While roaming the halls at last week’s World Healthcare Congress, I ran in to an old colleague and former CEO of mine, and discussed old times and different ideas we had over ten years ago.  Among these was the direction that employers would take in their already major efforts to reduce their healthcare costs.  He is still convinced that they will be on the sidelines in efforts by governments and healthcare organizations to address this challenge.  I think he’s half right.

Employers seem to be dividing themselves into two camps, or at least arraying themselves along a bipolar continuum.  At one end are those treating their employees, who generate all those healthcare costs, after all, as the problem, to be grudgingly paid and deprived of benefits where possible, while the employer reduces its investment in their health as much as it can.  This may mean dropping coverage entirely, offering mini-insurance with low annual maximums, or catastrophic coverage with high deductibles, or otherwise shifting as much of the burden as possible to employees.  This automatically saves such employers a lot of money.

At the other end, however, and there were representatives of many such employers at the Congress, are those who see their employees as essential “human capital” assets whose performance and value to their firms can be dramatically improved by enabling them to become healthier.  This means using “Value-Based Benefit Design”, where all employee benefits are planned, managed, and evaluated for the value the employer and employees gain thereby.

In effect, while one set of employers focus on reducing or eliminating their obligations relative to sickness care, by shifting it to anyone else who will take it on, the other set is investing in increasing their obligations relative to health care.  In this latter approach, they are creating worksite wellness programs, onsite clinics, and partnering with their employees to not only reduce the productivity and performance impairments that are related to “unhealth”, but to promote productivity and performance improvements that can emerge from surpassing the normal levels of impairment in even healthy employees.

When HealthMedia, Inc., Ann Arbor, Michigan, analyzed data from roughly 175,000 employees on their self-reported productivity impairment, for example, it found a level of between 6% and 7% impairment among those with no reported health issues at all.  This was almost half the total overall impairment discovered relative to chronic diseases, risk conditions and behaviors across all employees, mainly because it applied to all employees.

Up to now, the main drivers of productivity and performance among employees have been new technologies and systems invested in by employers, giving the US about the world’s highest productivity per employee.  But the drivers of employees’ voluntary productivity, that not forced by their fear of losing their jobs and need for the necessities of life, have barely been scratched.   And while health improvements can make significant, even dramatic differences to worker performance, their commitment, morale, and empowerment to do the best possible job has largely been ignored.

While the theme of “pay-for-performance” (P4P) was also a common topic of discussion at the Congress, it related to paying providers more for doing what they are supposed to do a little better.  If more motivating and satisfying P4P systems were applied to employees, along with effective health improvement efforts, who knows what heights of productivity and performance might be reached by employers willing to make the investment.

Best Buy, for example, was able to increase its corporate office workers’ productivity by 35%, in one year, with the relatively simple step of empowering them to work whenever and wherever they pleased – while decreasing turnover from over 16% to zero. [M. Conlin “Smashing the Clock” Business Week Dec 11, 2006]  A windshield repair firm improved its worker productivity by 44% in one year by switching to a P4P system, while reducing turnover among high-performers by 21%. [E. Lazar “Performance Pay and Productivity” American Economic Review 190:5 Dec 2000 1346-1361]

If employers were to adopt an overall “Value-Based Human Capital Management” policy and practices, they might find that similar gains in productivity and performance can be achieved, by combining health with motivation and talent improvements.  If that happens, the real “competitive solution” to the health care crisis might be led by employers who can prove they are on the right end of the continuum in terms of the value of human capital assets, and the ways to get the most value from them.