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Optimizing Health and Productivity
Houston Business Coalition on Health
Thomas Parry, Ph.D. Chris McSwain President Former Vice President, U.S. Benefits
Integrated Benefits Institute Walmart
The Transformation of Workforce Health -- From Cost to Business Value --
Thomas Parry, Ph.D. President
Integrated Benefits Institute
A New Employer Setting
• Transition from tactics in responding to healthcare
reform to strategies for managing health and
business-relevant outcomes
• Show the C-suite the value of improved workforce
health
• Dead end: attempting to control claims costs in
separate program silos
• Looking for best strategies to improve workforce
health, reduce lost time, enhance productivity and
impact business
• Limited data, time and dollars
Where Employers Started: Cost Shifting
Health Costs Plan Design
Trying to Get on the Front End of Cost
Treatment
Health Costs Plan Design
Chronic Health
Conditions
Health Risks
Understanding Outcomes
Treatment
Health Costs Plan Design
Chronic Health
Conditions
Health Risks
Work
Absence/Disability
Work
Performance
Lost Productivity
Next: Encompassing a Broader View
Treatment
Health Costs Plan Design
Chronic Health
Conditions
Health Risks
Work
Absence/Disability
Work
Performance
Lost Productivity
EE Health
Behaviors &
Engagement
Corporate
Culture &
Structure
Business
Performance Wellbeing
What’s at Risk for
Employers?
The True Costs of Health
• 10,000 life manufacturing company
• 71% male
• 19% of employees 55 years or
older
• 61% skilled/semi-skilled laborers
Healthcare Costs – The Traditional View
Health Costs – Adding Lost Time Costs
The Total Costs of Health
The “Other” Costs of Absence
Quantifying Financial Lost Productivity*
• Lost productivity – “the financial impact on a
company when employees are not at work and fully
functioning”
• Two components: absence and decrements in job
performance (“presenteeism”)
• The Financial Impact of Absence
Wage replacement payments
“Opportunity costs” of ER’s response
• The Financial Impact of Presenteeism
Wage and benefit “overpayments”
Opportunity costs of resulting lost time
** Source: Sean Nicholson, Mark Pauly, et al., "Measuring the Effects of Work Loss on Productivity with Team
Production," Health Economics 15: 111-123 (2006). 14
Full Cost Components
Number of Chronic Conditions
Chronic Conditions & Treatment
Lost Productivity Costs: Top 5 Chronic
Conditions
$5.5
$4.3 $3.8
$3.2 $3.0
Chronic Conditions & Co-Morbidities
Linking Healthcare to
Productivity Outcomes
Going Beyond Medical & Pharmacy
to Absence and Presenteeism
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Co
st
per
1000 E
Es
Medical Pharmacy Absence lost prod Presenteeism lost prod
Co-Morbidity and Lost Time
IBI Research: Making
Health the CFO’s
Business
Strength of Health Culture
The Impact of a Health-Focused
Culture • Improving health is seen as very important
to productivity
• Health’s impact on business goes beyond
healthcare costs and includes sick leave,
“opportunity costs” of health, turnover, and
absence payments
• Broader information available to make
investment decisions: EE satisfaction, health
risks, performance impact, ROI
Linking Health & Financial Performance:
Putting Results in the CFO’s Terms
• Healthcare costs
• Sick days
• Turnover
• “Opportunity costs”
• Absence payments
Broad Information is Useful … But Not Very Available
MGM Mirage Case Study
IBI Health & Productivity Snapshot Results
1.8 lost
days per
FTE/Year 6.2 lost
days per
FTE/Year
Lost worktime = 8
days per FTE/Year
or $2,598 per
FTE/Year in Lost
Productivity
Lost-Time Improvement’s Impact
on EBIDTA
Reducing 1 lost day/FTE =
$15 MM to EBIDTA* from
Productivity Gains
*Earnings before Interest, Depreciation, Taxes and Amortization
The Bottom Line
Savings $15.0 MM Wall-Street Multiple 10.7X Outstanding Shares 284.3 M Gain in Stock Price $ .56/share Principal Owner (56%) $90 MM
One Day of Productivity Improvement
The Challenge of “Big
Data” to Employers
Workforce Key Health Dimensions* Financial (cost)
Program participation
Biometric screening
Health risks
Utilization
Preventive care
Chronic conditions
Lost worktime
Lost productivity
Employee engagement
* Thomas Parry and Bruce Sherman, A Pragmatic Approach for Employers to Improve Measurement in
Workforce Health and Productivity, Population Health Management, Vol. 15, No. 2, 2012
The Temporal Dimension Leading indicators
Health risks
Biometrics
Chronic condition prevalence
Treatment indicators
Preventive care
EE engagement
Health services utilization
Program participation
Lagging indicators
Financial
Lost worktime
