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First, Make it Matter:First, Make it Matter:
Health in the Context of Personaland Business Success
Wendy D. Lynch, Ph.D.SeniorScientist,HealthasHumanCapitalFoundation
Founder,LynchConsulting,LTD.
Confidential. Not for Distribution. 2009. All Rights Reserved.
A commendable trendA commendable trend
Health improvement!
Modified actual
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Confidential. Not for Distribution. 2009. All Rights Reserved.
Reduction in sick leave absencesReduction in sick leave absences
Average monthly absences in department
Confidential. Not for Distribution. 2009. All Rights Reserved.
Health and business successHealth and business success
ImproveEmployee
Health
ReduceCost
SaveMoney
ImproveBusinessSuccess
Dosomething
ReduceAbsence
Improve
Productivity
The easy explanation
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Confidential. Not for Distribution. 2009. All Rights Reserved.
Benefits CostBenefits Cost
Health improvement!
What happened?
Modified actual
Confidential. Not for Distribution. 2009. All Rights Reserved.
What happened?
Benefits CostBenefits Cost
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Confidential. Not for Distribution. 2009. All Rights Reserved.
Health and business successHealth and business success
ImproveEmployee
Health
ProduceCost
Reduction(medical,absence,
prod.)
SaveMoney
ImproveBusinessSuccess
DoSomething
!
Medical &absence
costswent up!
Were
losingMoney!
Must beemployees are
sick (ormisbehaving)
Uh oh!
?What if its not
all abouthealth?
Confidential. Not for Distribution. 2009. All Rights Reserved.
The story behind
benefits consumption
The story behind
benefits consumption
Business pressure
Slowing sales
Hiring freeze
Growth
High profits
HCMSGroup, 2009, used with permission
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Confidential. Not for Distribution. 2009. All Rights Reserved.
Human Capital
The potential value an individual or group ofindividuals brings to an organization.
Human Capital includes three assets:
Skills education and experience Motivation attitude and incentives Health physical and mental capacity
DefinitionDefinition
skills
motivation
health
Confidential. Not for Distribution. 2009. All Rights Reserved.
Human CapitalHuman Capital
skills
motivation
health
Human Capital
Assets
How youchoose
Work,Leisure
You Spend
Money
Recognition
Travel
To GetSomethingUseful orSatisfying
Rewards
Intrinsic,Extrinsic,
Monetary,Intangible
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Confidential. Not for Distribution. 2009. All Rights Reserved.
Its a trade-offIts a trade-off
HCMSGroup, 2009, used with permission
SkillsMotivationAnd Health{
Confidential. Not for Distribution. 2009. All Rights Reserved.
What interferes w ith
productivity?
What interferes w ith
productivity?
2007 Health as Human Capital Survey
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Confidential. Not for Distribution. 2009. All Rights Reserved.
Health and business successHealth and business success
ImproveEmployee
Health
ReduceCost
SaveMoney
ImproveBusinessSuccess
Dosomething
ReduceAbsence
ImproveProductivity
The easy explanation
Confidential. Not for Distribution. 2009. All Rights Reserved.
What if weve got it
backwards?
Invest in To improve
HEALTH PERFORMANCE
Reward
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Confidential. Not for Distribution. 2009. All Rights Reserved.
Make Human Capital MatterMake Human Capital Matter
Share Rewards: Performance improves Health matters more
Share Responsibilities: Employees become better stewards of resources Consumerism matters more
Promote Human Capital Growth: Employee protect their assets and reinvest
(health)
Confidential. Not for Distribution. 2009. All Rights Reserved.
