Is Your Health Care Organization a Healthy System?

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Health care organizations, just like most other employers in the United States, are facing an unprecedented tsunami of poor employee health. Chronic health problems, increased absence and disability, turnover of key talent and loss of productivity are undermining many hospitals' ability to properly execute their business strategy.

Recognizing these factors, some forward-thinking HR leaders and administrators are taking steps to address both the health and the health care needs of their employees. These health-focused health care providers are partnering with their employees to create and implement preventive health care solutions that aim to optimize their health and behaviors, not just eliminate risks.

What Outcomes Can Hospitals and Health Care Systems Expect?
Sibson recently conducted a Healthy Enterprise Study to both examine the business case for being a healthy enterprise and explore whether the nature and scope of employers' healthy enterprise efforts make a difference to their return on investment, as measured by savings. Nearly 300 employers, including 50 health care organizations, participated in the study. The participants represent more than 2 million employees, headquartered in 44 states, the District of Columbia and Canada. (For more information, see Results from Sibson's Healthy Enterprise Study at http://www.sibson.com/publications/surveysandstudies/HealthyEnt.pdf.)

The study found significant variance in each of the outcome metrics reported – health cost per employee, health cost increase per employee, turnover, unscheduled absence, extended absence, and workers' compensation cost as a percentage of payroll. As the table below shows, the 90th percentile is always more than double the 10th percentile (the level at which 10 percent of respondents reported a lower outcome). This relationship is also consistent even after adjusting for industry and demographics.

Differences in Outcome Metrics by Percentiles of Respondents*

* For each metric, the percentiles of respondents reflect the lowest to highest dollar amounts or percentages.
Source: Sibson Consulting

To better understand the organizational drivers for this variance, Sibson developed a Healthy Enterprise Index, which rates organizations from zero to 100 percent, according to how well they partner with their employees on health initiatives. The average Healthy Enterprise Index score is 57 percent.

Although not every health care organization will aim for a Healthy Enterprise Index of 100 percent, its leaders may want to determine their index and, if it is low, develop strategies to improve it. Sibson has found that a higher Healthy Enterprise Index is associated with lower health care costs. On average, a 10 percentage-point increase in the index equates to a $160 reduction in health care cost per participant. An organization that has an average of 1.5 dependents for each employee could experience a reduction in annual health care costs of $400 per employee by increasing its index by 10 percentage points.

Participants in the top quartile of the Healthy Enterprise Index achieve better outcomes across the board, as shown in the following table.

Comparison of Average Adjusted* Outcome Metrics for the Top Quartile Compared to All Others

* Sibson adjusted each outcome metric for various factors, such as industry and demographic (i.e., age and average family size). For information about which adjustments were applied to each metric, refer to the online supplement to this report that discusses the study methodology, which is available on the following page of Sibson's Web site: http://www.sibson.com/publications/surveysandstudies/HESsupp2.pdf
Source: Sibson Consulting

The ROI of becoming a healthy hospital is potentially considerable. For example, a recent meta study (a study of studies) conducted by Harvard University concluded that the return can be 3.27:1 on medical costs and 2.73:1 on absence and related costs. The programs that were the subjects of the reviewed studies generally were crafted carefully with the intent of measuring an outcome. This suggests that hospitals need to design their healthy hospital initiatives carefully to ensure they, in time, will produce a healthy ROI.

What Steps Should Health Care Organizations Take to Become Healthy?
The results of Sibson's Healthy Enterprise Study suggest that hospitals that want to become healthy hospitals should:

• Establish a dedicated initiative leader and a wellness committee. This can ensure good program leadership and oversight.
• Develop a healthy hospital strategy that is aligned with the organization's strategy. An aligned strategy clarifies the vision of the desired state, makes the initiative more real to employees and helps leadership understand how the initiative supports their objectives.
• Inventory and assess the "current state." This is an assessment of where the organization stands in achieving its vision and may include the services and offerings currently available as well as the outcomes achieved and the perceptions and effectiveness of these programs. (For further insights, see the sidebar "So, How Healthy Is Your Organization?")
• Involve key stakeholders. They include leadership, employees and other potential internal partners.
• Re-evaluate the many investments the organization makes to become a healthy hospital. It may be possible to invest differently without spending more. For example, many hospitals provide financial counseling – which can have a beneficial effect on employees' health to the extent that it relieves stress – in a fragmented way: through retirement programs, employee assistance programs and voluntary benefit programs. These resources can be redeployed as part of a financial wellness program that provides more comprehensive and independent financial counseling.
• Take steps to get employees to embrace the initiative. Employees need to not only participate, but embrace the initiative enthusiastically, which requires leadership support, a broad set of effective resources and communications focused on changing behaviors.
• Create an effective workplace. Employees cannot and will not tend to their personal needs if they are working in a toxic environment where there are various forms of aggression (e.g., harassment and bullying) and a lack of trust and respect. They need the appropriate tools and resources to enable them to be efficient and successful.
• Pay attention to dependents. Dependents can represent half or more of an organization's medical costs. Moreover, dependents can significantly influence the behaviors of employees. As a result, it is important to think about the strategies employed to engage dependents and to address their unique needs.
• Measure outcomes. It is important to identify the metrics that will determine if the organization is achieving its stated strategy. Measuring success, shortcomings and failures is as essential as measuring costs. Health care organizations should share these key metrics across various constituents within the organization, both to foster support and to show progress.