Lost productivity
Dimensions & Dashboard Metrics
Dimension Summary Metric
Financial Program cost/EE
Program participation EEs participating/All EEs
Biometrics EEs reaching target/All EEs
Health risks # of health risks/EE
Utilization # EEs getting care/All EEs
Preventive care # EEs getting screened/All EEs
Chronic conditions # EEs w/ chronic conditions/All EEs
Lost worktime # of lost workdays/EE
Lost productivity Lost productivity $/EE
Employee engagement Engagement score/EE
Thinking about Metrics as
Hierarchies
Dashboard
metrics
Component
metrics
Contributing
metrics
Chris McSwain
Vice President, U.S. Benefits
Walmart
Moving From a Vendor to a Partner Strategy
39
Employer Challenges and Key Questions
Employer Strategy and Use of Data
Vendor / Supplier / Partner Differences
Supplier Management Roadmap and Speed Bumps
Examples and Lessons Learned
Supplier Management Tools and Checklist
40
Economic – Approval for investment resources
Cultural – Openness to real change
Behavioral – Employee engagement
Logistical – Reaching all covered lives
Community – Environmental determinants to health
Service Delivery – Effective integration of internal, external , and emerging partners
Communication – CDHP, HRA, HSA, FSA, 401K
Strategic – Turning data to information into knowledge to drive action
Effective supplier management can help address these headwinds
41
How much do I spend/invest in our people each year, their dependents and our retirees; U.S.; and abroad?
Who are my vendors (and their vendors), how much am I paying them, and how are they performing against my expectations?
Are my vendors working like vendors, suppliers or partners, and how would I know the difference?
What is the value received by our members and the ROI gained by the business, and is this aligned with my business strategies?
How do I get started in answering these questions and who should I look to for help?
Our people, the Human Capital, are the final differentiator
42
Onsite
Resource
Center
Group Health
Plans
Disease
Mgmt.
Safety
Programs Absence
Mgmt.
Wellness /
Prevention
Pharmacy
Benefits
Behavioral
Health
/ EAP
Effective supplier management can help maximize the value to each member at every touch point and increase ROI for employers
Employee Experience
43
Programmatic
Benefit
Management
Medical
Pharmacy
Behavioral
LTD
STD
Unplanned
Absence
Medical
Pharmacy
Behavioral
LTD
STD
Unplanned
Absence
44
Programmatic
Benefit
Management
Medical
Pharmacy
Behavioral
LTD
STD
Unplanned
Absence
Medical
Pharmacy
Behavioral
LTD
STD
Unplanned
Absence
Health
Assessment
Wellness and
Prevention
Care
Management
Occupational
Health and
Safety
Worker’s
Compensation
45
Programmatic
Benefit
Management
Medical
Pharmacy
Behavioral
LTD
STD
Unplanned
Absence
Medical
Pharmacy
Behavioral
LTD
STD
Unplanned
Absence
Integrated
Health
Management
Integrated
Absence
Management
Integrated Benefit
Management
Health
Assessment
Wellness and
Prevention
Care
Management
Occupational
Health and
Safety
Worker’s
Compensation
46
Programmatic
Benefit
Management
Medical
Pharmacy
Behavioral
LTD
STD
Unplanned
Absence
Medical
Pharmacy
Behavioral
LTD
STD
Unplanned
Absence
Integrated
Health
Management
Integrated
Absence
Management
Integrated Benefit
Management
Health
Assessment
Wellness and
Prevention
Care
Management
Occupational
Health and
Safety
Worker’s
Compensation
Integrated
Health
Management
with Focus
on
Productivity
Integrated Health and Productivity Management
47
Programmatic
Benefit
Management
Human
Capital
Management
Medical
Pharmacy
Behavioral
LTD
STD
Unplanned
Absence
Medical
Pharmacy
Behavioral
LTD
STD
Unplanned
Absence
Integrated
Health
Management
Integrated
Absence
Management
Integrated Benefit
Management
Health
Assessment
Wellness and
Prevention
Care
Management
Occupational
Health and
Safety
Worker’s
Compensation
Integrated
Health
Management
with Focus on
Productivity
Integrated Health and Productivity Management
Human Capital
Management
DB, DC, HR
Compen-sation,
Perform-ance
48
Silo Focused
Tactical
Limited Innovation
Transactional Operational
Minimal Customization
Multiple Silos
Strategic
Open to Innovation
Measurement and ROI
Customized Programs
Own the Problem
Consultative
Innovation Focus
Outcomes-Driven
Proactive Strategies
VENDORS SUPPLIERS PARTNERS
49
Behavioral health
On-site health centers with integrated services
Analytical agenda and measurement
Total Health and Productivity Supplier
Medical home and community of health initiatives
Pharmaceutical company employer groups
Every member touch point is an opportunity to ensure optimum integration potential is achieved and produces maximum economic value.
