A growing body of evidence supports the notion that focusing on the health and safety of a workforce is good business.
Engaging in a comprehensive effort to reduce the health risks of a workforce and mitigate the complications of chronic illness within these populations, can produce remarkable impacts on health care costs, productivity and performance.
An excerpt from the Journal of Occupational Occupational & Environmental Medicine:
Fabius, R; Loeppke, R; Hohn, T: et.al. “Tracking the Market Performance of Companies That Integrate a Culture of Health and Safety: An Assessment of Corporate Health Achievement Award Applicants”. JOEM. Volume 58: Number 1. Jan, 2016.
- Objective: To test the hypothesis that comprehensive health and safety efforts, judged separately on their merits by the CHAA, contribute to better performance in the marketplace.
- Methods: Stock market performance of CHAA winners tracked under 6 different scenarios using simulation and past market performance.
- Results: The results demonstrate that a portfolio of companies recognized for excellence in workforce health or safety, or both, outperform in the marketplace. When we deconstructed the CHAA process and established portfolios among the applicants and award winners that achieved threshold scores in either health or safety as well as threshold scores in both, all significantly outperformed the S&P 500 standard index companies.
- Conclusions: This study adds to the growing evidence that a healthy and safe workforce correlates with a company’s performance and its ability to provide “healthy” returns to shareholders.
To more objectively test this hypothesis, the stock market performance of the prior American College of Occupational and Environmental Medicine (ACOEM) Corporate Health Achievement Award (CHAA) winners were tracked under 4 different scenarios. Using simulation and past market performance, a theoretical initial $10,000 investment in publicly traded award winners was tracked from 1999 to 2012. This portfolio of publicly traded award winning companies clearly outperformed the market. Though correlation is not the same as causation, the results consistently and significantly suggest that companies focusing on the health and safety of their workforce are yielding greater value for their investors as well. More research needs to be done to better understand the value of building these “cultures of health” in the workplace. Perhaps such efforts as this simply identify “smart” companies that outperform. But the evidence appears to be building that healthy workforces provide a competitive advantage in ways that benefit their investors.
The literature is replete with examples demonstrating that the health of employees impacts their performance and productivity. Additionally, for the majority of employers who pay for the cost of health care provided to their employees there is a direct impact on the bottom line.
Consider these statistics…
- Over 22% of working age adults surveyed reported health-related work impairment from chronic illness in the previous 30 days. Those with impairment average 6.7 lost days. This is equivalent to $2.5 billion impaired days per year.(1)
- In a 2003 study, it was found that illness and disability reduces total work hours by approximately 8.6%, with nearly 8.7 million Americans unable to work. The loss to the U.S. economy represented about $468 billion.(2) In 2006, over $2 trillion was spent on health care with three-fourths of that amount focused on treating chronic conditions.(3)
- In a multi-employer study by ACOEM, IBI and Dr. Kessler of Harvard Medical School, Loeppke, et.al., reported that for every dollar of medical and pharmaceutical costs spent an employer lost an additional $2.30 of health-related productivity costs. Health-related presenteeism was shown to have a larger impact on lost productivity than absenteeism, with executives and managers suffering higher losses. Co-morbidities demonstrated the largest effects on productivity loss.(4)
These facts led to a hypothesis…
Companies that envelope their employees and dependents in an environment that reinforces conscious and unconscious lifestyle choices as well as more effective accessing of healthcare, i.e. surround them with a “culture of health,” should be more productive and that productivity should be reflected in the price of their stock.
Testing the Hypothesis
To test the hypothesis, we turned to the American College of Occupational & Environmental Medicine’s corporate health awards (http://www.chaa.org/). The Corporate Health Achievement Award (CHAA), established in 1997, recognizes organizations with exemplary health, safety and environmental programs. Participating organizations submit a comprehensive application about their program and undergo a rigorous review by an expert panel to assess four key categories:
- Leadership & Management
- Healthy Workers
- Healthy Environment
- Healthy Organization
Awards have been given to organizations in manufacturing and service sectors, including city health departments, federal agencies and healthcare systems. Most years since inception of the award there has been at least one recipient. Most recipients have been publicly traded companies.
Since these award-winning companies are recognized for their exemplary efforts in creating a healthy workforce and since a healthy workforce generates less health care costs and improved productivity, we tested the thesis that a portfolio of these companies would outperform the marketplace.
