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Journal of Occupational & Environmental Medicine:
doi: 10.1097/01.jom.0000205866.77195.ab
Departments: Occupational Medicine Forum

Occupational Medicine Forum

Schwerha, Joseph J. MD, MPH

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The Occupational Medicine Forum is prepared by the ACOEM Occupational and Environmental Medical Practice Committee and does not necessarily represent an official ACOEM position. The Forum is intended for health professionals and is not intended to provide medical or legal advice, including illness prevention, diagnosis or treatment, or regulatory compliance. Such advice should be obtained directly from a physician and/or attorney. Inquiries and contributions to the Forum should be forwarded to Joseph J. Schwerha, MD, MPH by e-mail at

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Good Health Is Good Business

By Ronald R. Loeppke, MD, MPH, FACOEM, Chief Strategic Officer, Matria Healthcare, Inc., Brentwood, TN, and Pamela A. Hymel, MD, MPH, FACOEM, Corporate Medical Director, Cisco Systems, San Jose, CA.

Note: This is the first in a series of articles on health and productivity management (HPM). The following article presents an overview/rationale for HPM. Future articles will focus on specifics such as identifying and analyzing relevant data, interpreting data and making the business case for investment, as well as practical based research from case studies regarding the implementation and evaluation of HPM interventions.

Increasing medical costs and health-related productivity losses are a growing threat to the U.S. economy. Burgeoning health benefit costs are eroding profits and threatening the survival of many companies. An even more significant and urgent threat to businesses' survival is health-related productivity costs as the result of absenteeism and presenteeism. On average, for every dollar of medical/pharmacy cost, employers are realizing two to three dollars of health-related productivity costs (Fig. 1).1–3 This translates into approximately $20,000 total cost per employee per year. A company with a net profit of 10% must generate nearly $200,000 in sales per employee to cover the total health-related costs of each employee.

Fig. 1
Fig. 1
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Employers are now recognizing the inextricable link between health and productivity and are demanding health care services that improve employee health and well-being. They are realizing that good health is good business and that a healthy bottom line is increasingly tied to the health of the workforce.4

As leaders in analyzing, understanding, and managing the health and well-being of workforce populations, occupational health professionals have been on the front line of the health and productivity movement for many years. The role of the occupational health professional has expanded beyond preventing and treating work-related injuries and illnesses to include managing the overall health-related issues of the workforce. This expanding role is reflected in the transition of terms used to describe the field—from “industrial medicine” to “occupational medicine” to “occupational health” and “corporate health” (Fig. 2).5,6 Increasingly, the occupational health professional functions as the company's chief health officer, responsible for managing the human capital related to the health and productivity assets of the workforce.

Fig. 2
Fig. 2
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A “healthy workforce” is characterized by four key attributes. Specifically, for individuals and organizations to achieve optimal performance each must be:

* Healthy—demonstrating optimal health status as defined by positive health behaviors, minimal modifiable risk factors, and minimal illnesses, diseases, and injuries;

* Productive—functioning to produce the maximum contribution to achievement of personal goals and organizational mission;

* Ready—possessing an ability to respond to changing demands given the increasing pace and unpredictable nature of work; and

* Resilient—adjusting to setbacks, increased demands, or unusual challenges by bouncing back to optimal “well-being” and performance without incurring severe functional decrement.4

A recent Institute of Medicine (IOM) report on integrating employee health outlined current trends toward achieving a healthy and productive workforce based on determinants of health and productivity.4 Innovative employers are implementing comprehensive initiatives across a continuum of a health care management services as solutions to this growing health care crisis.7

As demonstrated in Fig. 1, medical/pharmacy costs are only one-quarter of the overall health-related costs. Another quarter are caused by absenteeism and disability, whereas the other half are caused by health-related productivity costs—an area referred to as presenteeism. Presenteeism is health-related productivity loss while at paid work and may include: 1) time not on task (eg, in the workplace, but not working); 2) decreased quality of work (eg, increased injury rates, product waste); 3) decreased quantity of work; 4) unsatisfactory employee interpersonal factor (eg, personality disorders); and 5) unsatisfactory work culture.1

If the components of health costs within a corporation are to be fully understood, all the pieces of the health care dollar—medical, pharmacy, disability, absenteeism, workers' compensation, and performance at work—must be evaluated to understand the total costs and to build integrated solutions that address the needs of the employer population. Until recently, the impact of illnesses and injuries has primarily been quantified using medical/pharmacy, workers' compensation, and disability claims costs. However, sophisticated and validated measurement tools that assess health-related absenteeism and presenteeism can offer a more detailed look at the consequences of poor health.1,8

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Problems With the Current Health Care Delivery Approach

The existing U.S. health care delivery system is fragmented and in desperate need of modernization—services must be integrated and connected with electronic health records. Historically, attempts to contain costs by cutting reimbursement rates to providers and by limiting or denying access to care have resulted in modest and temporary decreases in direct medical/pharmacy costs.