In addition to the cost savings associated with being a healthy hospital, there may be productivity gains to the extent that healthy employees are more satisfied with their jobs and more engaged in their work than are unhealthy employees.

Trying to become a healthy hospital right out of the blocks can be a daunting task that is outside the scope of most hospitals and health care organizations. A more realistic approach is to start by defining a strategy that clearly aligns with and supports the business strategy. Health care organizations can then begin by making investments that optimize success within the current culture. Many hospitals start promoting health and productivity by repackaging the programs and services they already have in place to support the strategy. They then add resources (e.g., health-risk assessments and screenings) to help employees and their families understand their risks and conditions and to better manage them through behavior modification (e.g., using health coaches, education, and other tools).

So, How Healthy Is Your Organization?
There are different levels at which an employer can partner with its employees on health initiatives. Based on investigations of best practices and our independent research and experience with clients, Sibson Consulting developed a Continuum of Maturity model that identifies three levels of maturity based on how proactive an organization is at addressing its employees' health issues:

1. Focus on Treatment. In the first stage of the continuum, the organization's focus is reactive rather than preventive. It addresses behaviors and health issues after they occur. Many organizations become aware of workforce problems through large claims increases or workplace incidents and concentrate in the short term on reducing costs rather than improving health and behavior. Organizations that focus on treatment may overlook the costs associated with productivity losses caused by health-related absences or disruptive workplace behavior.
2. Focus on Prevention/Management. In the second stage of the continuum, the organization's focus is more proactive. It promotes better physical and mental health for employees and family members by helping them identify health risks and conditions and then address them through supportive resources. Organizations in this stage are increasingly proactive in sharing responsibility and encouraging safety, personal accountability, and health risk and condition management through healthy personal and workplace behavior.
3. Focus on Optimal Behavior and Health. In the third stage of the continuum, the organization's focus moves beyond risks and conditions to a demonstrated commitment to improve the health and behavior of employees and the organization. This is imbued throughout the culture as a means to enable employees to engage fully in their work and their personal lives. Evidence of a "healthy culture" is reflected in all aspects of organizational behavior, from encouraging a team-based environment with a climate of trust and respect to maintaining a smoke-free environment. Healthy behavior is encouraged, exhibited and rewarded. Many proactive healthy organizations also consider the financial wellbeing of their employees as part of the total picture.

A number of factors differentiate the three stages of a healthy hospital. For example, where a hospital in the first stage will primarily be reactive in treating conditions and dealing with unacceptable behavior, a hospital in the second stage will focus on managing risks and conditions by shaping behavior. A hospital in the third stage, however, will focus on optimizing health and behavior by maintaining a healthy culture that is evident at every level.

In addition to this strategic orientation, each stage of maturity is characterized by its approach to addressing the various elements of its programs/initiatives, such as health plans, time-off programs, workplace support, behavioral health programs, communications, organizational behavior, and measurement and metrics. See the table below, for a sample of key distinguishing features.

Key Distinguishing Features Along the Healthy Enterprise Continuum

Source: Sibson Consulting

Conclusion
Most health care organizations seek to optimize their workforce by reevaluating all of their investments to determine what is essential to carry out their business strategy while enhancing the organization's culture. A well-thought-out healthy hospital initiative can help an organization better control its health care, turnover and absence-related costs while helping its employees stay engaged, healthy and productive.

Steven F. Cyboran is a vice president and consulting actuary in the Chicago office of Sibson Consulting. He leads Sibson's Healthy Enterprise Initiative and has been actively involved in a variety of projects focusing on cultural transformation. He can be reached at 312.984.8558 or scyboran@sibson.com. Glenn M. Alonzo is a senior vice president and national hospital and health care market leader in the Hartford office of Sibson Consulting. He can be reached at 860.678.3013 or galonzo@sibson.com.