Our results strongly support the notion that focusing on the health and safety of a workforce is good business. Engaging in a comprehensive effort to reduce the health risks of a workforce and mitigate the complications of chronic illness within these populations, can produce remarkable impacts on health care costs, productivity and performance.
The Cost of Chronic Disease
Dee Edington, Ph.D., has demonstrated that companies who do not pay any attention to elevating the health status of their workforce will see their employees developing increasing health risks and health care costs.(12) His results found that non-managed workforces acquire increased health risks and conditions resulting in increased costs over time. In fact, his research found that within non-managed populations the low risk cohort diminishes by roughly 5% while the moderate and high risk segments increase by roughly 8% and 11% respectively over a three-year period. He also demonstrated that it is possible to markedly reduce this trend through the execution of risk reduction programs at the workplace.(13)
Preventive services can stem the progression of health risks, chronic conditions and medical costs. RAND Corporation estimates one fifth of all healthcare expenditures will be devoted to treating consequences of obesity by 2020. Lowering obesity rates to 1998 levels could lead to annual productivity gains of $254 billion as well as the avoidance of $60 billion in annual treatment expenditures.
Seven chronic conditions (cancer, heart disease, hypertension, mental disorders, diabetes, pulmonary conditions and stroke) are currently costing the U.S. economy alone more than $1 trillion per year. Assuming the current trend continues to 2023, it would lead to a 42% increase in cases of the seven chronic diseases for a total of 230.7 million cases of these diseases with $4.2 trillion in treatment costs and lost economic output.
Plausible estimates of potential gains in 2023 associated with reasonable improvements in prevention, detection and treatment of just those seven conditions include:
- Preventing 40 million fewer cases of illness
- Cutting annual treatment costs in the U.S. by $217 billion
- Reducing annual health-related productivity losses by $905 billion
- Yielding more than $1 trillion in labor supply and efficiency(14)
Employers can realize similar results by implementing the best efforts in prevention, early detection and evidence based treatment for their workforce and covered lives.
A critical Meta-Analysis of 22 research studies in the scientific literature published in Health Affairs in February 2010 showed that medical and pharmacy costs fall by about $3.27 and absenteeism costs fall by about $2.73 for every $1 invested in wellness.(15) This results in a return on investment of six to one.
Recognizing the merits of a healthy workforce even before this paper, ACOEM provided significant guidance. The College has stated that the marketplace has markedly underestimated the full impact of poor health in the workplace and on the economy. Employers would benefit by having a better understanding of the diseases and conditions that impact their employees and covered lives so that they could implement programs to mitigate their consequences. There is a connection between the health and safety and the productivity of workforces. Health care costs should be viewed as an investment in their employees rather than an expense. Health improvement strategies have proven to produce excellent returns. Comprehensive programs focus on primary, secondary as well as tertiary prevention.(16)
The workplace offers unique advantages for the implementation of health improvement initiatives. Roughly one quarter of our population is employed. When including retirees and family members this reach includes the majority of Americans. The workplace environment and the corporate culture can reinforce healthy behaviors. Powerful communication and educational assets can be leveraged. Incentives, penalties and mandates can be built into compensation and health benefits. Tenured employee relationships can promote sustainability. And finally employers possess the capability to measure the impact of health improvements on performance, productivity and business results.
The logic behind investing in workplace health is straight forward.
- A large proportion of illness is preventable by reducing health risks. (17)
- Health risks can be improved through workplace health programs. (18)
- Reductions of health risks can lead to reductions in health costs. (19)
- Worksite health programs can produce a positive ROI and VOI. (20,21,22,23,24)
Moreover, research supports a corporate-wide impact. Towers Watson has demonstrated that employers with highly effective health and productivity programs:
- Generate 20% more revenue per employee
- Realize a 16.1% higher market value and
- Deliver 57% higher shareholder returns(25)
A recently published paper by Loeppke et al(26) emphasized the importance of integrating health promotion and health protection. This paper suggests that the CHAA assessment process should be realigned to follow the format of the DJSI. The CHAA’s current categories of measurement would be converted to mirror the DJSI’s categories, which include economic, environmental, and social metrics. This would result in an Integrated Health and Safety Index (IH&S Index).
Imagine a future scenario in which employers of sufficient size would be required or encouraged to publicly report on the degree to which they have achieved a culture of integrated health and safety. Those that report high Integrated Health and Safety Index scores could potentially be rewarded in the marketplace with greater investment as well as premium cost-reductions for group health and/or workers’ compensation insurance.