Shared Rewards (examples)Shared Rewards (examples)
Shared
Rewards
Eligibleforperformancebasedbonuses Yes
Ifyes,toperformancebonuses:
Employeesknowexactlyhowtheirbonusisdetermined Yes
Bonusisatleastpartiallydeterminedbyindividualperformance Yes
Totalamountemployeescanearninbonusorprofitsharingis>10%of
salary
Yes
Cancashinsomeunusedpaidtimeoffat100% Yes
OfferaHealthSavingsAccountwith$1500ormoreinemployerfunds Yes
Matcha401Kdepositat4%orhigher Yes
Coverprevention/screeningsat100%(nodeductible) Yes
Offertraining/tuitionallowanceworthatleast2%ofsalary(and>10%
useit)
Yes
Allworkershavemultipleopportunitiestoadvanceintheorganization,
andoftendo.
Yes
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Confidential. Not for Distribution. 2009. All Rights Reserved.
ImproveBusinessSuccess
ImprovePerformance
Health and business successHealth and business success
RewardProductivity
Dosomething Health
Improvement
AlignIncentives
Confidential. Not for Distribution. 2009. All Rights Reserved.
Bonus Eligibil ityBonus Eligibil ity
Eligibility Knowledge About Bonus
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Confidential. Not for Distribution. 2009. All Rights Reserved.
What Makes Health MoreImportant?What Makes Health MoreImportant?
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150%
Bonus Relative to Salary
Percent Rating Health as Important to Work Success
Controlling for age, gender, company size
Confidential. Not for Distribution. 2009. All Rights Reserved.
Relationship between
bonus and medical costs
Relationship between
bonus and medical costs
Controlling for age, gender, salary, previouslevel of illness, year one cost, company,
Health as Human Capital Research Group, 2007
Medical Cost
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Confidential. Not for Distribution. 2009. All Rights Reserved.
Reduction in absences afterimplementing pay-for-performanceReduction in absences afterimplementing pay-for-performance
Average monthly absences in department
After bonus
Confidential. Not for Distribution. 2009. All Rights Reserved.
Likelihood of STD by Percent of
Variable Pay For W hich Employee is Eligible
Likelihood of STD by Percent of
Variable Pay For W hich Employee is Eligible
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
0% 10% 20% 30% 40% 50% 60%
Relative Variable Pay (Variable Pay/Total Compensation)
LikelihoodofHavinga(Non-Pregnancy)STDClai
Likelihood of having a (Non-
Pregnancy) STD Claim, controlling
for age and gender.
Likelihood of STD (Non-pregnancy)Controlling for age and gender.
% Bonus Pay
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Confidential. Not for Distribution. 2009. All Rights Reserved.
Why w e grow human capitalWhy w e grow human capital
skills
motivation
health
Assets
Spend howyouchoose
GrowHuman Capital
MoreOptions
Bigger ormore
reliable
Rewards
Intrinsic,Extrinsic,Monetary,Intangible
Confidential. Not for Distribution. 2009. All Rights Reserved.
Effort Reward ImbalanceEffort Reward Imbalance
skills
motivation
health
Human Capital
Assets
Effort spenton work
You Spend
Opportunity
Recognition
Money
To GetSomethingUseful orSatisfying
Rewards
Whatif rewards
seem out ofbalance?
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Confidential. Not for Distribution. 2009. All Rights Reserved.
Most frequent response: quit
When exposed for periods of time:
Decreased health status
Increased health risks
Effort Reward ImbalanceEffort Reward Imbalance
Confidential. Not for Distribution. 2009. All Rights Reserved.
Increased likelihood of having 3 or more health risks
(inactivity, smoking, BMI , alcohol)
Increased likelihood of having 3 or more health risks
(inactivity, smoking, BMI , alcohol)
Results for men. Controlling for age, job type, marital status, SES.
Kouvonen A. et al. BMC Public Health 2006, 6:24 doi:10.1186/1471-2458-6-24
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Confidential. Not for Distribution. 2009. All Rights Reserved.
Make Human Capital MatterMake Human Capital Matter
Share Rewards: Performance improves Health matters more
Share Responsibilities: Employees become better stewards of resources Consumerism matters more Influence over decisions
Promote Human Capital Growth: Employee protect their assets and reinvest
(health)
Confidential. Not for Distribution. 2009. All Rights Reserved.