Patients/consumers need to be active participants in their care and share accountability for their health risks and clinical outcomes. To do this, patients/consumers must be empowered with the education and tools to be wiser health care users; otherwise, they may avoid not only discretionary care but also necessary care when health care costs are shifted to them through significantly higher copays and deductibles. Poorly managed medical conditions will, in turn, result in an increase in total health-related costs for the employer because of more emergency room visits, hospitalizations, and absenteeism and presenteeism costs. Unless both the patient/consumer and the employer/provider are empowered, there will likely be an increase in the total health-related economic impact on all parties.

Currently, not enough attention is paid to the ‘hidden,“ but related, costs of lost productivity. The current medical care model has led to the following results9:

* An average productivity loss of 115 hours per employee per year because of illness;

* 10 days per year of absenteeism per person with chronic illness;

* Avoidable sick days—400 per year per 1000 employees; and

* For every absent employee (absenteeism), three more employees are present but not productive because of illness (presenteeism).

A recent survey further indicates that 69 million workers reported missing days at work because of illness, resulting in a total of 407 million lost workdays. In addition, 55 million workers reported a time when they were unable to concentrate at work because of their own illness or that of a family member, accounting for another 478 million lost days. Together, lost time from work because of health reasons was estimated to represent lost economic output totaling $260 billion per year.10

A total cost perspective takes into account the full economic impact of employee illness or wellness on corporate productivity. However, significant fragmentation in today's health care industry obstructs this view of integrated health and productivity management and often results in employer/employee frustration, inconsistent quality of care, and higher total costs. In fact, traditional managed care created disincentives among providers and dissatisfaction among consumers. Typical health plans do not invest enough in prevention and disease management because their “membership” turns over every 18 months. However, employers keep employees approximately 10 years on average and therefore are motivated to invest in their health and productivity.

Even current efforts that focus on care quality and clinical outcomes are rudimentary and do not provide enough actionable and timely data for feedback at the doctor-patient level—the level in which meaningful change can be effected. However, there are promising efforts underway in more than 100 “pay for performance” initiatives.

In addition to good health, good medicine is also good business. Clinical excellence is in the best interest of the employer/purchaser as well as the consumer/patient. The IOM report from the Committee on the Quality of Health Care in America addressed issues of quality care in the American health care system and made recommendations for a wide variety of key stakeholders to improve health care effectiveness and efficiency.11 The Midwest Business Group on Health and the Juran Institute both report that one third of health care costs today are related to poor quality medical management. Poor quality includes unnecessary surgeries, duplication of services, inadequate disease management, as well as inadequate communication and coordination among physicians and other providers.12 The aligned incentives and shared savings model has been validated in the marketplace and proven to be a viable contracting mechanism that employers are willing to use (Table 1). Intermountain Health Care in Utah has negotiated such arrangements with employers and health plans. The Midwest Business Group on Health has developed a reimbursement model that aligns incentives and shares any cost savings with the plans and providers responsible for lowering health care costs, decreasing absenteeism, and improving productivity.12

Table 1
Table 1
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In response to IOM's “Quality Chasm” report, which said payments for care should be redesigned to encourage providers to make positive changes to their care processes, a group of employers, physicians, health plan providers, and patients have formed Bridges to Excellence, the purpose of which is to create programs that will realign all stakeholder incentives around higher quality.13 Initiatives such as these, driven largely by organizations outside the health care delivery system, are forging a new way to look at incentives for value-based care delivery. We are on the verge of transformation of our delivery system from just being a reactive and illness oriented medical care system to also being a proactive and wellness oriented health care system (Table 1).

Disease management is receiving well-deserved recognition for improving clinical outcomes. However, many traditional disease management services are too narrowly defined to meet the expanding needs of customers, especially employers. Individuals now desire integration and coordination of services across the health care continuum with quality-driven, outcomes-based, patient-centered care. The singular focus and the “carving out” of the medical management of a specific medical condition (eg, diabetes etc.) can empower patients and providers with adherence to best-practice clinical guidelines supported by evidence-based medicine. However, a weakness of this approach is that it often “carves up” the patient into separate organ-based medical problems through fragmented competing disease management initiatives that lack coordination and integration.