This would provide a major incentive for more companies to focus on the health and safety of their workforces and markedly aid in addressing many of the factors that are driving the American health care crisis—including the rise of chronic disease. If enough companies were able to improve and sustain the health status of their workforces, it could impact millions of Americans, providing a national tipping point in our effort to improve health outcomes and lower costs. The data in this paper suggest that such an effort might also contribute to investment-oriented opportunities and company differentiation in the marketplace.
Integrating health promotion (wellness) and health protection (safety) strategies creates synergy among these efforts, enhancing the overall health and well-being of the workforce, empowering employees to perform at the height of their potential and improving the organization’s bottom line.
- Kessler et al. the Effects of Chronic Medical Conditions on Work Loss and Work Cutback. JOEM. 2001; 43(3):218-225.
- Berger, M, et al. Investing in Healthy Human Capital. JOEM. 2003; 45(12):1213-1225)
- Goetzel R. Do Prevention or Treatment Services Save Money? The Wrong Debate. Health Affairs. 2009; 28(1):37-41.
- Loeppke, R., et al., “Health and Productivity as a Business Strategy: A Multi-Employer Study”, JOEM, 51:4, April, 2009. pp 411-428.
- Peterson K W, Yarborough CM III, Ferguson EB, Matthew SJ. ACOEM Award: The American College of Occupational and Environmental Medicine’s Corporate Health Achievement Award.J Occup & Environ Med. 1996;38(10):969-972.
- Baldrige Award Winning Quality, 17th edition, by Mark Graham Brown, CDC Press, 2008.
- Malcolm Baldrige National Quality Award. [website]
- C. Everett Koop Award [website]
- Yarborough, CM. Administrative Track: What Constitutes Excellence for the Corporate Health Achievement Award. J Occup & Environ Med. 1998;40(4):381.
- Scope of Occupational and Environmental Health Programs and Practice. J Occup Environ Med. 1992;34:
- NCQA. Health Evaluation Data Information Set (HEDIS) 3.0. Washington, DC. National Commission on Quality Assurance. 1996.
- Edington, AJHP, May-June 2001, Vol 15, No. 5, pp-341-349. Research Overview of Natural Flow
- ZERO TRENDS by Dee Edington, 2009, published by the Health Management Research Center – University of Michigan
- Loeppke, R; Edington, D; Bender, J; Reynolds, A. “The Association of Technology in a Workplace Wellness Program with Health Risk Factor Reduction” Journal of Occupational and Environmental Medicine: March, 2013; Volume 55, Number 3: pp 259–264.
- Devol, R et.al, 2007, An Unhealthy America: The Economic Burden of Chronic Disease. Charting a New Course to Save Lives and Increase Productivity and Economic Growth, Milken Institute
- Baicker, K., et.al., Workplace Wellness Programs Can Generate Savings., Health Affairs, Feb. 2010, Vol 29, No. 2. pp: 1-8
- ACOEM Guidance Statement, Healthy Workforce/Healthy Economy: The Role of Health, Productivity and Disability Management in Addressing the Nations’ Health Care Crisis, JOEM, 51:1, pp 114-119, January, 2009.
- Healthy People 2000, 2010; Amler & Dull, 1987; Breslow, 1993; McGinnis & Foege, 1993; Mokdad et al., 2004.
- Loeppke, et al., 2008; Wilson et al., 1996; Heaney & Goetzel, 1997; Pelletier, 1999.
- Edington et al., 2001; Goetzel et al., 1999
- Aldana SG. Financial impact of health promotion programs: A comprehensive review of the literature. Am J Health Promotion 2001;15:296-320.
- Loeppke R. “The Value of Health and the Power of Prevention”. Int J Workplace Health Manage. 2008; 1(2):95-108.
- Serxner, S., et.al., Do Employee Health Management (EHM) Programs Work? Am J Publ Health2009; 23(4):
- Goetzel, R; Loeppke, R, et al. “Do Workplace Health Promotion (Wellness) Programs Work.” J Occup Environ Med. 2014; 56 (9):927-934, September, 2014.
- National Business Group on Health/Watson Wyatt “Staying at Work Report” 2007/2008 from Survey of 355 Large Employers
- Loeppke, R; Hohn, T; et.al. “Integrating Health and Safety in the Workplace: How Closely Aligning Health and Safety Strategies can Yield Measureable Benefits.” Journal of Occupational & Environmental Medicine 2015: 57 (5): 585-597. May, 2015.