50
Expectation
Setting
Complete Spend Analysis (broken down by Supplier and by Category)
Develop list of suppliers to include
Meet with Executive Sponsor to select potential participants
Identify list of applicable internal workshop participants
Send Sponsor-authored email to announce program
Communicate internal participant responsibilities
Identify Supplier contacts/additional BU participants
Contact suppliers to participate in educational presentations
Provide clear, focused and condensed guidelines for Supplier Educational Engagement
Secure viable Supplier Summit dates and Educational engagement dates
Request Survey/Scorecard completion from Supplier/internal participants
Conduct survey follow-up as needed
Customize meeting agenda based on survey feedback
Send out Supplier Summit reminder to all participants
Conduct Summit adhering to timeline set by sponsors
Distribute agenda with focus objectives and criteria to lead the discussion
Schedule follow up call with all participants to drive accountability
Provide sponsors with progress reports on completed/active projects
Provide Suppliers with Summit notes to review
Establish implementation team; sponsor approved
Hold regular teleconferences on project status
Deliver awards/recognition when initiatives are complete
Participant
Selection
Supplier
Education
Meeting
Supplier
Summit
Idea
Implementation
What a supplier does alone gets them in the room. What they are able to do with other suppliers keeps them on the invitee list.
51
Key Questions:
Vision only?
Integration opportunities with other services?
Would each supplier handle this the same way? How would you know?
Employee served only or would any thought be given to spouse or other family members?
You receive a call from a member who is unsure as to which company number
to call and are made aware that she is having trouble with her vision and that
she is actively engaged in a Disease Management program for her Diabetes.
She also makes it clear that she is having a tough time paying for these
services due to a sick parent that she is also supporting medically. She is
located in Greenville, Ohio. What are your next steps in speaking with this
family member?
52
53
Supplier management needs to be a core competency for HR
Top 20-25 suppliers represent approximately 98% of spend and critical touch points
Successful supplier management supports business, people and total
reward strategies
Critical to share your strategies with suppliers and clearly define expectations
Vendors are often on the same journey; often innovation comes from employers
Getting the right partners and aligning the internal and external silos accelerates the journey
Data is the critical starting point to driving successful future actions
Employer must drive relentless attention to the member experience
54
Internal silos across HR and other internal constituents
Processes, contacts, performance guarantees not in place
Poorly defined expectation or strategies
Skills, time and resources
Number of vendors can be inefficient
Ownership, accountability, and roles not well defined
Data quality and multiple views of the truth with each data warehouse
Complicated, confusing and poorly integrated member experiences at
point of service
55
Supplier identification and profile
Supplier overview worksheet
Defining roles
Supplier management accountability matrix
Supplier integration opportunity
Sample job description
Getting started checklist
56
Role Definition
Designing Bidding
Procedures
Defining Business Require-
ments
Conducting Market
Research
Designing RFP
Evaluating Bids
Negotiating
Writing Contracts
& PG’s
Performance & Clinical
Audits
Build Relationships
Broker /
Consultant
Procurement
Benefits or HR
Staff
Supplier
Management
Legal
HRIS
IT / Security
Involvement: N=None, M=Minimal , H=High, J=Joint ownership, S=Sole owner
57
Supplier Management Accountability Matrix (pg 1)
Process Category Activity Lead
Accountability
Support
Accountability
Strategy
Develop business strategy, goals and objectives, benchmarking
comparative companies, communications of this strategy as appropriate to
procurement and other process partners.
Cumulate historical supplier spend data, regardless of system of record
(procurement can gather data when in ERP systems) including the planning
and forecasting of future spend and cost center management.
Assess supply market, benchmarking/understanding suppliers in each
industry, and their capabilities.
Develop sourcing strategy (bid, targeted, renegotiation sole/single sources).
Provide counseling to business on policies, practices, and guidelines that
govern any and all parts of the sourcing process (e.g. commitment of funds,
procure to payprocess, etc…)
Manage the discovery (RFI) and competitive bid (RFP) process if
applicable.
Execution
Lead and structure supplier negotiations that result in multi-year and/or
complex agreement.
Lead the contract negotiation completion ensuring all key parties are
involved, and acting as liaison with legal.
Responsible for final decision supplier selection of business terms,
acceptance of business risk consensus gathering, and internal stakeholder
communications.
Report and track expected cost savings, working capital improvement etc.
