Risk mitigation Featured

5:58pm EDT August 30, 2006
It wasn't long ago that American employers eagerly embraced managed care, which did a reasonably good job of cutting expenditures on a one-time basis. Nearly all companies have been since hit with rising health care bills and are now looking for ways to balance out those high costs.

"Employers are trying to figure out what to do now, and where to go next," says Pamela Peele, Ph.D., vice president of health economics at UPMC Health Plan in Pittsburgh."Many are embracing the idea of managing the health of their employees as a way to get a handle on their ever-growing health care expenditures."

That means mitigating health risk among employees, says Peele, instead of focusing solely on disease management.

Smart Business spoke with Peele about how companies can come out winners by taking a pro-active approach to the concept of health economics.

What is health economics?
In a basic sense, economics is simply the study of the allocation of scarce resources. Health economics concentrates on issues related to the production, the financing and the provision of health care.

How does health economics apply to businesses?
One of the most important assets that a company has is its labor force, whose productivity is greatly impacted by the health of individual employees. Unhealthy employees tend to be unproductive employees, both in terms of being unproductive on the job and being absent from work.

We've all read about the correlation between poor health and on the job injuries, as well as workers' compensation claims and other health-related issues that impact a company's productivity. With that in mind, employers should be taking care of their employees' health much in the way that they would invest in an expensive piece of equipment.

How can a company use health economics to its advantage?
Realizing that companies have limited budgets, they simply can't do everything, so they must prioritize. That means figuring out how to use their scarce resources to best maintain employee health through the use of health economics -- and it starts with an analysis (such as a return on investment or cost-effective analysis) to determine where those dollars will be best placed in order to improve that level of health.

Using an economic model, employers gain a better understanding of where to allocate their resources across various types of interventions and programs, thus positively affecting the health of their employees.

Where do companies face challenges in this realm?
The hard part is realizing that with health economics, following the money is the wrong approach. Whether employers are self-insured or fully-insured, they'll find that a small percentage of their employees account for a large percentage of those expenditures. Try to follow that money line and you'll end up in the wrong place, because the next year those same workers will be perfectly healthy and back to work without any further intervention or programs needed. That's because outside of those individuals who are suffering from serious, chronic diseases, the majority will receive the health care they need and go on to lead healthy lives.

This is a hard concept for employers to embrace because they're so accustomed to following the money, when what they should be doing is targeting those individuals who are consistently high users of health care and focus on getting them into the kinds of care management programs that help them mitigate and solve their health issues.

Then employers need to identify the brewing health risks in their workforce and take positive steps to help keep their employees from developing chronic diseases.

What advice would you give business owners who want to integrate health economics into their own operations?
Figure out where you are first. That's a critical issue. Before companies start expending dollars or worrying about econometric modeling, they really need to take stock of what they have.

Savvy employers are using a variety of employee screening methodologies, such as onsite screening that includes blood pressure monitoring, lipid panels, glucose and body mass measures. They're also using educational elements (such as Web-based applications of health risk assessments) to help figure out the impending health risk of their work forces so they can focus their health care dollars on mitigating the health risks that exists in their workforce.

To make this initiative successful, companies need to first figure out what pieces of their plan are actionable, and which are manageable, and then translate that into steps that integrate health economics into an overall plan to create and maintain a healthy workforce.

PAMELA PEELE, PhD., is vice president of health economics at UPMC Health Plan in Pittsburgh. Reach her at (412) 454-7952 or e-mail at peelepb2@upmc.edu.