and a perception of being a valued support provider.

EMOTIONAL WELLNESS: possession of a secure self-identity and a positive sense of self-regard; also the ability to cope with and/or improve unpleasant mood states.

INTELLECTUAL WELLNESS: perception of being internally energized by an optimal amount of intellectually stimulating activity.

ENVIRONMENTAL WELLNESS: positive perception of the environment that one works and lives in.

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How Wellness Works

22

Catastrophic

High Risk

Moderate Risk

Healthy / Low Risk

3%

17%

40%

40%

30%

50%

17%

3%

People $$$Well Person

50%

Well Person with Risk Factors

30%

ChronicDiseases

15%

Acute Diseases

5%Illness

Wellness

Med

ical/H

ospi

tal M

anag

emen

t

HRA and Lifestyle changes to prevent risk factors

HRA and Lifestyle adjustments to prevent progression of risk factors to disease

Lifestyle adjustments to augment medical treatment in order to arrest/delay disease progression

Lifestyle adjustments to augment medical treatment to facilitate fast recuperation

Wellness programmes reduce medical costs by preventing the occurrence of poor health that negatively impact productivity.

HRA is the single most important tool used in wellness programmes to determine the pre-existing conditions that make person vulnerable to poor health.

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What Next?

Unhealthy Behaviours

Health Risks

Chronic Diseases

Healthcare Costs

Integrated Health Management – Break The Chain

24

Turn health into a viable business strategy by investing in your most valuable assets through Integrated Health Management (IHM).

Spending on employee health should be a long term investment that will support he corporate growth.

To fully capitalise on the strategy and achieve best possible outcomes the organisation should:• Make the IHM a corporate strategy with full senior management commitment• Higher professional Health Management Organisation to manage the programme• Monitor closely outcomes to determine gaps in achieving objectives

The IHM should have the following characteristics:• Comprehensive (Illness + Wellness focus)• integrated risk reduction (HRA), • Employee incentives, employee accountability, • Electronic data capture and analysis (prospective BI)

Integrated Health Management

Corporate WellnessManagement

Corporate Medical Management

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Where Are We? Stages of Corporate Healthcare Wellness Services

1. Fragmented2. Selective3. Participatory4. Non-Strategic

Experimental Discovery Comprehensive

1. Fragmented2. Selective 3. Compulsory4. Strategic

1. Holistic2. Integrated3. Compulsory - Benefits4. Strategic5. Evidence Based

Stage 1 Stage 2 Stage 3

Present Best Practices in Providing Corporate Wellness Programmes

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Association Between Nine Quality Components and Superior Worksite Health Management Program Results.Terry, Paul; Seaverson, Erin; Grossmeier, Jessica; Anderson, David

Journal of Occupational & Environmental Medicine. 50(6):633-641, June 2008.DOI: 10.1097/JOM.0b013e31817e7c1c

Fig. 1. Percentages of organizations that implemented program components by practice.

27

Quo Vadis?

Wellness is Becoming Corporate Growth Strategy

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Decreased direct medical costsDecreased direct medical costs Increased productivityIncreased productivity

Higher brand awarenessHigher brand awareness Ready obtainable health informationReady obtainable health information

• Reduction of chronic and acute illness occurrence

• Reduction of insurance premiums for the healthy pool of employees

• Better Budgeting

• Reduction of chronic and acute illness occurrence

• Reduction of insurance premiums for the healthy pool of employees

• Better Budgeting

• Increased Productivity through elimination of non-illness caused absenteeism

• Increased productivity through decreased medical absenteeism

• Reduction in presenteeism• increased motivation of employees• Better retention of talents• Lower administrative costs

• Increased Productivity through elimination of non-illness caused absenteeism

• Increased productivity through decreased medical absenteeism

• Reduction in presenteeism• increased motivation of employees• Better retention of talents• Lower administrative costs

• The market (customers) rewards companies with healthy work practices and social and ecological consciousness.

• Enhanced company image – higher brand value

• The market (customers) rewards companies with healthy work practices and social and ecological consciousness.

• Enhanced company image – higher brand value

• Ready obtainable health information on the health status of each employee or the entire organisation

• Predictive and Preemptive health management further reducing health expenditure

• Possible savings on insurance premiums on the healthy and light risk employee population: no pooling of costs

• Ready obtainable health information on the health status of each employee or the entire organisation

• Predictive and Preemptive health management further reducing health expenditure

• Possible savings on insurance premiums on the healthy and light risk employee population: no pooling of costs

Conclusion – Imagine That

By implementing Comprehensive Health Management that include Wellness Programmes the organisation will create work environment in which people are healthy and motivated; productivity and profitability will increase.

The dream becomes reality

• Employees coming to work an hour earlier • Taking short yoga, Tai-Chi, and meditation breaks to reduce stress• Enjoying organic food, fresh fruits and juices• Employees loving their job and the place they work• CEO and CFO are on long vacation• Your company is featured at the top of Fortune 100 list 

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Sustainability = Loyalty X Durability

In Pursuit of Healthy Business Model - Definitions

30

Healthy Business Model is achieved when high profitability is associated with sustainability

Healthy Business Model = High Profitability + Sustainability

Profitability = Costs X Productivity

Profitability is the function of Lower Costs and High Productivity

Sustainability is the measure of maintainability

Healthy Business Model = ( Costs X Productivity) + ( Loyalty X Durability)

Healthy Employee is a Competitive Business Advantage

31

In order to support healthy business model, employees need to have relevant skills, good health, and caring environment that fosters high loyalty and professional creativity/motivation.

The most essential and valuable assets (resources) of 21st century organisation, in knowledge economy, are employees.

Desirable Human Capital for Healthy Business Model

(Relevant Skills X High Creativity/Motivation) + (High Loyalty X Good Health)

Employees’ Good Health is the central and essential quality that determines level of productivity