Shared Responsibilit iesShared Responsibilities
Shared
Responsibilities
Receiveastatementclearlyidentifyingthedollarvalueofall
investments/benefitstheorganizationmakesontheirbehalf.
Yes
APTObankoftimeoff,ratherthanseparatesickleave Yes
Lessthan100%ofpayduringShorttermdisability Yes
Asinglehighdeductiblehealthplan,withthedeductibleatleast$1500 Yes
Anoutofpocketmaximumof$3000orhigher Yes
Fewerthan31daysofpaidtimeoffperyear Yes
Strongagreementbyemployeesandmanagerstothefollowing2
questions:
Ateverylevel,employeesmakeindependentdecisionsabouttheir
work
Yes
Employeesareencouragedtogivetheirideasabouthowthecompany
candobetter
Yes
Employersponsorsfinancialdecisionmakingsupport Yes
EmployersponsorsCDHPandhealthdecisionmakingsupport Yes
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Confidential. Not for Distribution. 2009. All Rights Reserved.
ImproveBusinessSuccess
ImprovePerformance
Health and business successHealth and business success
ReduceCost
(medical,absence)
RewardProductivity
RewardProtection ofResources
Dosomething Health
Improvement
AlignIncentives
Make health matter more
Confidential. Not for Distribution. 2009. All Rights Reserved.
skills
motivation
health
Performance
Rewards
Human Capital Business Investments
We exchangework for pay
The employment contractThe employment contract
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Confidential. Not for Distribution. 2009. All Rights Reserved.
skills
motivation
health
Performance
Rewards
Human Capital Business Investments
When wesubstitute
benefits for
performance
rewards
RewardWhat?
benefit 1
benefit 2
benefit 3
?
Confidential. Not for Distribution. 2009. All Rights Reserved.
skills
motivation
health
Performance
Rewards
Business Investments
When wesubstitute
benefits for
performancerewards
RewardWhat?
Unlimitedsick leave@ full pay
Extreme incentives: BelgiumExtreme incentives: Belgium
1.3% GNP
Some departments35 days/year
65% could beworking
Most labeled with
depression
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Confidential. Not for Distribution. 2009. All Rights Reserved.
skills
motivation
health
Performance
Rewards
Business Investments
When wesubstitute
benefits for
performance
rewards
RewardWhat?
RichMedicalBenefits
Misaligned incentives: healthcareMisaligned incentives: healthcare
Cover BariatricSurgery
New employees
getting surgery
Full coverage and
STD
Most quit in 18months
Confidential. Not for Distribution. 2009. All Rights Reserved.
Incentive Alignment MatrixIncentive Alignment Matrix
0
1
2
3
4
5
6
7
8
9
10
0 1 2 3 4 5 6 7 8 9 10
SharedRewards
SharedResponsibilities
Aligned
Pampered Partners
Entitled Disengaged
AlignedMisaligned
Misa
ligned
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Cost DriversCost Drivers
Non-M
odifiable
Modifiable
(11%)
(28%)
www.hhcf.blogspot.com 2009
Medical and Absence Costs
Workforcedemographics
(28%)
(11%)
Confidential. Not for Distribution. 2009. All Rights Reserved.
Shared Responsibilit iesShared Responsibilities
Shared
Responsibilities
Receiveastatementclearlyidentifyingthedollarvalueofall
investments/benefitstheorganizationmakesontheirbehalf.
Yes
APTObankoftimeoff,ratherthanseparatesickleave Yes
Lessthan100%ofpayduringShorttermdisability Yes
Asinglehighdeductiblehealthplan,withthedeductibleatleast$1500 Yes
Anoutofpocketmaximumof$3000orhigher Yes
Fewerthan31daysofpaidtimeoffperyear Yes
Strongagreementbyemployeesandmanagerstothefollowing2
questions:
Ateverylevel,employeesmakeindependentdecisionsabouttheir
work
Yes
Employeesareencouragedtogivetheirideasabouthowthecompany
candobetter
Yes
Employersponsorsfinancialdecisionmakingsupport Yes
EmployersponsorsCDHPandhealthdecisionmakingsupport Yes
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Confidential. Not for Distribution. 2009. All Rights Reserved.
