The Dollars and Sense of Employee Health

(Editor's note: Are you feeling the pinch of a tough economy? Too often, hospital administrators fail to see the cost-savings that employee health provides. In the next two issues of Hospital Employee Health, we will address the value of employee health.)

Money matters: Your employees' health directly affects hospital's bottom line

Absenteeism, 'presenteeism' drain the bottom line

In these tough economic times, it may seem like a luxury to go beyond the basics in employee health. But addressing the health needs of your workers — from injury prevention to chronic disease management — may be the smartest way to save money.

When a nurse is absent, it costs the employer 1.4 times his or her salary in direct and indirect costs,1 says Sean Nicholson, PhD, associate professor in the Department of Policy Analysis and Management at Cornell University in Ithaca, NY.

Nicholson's model takes into account how difficult it is to replace the worker with an "equally productive substitute" and how the absence affects the work of other employees in the unit.

"[Employers] are likely to underestimate the benefits of making workers healthier," he says. "You've got to measure accurately the benefits of making workers healthier, or the costs of them not being healthy."

In fact, worker health and productivity are inextricably linked. That was the key message from the Workplace Health and Productivity Summit held last fall. The summit, co-sponsored by the American College of Occupational and Environmental Medicine (ACOEM) and the Integrated Benefits Institute, a San Francisco-based nonprofit that provides research, measurement tools, and analysis to employers, produced a set of recommendations that urge employers to adopt a "culture of health" and to implement interventions that address both health and productivity.

"Health is really an investment that needs to be leveraged rather than just a cost that has to be justified," says Ron Loeppke, MD, MPH, executive vice president of Alere, a Brentwood, TN-based company that specializes in health care management. Loeppke also is the co-chair of the ACOEM Section on Health and Productivity and a coordinator of the summit.

If you look at health costs broadly, safe patient handling produces benefits far beyond the realm of workers' compensation.

Based on medical and drug costs alone, the most costly conditions are cancer, back and neck pain, and coronary heart disease. But when the impact on productivity is taken into account, back and neck pain becomes the most expensive condition, followed by depression and fatigue.2

When they calculate the health-related costs of workers, most employers just look at the obvious numbers: workers' compensation payments and premiums and medical costs. But research into work force health revealed a wide impact, says Loeppke.

"On average, across corporate America regardless of employer type, for every one dollar that employer spends on medical/pharmaceutical cost they're spending two to three dollars on health-related productivity loss," he says.

Loeppke and colleagues analyzed more than 15,000 employee responses to the Health and Work Performance Questionnaire, which encompassed four companies. They found that "presenteeism," or productive time lost even when the worker was on the job, was about as costly among those with chronic back and neck pain as their medical/pharmaceutical costs and lost work time.

"The employer community is realizing that they have to look beyond medical-pharmacy cost impact and look at this whole iceberg of costs [to understand] the total cost of poor health," says Loeppke. "They're actually looking at the business value of health."

Seeking a 'culture of health'

What can you do to improve productivity and create "a culture of health"? First, you need to understand more about your employees' health status, says Tom Parry, PhD, president of the Integrated Benefits Institute.

IBI uses the Health and Work Performance Questionnaire, which was developed by Ronald Kessler, PhD, at Harvard University, to gain information on absenteeism, "presenteeism," and the impact of health on productivity. (Editor's note: More information is available at

If you analyze medical claims data to learn about your employees' health, you may get a skewed picture, Parry cautions. The medical benefits shape employee decisions about seeking treatment. And some conditions, such as sleep disorders, may take a toll on productivity but may not show up in medical claims data, he says.

"Depression is a major problem for many employees, yet often it is underreported, isn't treated, and has an impact on the bottom line," he says. Employee assistance programs can address the gap by providing services and counseling to employees struggling with depression, he notes.

Some employers develop health promotion programs that include health risk assessments and targeted interventions. Some even offer an employee health clinic that offers monitoring of chronic conditions, such as high blood pressure or diabetes.

But the interventions don't have to be elaborate or expensive. Offering healthy food choices in the cafeteria — and pricing them lower than unhealthy items — sends a message. You can add better lighting and brighter paint to your stairwells to make them more attractive for employees to use, suggests Parry.

At the same time, you need to actively promote injury prevention and provide equipment and education to make the workplace safer, he says.

"You can't have a 'culture of health' and have an unsafe workplace," Parry says. "I would communicate very clearly to my employees that 'we're in this together. Your health matters not only to you, but to us.'"

Employees will benefit if they develop a healthier lifestyle. And so will your bottom line.


1. Nicholson S, Pauly MV, Polsky D, et al. Measuring the effects of work loss on productivity with team production. Health Econ 2006; 15:111-123.

2 Loeppke R, Taitel M, Richling D, et al. Health and productivity as a business strategy. J Occup Environ Med 2007; 49:712-721.