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Connecting the Dots: Examining the Link Between Workforce Health and Business Performance

Published Online: February 19, 2014
Bruce W. Sherman, MD; and Wendy D. Lynch, PhD
Traditionally, employers have viewed health benefits as a cost of doing business. Benefits have served as a means to provide access to essential healthcare services, as well as an important consideration for employee recruitment and retention. With rising healthcare costs, employers have been forced to more closely scrutinize what has become a significant source of organizational expense. Some have reduced or eliminated healthcare benefits, or are considering paying the federal penalty and allowing their employees to join an exchange. Others are adopting progressive approaches such as account-based high deductible health plans, in an effort to control costs.

In light of the magnitude of the benefits expense, some employers have begun to more critically assess the value of business investments in workforce health. While workforce health status has been demonstrated to have a direct link to healthcare expenditures, absence, and presenteeism,1-5 several recent reviews and commentaries have brought into question the degree to which corporate efforts to improve health produce positive health or financial outcomes.6-8 Illness increases business expense, but there may be limits on the extent to which businesses can achieve and sustain improvements in the prevalence and severity of illness.

At the juncture of continued healthcare cost inflation and increased scrutiny regarding the impact of healthrelated investments, employers have a fiduciary duty to carefully examine the link between health and business outcomes. Currently, measurement of the perceived effect of workforce health appears limited to 2 fundamental dimensions— healthcare costs and lost productivity (including absence)—both of which are in the human resources (HR) domain. Although workforce health status has a plausible and potentially comprehensive impact on business performance, measurement of this broader dimension of value of business investments in health has not been well articulated.

While a number of factors have contributed to the current scenario, 2 in particular stand out. First, HR departments have generally been viewed by senior leadership as cost centers, with cost management as their primary priority. This has effectively restricted measurement of the business impact of health management to HR metrics. Second, it makes intuitive sense that improvements in workforce health status can favorably influence healthcare costs, as well as the potential for greater employer engagement and reduced turnover, leading to improved work quality and greater customer satisfaction and sales revenue. Disappointingly, supporting data are woefully lacking beyond the impact of workforce health status changes on healthcare expenditures—and even that relationship has recently been called into question. It would therefore seem prudent for employers to realize a greater level of understanding of the business impact of health. Doing so may help to more appropriately prioritize employer human capital investments toward those likely to create the greatest net organizational value.

The intent of this commentary is to help employers, plan sponsors, and payers expand their approach to quantifying and therefore better understanding the broader business impact of workforce health status. It is important to note that the intent of this commentary is not to assess the extent to which employer investments in health impact healthcare costs and lost productivity. As applied, this expanded approach provides both HR personnel and their senior business leadership with a more comprehensive perspective of the impact and value of strategic investments in workforce health. This broader set of metrics more effectively aligns HR and business objectives around what can become a consensus framework, with organizational revenue and profitability as the common goal.

Health Data Metrics in Common Use

Employers have traditionally used health data metrics to identify causes of high healthcare costs. Used appropriately, these metrics can help to pinpoint specific sources of significant healthcare expenditures in order to develop risk mitigation strategies. To this end, benefits strategies have largely focused on cost management, with more recent approaches incorporating value-based benefit design, narrow or tiered provider networks, innovative pricing models, and population health management programs

Claims data warehouse technology enhancements have simultaneously advanced analytic capabilities and reduced the financial barriers to employer access. This has expanded employer understanding of population-level health metrics, including condition-specific healthcare compliance, utilization, and costs. Health risk and biometric screening data are now more commonly integrated with claims data analysis to quantify medical costs related to identified health risks and guide wellness program strategy.3,5 These advances have helped employers to refine their focus to more efficiently address the root causes of identified healthcare cost drivers. Publications regarding employer metrics for health management have also helped to broaden employer understanding and provide additional refinement for strategy development.9,10

Human Resources as a Health and Productivity Management Silo

During the past decade, efforts to gain a better understanding of the medical and productivity costs of poor health have yielded insightful information. Benchmark reports from the Health Enhancement Research Organization,3 the Integrated Benefits Institute,11 Institute for Health and Productivity Management, 12 and others2,4,5,13,14 have broadened our understanding of how health risks and chronic conditions contribute to these organizational costs. However, it is important to note that these studies and others have limited their analysis to HR-related measures: healthcare costs and lost productivity. While healthcare expenditures are readily acknowledged at the C-suite level as a primary HR management responsibility, 15 lost productivity measures, particularly presenteeism, have not been as well received by business leaders as a meaningful business measure.16 And while presenteeism has been characterized as impacting work quantity and quality,17 little evidence exists to link these findings with business performance measures. Strengthening the connection between health and business performance has potential to increase business leader acceptance of the business value of a healthy workforce.

Why is it that no link between health and business performance been formalized? Several reasons may exist. First, these 2 areas rely on very different sources of information, with no precedent for data integration due to organizational silos. HR leaders have been significant contributors to our understanding of their departmental costs, limiting quantification of the costs of poor health to attributes under their direct control. Business performance is not a direct responsibility of HR function, which is typically viewed as a siloed cost management center, as shown in Figure 1. Second, health absence and presenteeism measures are common across all industry types, facilitating data collection and analysis. In contrast, business performance metrics across different industries differ widely, substantially limiting generalization. Third, employer health and productivity data are typically collected at an individual level to reflect individual health and productivity costs, and are then aggregated at the business unit or organization level. In contrast, business performance metrics may or may not be tracked at the individual level, which can create challenges to meaningful data integration. As a result of these considerations, and likely others, there has been little focus on the connection between workforce health and the business value of a healthy workforce.

Existing Evidence for Health-Related Performance Impact

A few examples of the relationship between employee health and job performance can be found. One area of recent research has targeted individual well-being as a more holistic approach to individual health, encompassing physical, behavioral, financial, social, community, and career dimensions. Researchers have demonstrated an association between individual employee well-being status and supervisor performance evaluation.18 This association has also been demonstrated at an aggregate level, with business unit well-being scores correlating with team effectiveness and business performance for a large employer.19 These recent results have provided a compelling basis for additional research in this area.

Generally, however, evidence supporting the impact of workforce health on organizational economic performance is scant. In support, some research has shown an association between employee health status and performance of individual tasks1 or occurrence rates of critical incidents, 20 but these results were not linked directly to business financial impact. It is easy to appreciate that absence and presenteeism are individual attributes, such that health status could affect individual productivity measures across diverse industries. In contrast, the link between health status and business financial performance is more difficult to generalize across industries, much less among employees within a single company.

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Issue: February 2014
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