Health and productivity management Featured

10:31am EDT April 26, 2006

If everyone knows that a happy, healthy employee is a productive employee, why do so few companies tie the two concepts together when creating effective workforce strategies? It’s a question that an increasing number of companies are asking themselves as overall health care costs soar, good employees become harder to find and business competition increases.

Some employers are finding the answer to their problems in a concept known as “health and productivity management,” which, according to Sally Stephens, president of Spectrum Health Systems in Indianapolis, integrates data and services management for all aspects of an employee’s health directly with work performance. Applicable to companies of all sizes, the approach ties together all health-related functions within a specific organization.

Smart Business spoke with Stephens about the premise behind health and productivity management, and about how employers can begin implementing this strategy in their own companies.

What is health and productivity management?
It’s an emerging business strategy based on integrated information aimed at improving the total value of human capital. Health and productivity management has become an important focus for organizations seeking to meet strategic business objectives as well as manage total employment costs. It allows organizations to

  • Identify factors that influence employee health and well-being

  • Measure and manage the performance and the relationship between employer-sponsored programs and their overall impact on costs and the company as a whole

  • Coordinate, prioritize and justify targeted management tools aimed at individuals, providers, conditions, plans and locations

Why is health and productivity management so important for today’s businesses?
Today, organizations can no longer look only at direct costs of health and disability costs. Instead, they must manage the significant impact that indirect costs such as replacement work wages, productivity losses, routine over-staffing and/or overtime premiums have on organizational performance. Since the same individuals are often served by multiple programs, organizations have started to recognize the synergies between these different programs and the benefits of coordinated benefits.

Where do companies go wrong when it comes to health and productivity management?
There are several areas where companies run into challenges with health and productivity management, mainly:

  • Not recognizing the value of coordinated management across all benefit programs.

  • Not identifying the root causes of excessive employee health costs and productivity loss by not analyzing by job type, location, and program specific experience.

  • Relying on shifting costs to other programs to reduce costs in high-impact areas.

The good news is that most of these challenges can be avoided by analyzing an individual’s costs, utilization and clinical profile across multiple benefit programs. Ultimately, the organizations are most open to change that will be successful in implementing health and productivity programs.

How does a company improve on or institute health and productivity management?
The first step is to collect data to determine actual experiences in key health and productivity areas. These areas include health costs, productivity loss, absenteeism and worker’s compensation, among others. From there, they should compare those experiences to internal and external norms and benchmarks, and identify potential areas of improvement. The last step is to determine which areas can be best managed internally, versus those that require outsourcing.

What other issues need to be addressed?
Health and productivity must be positioned as a business strategy rather than a human resources initiative. It must be aligned with the overall business plan of the organization, and it must also be viewed as a way to improve the quality of work and life — not just a means for cutting costs. To work properly, mechanisms for funding health and productivity must be clearly understood and well established in advance of implementation.

Communication along the way is crucial to the successful implementation of health and productivity initiatives. A good starting point is establishing interdisciplinary teams and shared decision-making strategies to ensure that health and productivity programs meet the needs of the entire organization.

Just how important will corporate health and productivity management be in the future?
Health and productivity management usage by firms is definitely growing in popularity. More sophisticated evaluation tools will be available as health and productivity management programs mature and expand. In the end, an organization’s ability to maintain a competitive edge will depends on its ability to manage costs across all benefit areas.

SALLY STEPHENS is president of Spectrum Health Systems in Indianapolis. Reach her at (317) 573-7600 or