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

For more information:

Thomas Parry

tparry@ibiweb.org

415-222-7282

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

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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

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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

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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

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Programmatic

Benefit

Management

Medical

Pharmacy

Behavioral

LTD

STD

Unplanned

Absence

Medical

Pharmacy

Behavioral

LTD

STD

Unplanned

Absence

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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

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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

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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

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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.

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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.

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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?

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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

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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

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Supplier identification and profile

Supplier overview worksheet

Defining roles

Supplier management accountability matrix

Supplier integration opportunity

Sample job description

Getting started checklist

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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

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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).

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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.

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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

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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