What happened?
Benefits CostBenefits Cost
Confidential. Not for Distribution. 2009. All Rights Reserved.
Job ControlJob ControlAssociated with
perceived and reportedhealth outcomes
4-year change in jobcontrol Risks increase
Self-reported healthworsened
Smith P. et al. Psychosomatic Medicine 70:8591 (2008)
Controlling for age, gender, chronic illnesses, previous control, household income, previous health risks and other factors.
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Confidential. Not for Distribution. 2009. All Rights Reserved.
ImproveBusinessSuccess
ImprovePerformance
Health and business successHealth and business success
ReduceCost
(medical,absence)
RewardProductivity
RewardProtection ofResources
Dosomething Health
Improvement
AlignIncentives
Make health matter more
Discretion&
Control
Confidential. Not for Distribution. 2009. All Rights Reserved.
A straight line meansA straight line means
Who consumes = who pays Who delivers = who gets paid
What we want = what gets paid for
Buyer Seller
Direct consequences
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Confidential. Not for Distribution. 2009. All Rights Reserved.
DIRECT EXCHANGE
Boss Worker
Business performance Improving performance
Business..Business..
Pays Gets paid
On e
Transact ion
Direct exchanges promote accessible information
Confidential. Not for Distribution. 2009. All Rights Reserved.
DefinitionDefinition
Consumer:
Everyday purchaser of a good orservice for his own use.
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Confidential. Not for Distribution. 2009. All Rights Reserved.
DIRECT EXCHANGE
Patient Provider
Improve wellbeing Improving wellbeing
Healthcare..Healthcare..
Pays Gets paid
On e
Transact ion
Confidential. Not for Distribution. 2009. All Rights Reserved.
ChoosePBM
Setformulary
RebatesFrom Ph
PickRx
HP setsfees by
complexity
Ptschedule
s appt
Ptselects a
docIn HP
Groupagrees to
fees
Doclearns
payments
HP findsMD
groups
Employernegotiates
HPcoverage
Pt selectsHealth
plan fromwork
PatientHas
Benefits
MD Grouphas billing
office
Doc has35 pts/
day
Patientand
doctormeet
Practice
Learnsfees
Maximize
feesMaximize
benefits
Assign
DXGoal
Who
wantsservice
Whodelivers
service
Who
pays
Who
gets
paid
Whatis
wanted
Whatis paid
for
Vendor 1
Notrequested
Paid by
Instead of
Vendor 2
Vendor 3
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Confidential. Not for Distribution. 2009. All Rights Reserved.
DIRECT EXCHANGE
Patient Provider
Improve wellbeing Improving wellbeing
Healthcare..Healthcare..
Pays Gets paid
On e
Transact ion
Direct exchanges promote accessible information
Confidential. Not for Distribution. 2009. All Rights Reserved.
ImproveBusinessSuccess
ImprovePerformance
Health and business successHealth and business success
ReduceCost
(medical,absence)
RewardProductivity
RewardProtection ofResources
Dosomething
HealthImprovement
AlignIncentives
ActiveConsumersDiscretion
&Control
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Confidential. Not for Distribution. 2009. All Rights Reserved.
What if weve got it backwards?
Invest in To improveHEALTH PERFORMANCE
Reward
Variable payProfit sharingTraining/Tuition
PTO cash backHealth savings accounts
Health protectionConsumerismDecision support
Engagement
Confidential. Not for Distribution. 2009. All Rights Reserved.
Book at:www.hhcfoundation.org
Blog at:www.hhcf.blogspot.com
Alignment:www.hcmsgroup.com
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