Source: Wolters Kluwer Health: Lippincott Williams & Wilkins

Released: Tue 09-Aug-2005, 11:10 ET  Embargo expired: Thu 11-Aug-2005, 12:00 ET  Printer-friendly Version

Investing in Employee Health Can Pay Off for Corporations

Newswise — If corporate health promotion programs can achieve even minor reductions in employee health risk factors—fractions of a percentage point per year—they can pay for themselves or even achieve net cost savings within a decade, suggests a study in the August Journal of Occupational and Environmental Medicine, official publication of the American College of Occupational and Environmental Medicine (ACOEM).

A research team led by Ron Z. Goetzel, Ph.D., of Cornell University Institute for Health and Productivity Studies analyzed the financial payoffs of one corporation's health and productivity management program: The Dow Chemical Company's Health and Human Performance (H&HP) initiative. The investigators estimated the health risks and health care expenditures for the Dow workforce over a 10-year period. They then used return-on-investment (ROI) techniques to calculate a "break-even" scenario—that is, how effective the H&HP program would have to be for the medical costs saved to equal the cost of the program itself.

Over a decade, the costs of the H&HP program were estimated at $15.4 million, in 2001 dollars. The estimated increase in health care spending for the same period was approximately $17.1 million—about 3.1 percent per year.

The break-even point came when ten major health risk factors were reduced by 0.17 percentage points per year. Under this scenario, the company was projected to recoup its $15.4 million investment in the H&HP program within 10 years.

In an alternative scenario, larger reductions in risk factors could result in substantial cost savings for the company. If the H&HP program reduced health risks by one percentage point per year, cost savings over a decade would equal $49.5 million: a return of $3.21 for each dollar invested in worker health. Even if the program reduced risks by just 0.1 percentage point per year, it would yield a relatively small financial loss to the company.

The true benefits of risk reduction are probably even greater, because the study did not consider gains in productivity achieved with improvements in worker health.

Corporations are increasingly interested in health and productivity management programs as a way of reducing health care expenditures. However, it can be challenging for company medical directors to "build a business case" for investing in health promotion. To achieve this goal, Dow's H&HP staff sought to "translate health and medical care issues into language that would be familiar to corporate staff in charge of the financial health of the organization."

Dr. Goetzel and colleagues suggest that ROI estimates can help corporate decision makers to understand that even minor reductions in health risks should lead to significant reductions in medical costs. As part of an overall business case for health and productivity management, such projections can help to create a "paradigm shift" in thinking about health care: not as an expense, but rather as "an investment in human capital."

ACOEM, an international society of 6,000 occupational physicians and other health care professionals, provides leadership to promote optimal health and safety of workers, workplaces, and environments.