58
Supplier Management Accountability Matrix (pg 2)
Process Category Activity Lead
Accountability
Support
Accountability
Inventory
Contracts/
Defines
Services and
Suppliers
Develop and maintain complete inventory of contracts/suppliers (aka pulse
check)
Develop complete, and maintain contract summary templates
Maintain Vendor Master in ERP, instruct HR in their role in procure to pay
process.
Maintain Statement of Work for all Services, identifying gaps in Services
expected/required/being provided.
Ensure all processes are fully understood by all parties involved, with
appropriate process mapping and documentation in place.
Ensure business requirements are understood by IT and HRIS in order for
the appropriate technology solutions, interfaces, file feeds, data mapping,
etc to be in place.
Determine
SLA's
Identify validate Critical Services or deliverables we may want to measure.
Determine/validate how SLA's are to be measured, such as historical
measurements, benchmark data supplier recommendations
Established/validate both quantitative and qualitative SLA's.
Develop
tracking /
reporting
mechanism
Define/validate SLA methodology (data source, who reports what,
frequency, calculation/formula interpretation root causes analysis).
Establish/validate non SLA reporting goals, metrics etc.. Such as suppliers
resources, process not deliverable measurements costs.
Develop Scorecards/dashboards to bring visibility to overall supplier
performances (not just operational SLA's).
59
Supplier Management Accountability Matrix (pg 3)
Process Category Activity Lead
Accountability
Support
Accountability
Governance
Define model/framework for governance taking into account objectives,
participants, frequency/format of meetings, accountabilities, escalation
process and role definition.
Establish and implement process to manage daily operations supplier
performance issue.
Establish and implement process to manage critical issues/risks escalated
from services delivery terms.
Manage supplier SLA's and non SLA's reporting requirements.
Conduct supplier performance reviews with suppliers and key stakeholders.
Coordinate and work with internal audit to ensure the appropriate controls
and processes are audited, as well as contract compliance.
Establish levels of communications to stakeholders needed regarding
individual projects, critical issues, concerns changes in-services,
performances, SLA's etc.
Evaluate a supplier award recognition program to reward suppliers for
outstanding performance.
Negotiation /
implementation
/ continuous
improvement
Define desired contract changes/re-establish expectations, such as
Services SLA's Term and conditions.
Management agreement maintenance to include disputes, changes the
agreement (e.g. amendments and agreement renewals).
Re-evaluate and update Sourcing Strategy based on the needs of the
business.
Re-evaluate and update Supplier Management Strategy based on the
needs of the business.
60
Vision: Execute a world class supplier management system, whereas suppliers of goods and services consistently deliver not just on their service level commitments, but collectively drive continuous improvement in our services and processes, enabling this organization to exceed the needs of the business.
Inventory Contracts /
Define Suppliers &
Services
Determine/
validate SLA’s
Develop tracking/
reporting
mechanism
Governance
Negotiation/
implementation/
continuous
improvement
•Inventory of Contracts − What exists − What does not
exist − Where are holes − Changes needed
•Define Suppliers
•Identify gaps in Services expected/ needed/ being provided
•Ensure appropriate process mapping is in place
•Business requirements understood by technology to enable appropriate automation
•Identify critical aspects of
Services (what should we
measure?)
•Define/validate what we
want to measure
•How do we measure?
− History
− Benchmark
− Supplier
recommendations
•Define Service Level
Agreements (SLAs)
− Quantitative (e.g.
claim accuracy, first
touch resolution)
− Qualitative supplier
input (e.g.
satisfaction)
•Define SLA methodology
− How reported/by whom
− Frequency
− Calculation
− Format
•Establish/validate non-SLA
reporting, goals, metrics, etc.,
− Supplier resources
− Process measurements
− Issue logs
•Develop Scorecard
− Standard scorecard
− Customize scorecard
− Communication tool
•Financial impact
(risk/incentive)
•Identify innovations
opportunities
•Define model/framework for governance
− Objectives − Membership − Frequency/format
of meetings − Accountabilities − Role definition
•Establish issue resolution teams
− Daily issues (MOB) − Critical issues/risks
•Manage SLA’s/ reporting requirements
•Performance reviews
•Coordination with audit as appropriate
•Communication/ change management
•Supplier recognition
•Define desired contract changes/re-establish expectations
− Services − SLA’s − T&C’s − Value adds
•Contract Administration
•Perform periodic assessments to identify future opportunities.
•Continue to update Sourcing and Supplier Management strategies
•Integration of suppliers
•Drive innovation pipeline
•Supplier summits
61
1. Inventory current Human Capital spend
2. Identify and profile all suppliers
3. Overview and prioritize each supplier
4. Review current internal organization design and identify all key stakeholders
5. Create shared vision using job description, role definition and supplier accountability matrix
6. Build business case together and receive approval
7. Schedule one-on-one meetings with each vendor
8. Develops relationships and drive annual supplier summit
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