Employers are discovering that not only is it important to affect the overall health of a population to manage health care costs and sustain productivity, (eg, minimizing the effect of absenteeism) but that promoting health also reduces presenteeism (the effect of diminished health on an employee's ability to function at full capacity while at work), reflecting the realization that not all employees present are fully engaged and optimally productive.14 Deliniating the components of absenteeism, disability, workers' compensation, and presenteeism enables employers to more closely examine the full effect of health risks on overall health-related costs including productivity.15

Corporate health integration is important because workers do not leave their personal health risks on their doorstep when they leave home, nor do they leave the occupational risks at the workplace when they return from work. A continuum of care needs to be built into an organized, integrated health care delivery system. This shifting paradigm is reflected in the integrated health and productivity movement where population-based public health issues and patient-based personal health issues are simultaneously addressed.

At the same time, enlightened employers are recognizing the benefits of population health management, which can proactively manage the health care needs of all employees and their families, rather than only the select few who are touched by specific disease management programs. Analysis of employee populations can identify not only which employees have an existing medical condition that needs management, but also reveal those employees who are at risk of developing future medical conditions that can be prevented or proactively managed. The U.S. health care system must build on the strengths of disease management and integrate health management and disability management. All stakeholders should strive to coordinate the continuum of care, not just for the whole person, but for entire population segments.

It is time to get back to the basics. In a previous article, it was proposed that the three “Rs” of health care be responsibilities, risks, and rewards. These three Rs should be promoted by aligning incentives among the health care system stakeholders. Each stakeholder should understand the responsibilities, risks, and rewards of the other stakeholders in order to align incentives between the consumer/patient, the provider, the employer/purchaser, and the payer/insurer.16 An example of the responsibilities, risks and rewards of key stakeholders in health care are shown in Table 2.16

Table 2
Table 2
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Health & Productivity

Initiatives such as these require a new vision and renewed leadership. Occupational and environmental medicine physicians have an unparalleled opportunity to assume this leadership role in the health care system on behalf of patients, employers, providers, and the communities they serve. From the perspective of both the large employer and the small employer, occupational medicine can integrate the health delivery model with a focus on explaining the business case of health and productivity.

There are enough data now to define a compelling business case, delineate the tools to use, and determine an action agenda for employers to implement. However, the battles against the rising insurgence of health care costs will not be won by better definition, delineation, and determination, but by demonstration of action. The front-line enemies are disease, disabling medical conditions, and destructive health risks. The battlefields are the workplaces, clinics, hospitals, and communities across the United States. The weapons are quality-driven, cost-effective health care initiatives that align incentives of the key stakeholders to improve the health and productivity of the American population. As health care professionals dedicated to fighting this battle, occupational and environmental physicians must assume a mantle of leadership and harness their intellectual capital as well as mobilize their collective consciousness in order to improve health and human performance of society. This is an unparalleled opportunity to help employers embrace a culture of health as well as safety.

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1. Loeppke R, Hymel PA, Lofland JH, et al. Health-related workplace productivity measurement: General and migraine specific recommendations from the ACOEM Expert Panel. J Occup Environ Med. 2003;45:349–359.

2. Edington DW, Burton WN. Health and Productivity. In: McCunney RJ, ed. A Practical Approach to Occupational and Environmental Medicine. 3rd ed. Philadelphia, PA: Lippincott Williams & Wilkins; 2003:40–152.

3. Brady W, Bass J, Moser R Jr., et al. Defining total corporate health and safety costs significance and impact: review and recommendations. J Occup Environ Med. 1997;39:224–231.

4. Institute of Medicine (IOM). Integrating Employee Health: A Model Program for NASA. Washington, DC: National Academies Press; 2005.

5. Partnership for Prevention. Leading by example: CEOs on the business case for worksite health promotion; 2005. Available at:,com_frontpage/Itemid,1/. Accessed February 1, 2006.

6. Loeppke R. Prevention and managed care: the next generation. J Occup Environ Med. 1995;37:5585–62.

7. Harris J, Loeppke R. Integrated Health Management: The Key Role of Occupational Medicine in Managed Care, Disability Management, Productivity, Prevention and Integrated Delivery Systems. Beverly Farms, MA: OEM Press; 1998.

8. Kessler RC, Ames M, Hymel PA, et al. Using the World Health Organization Health and Work Performance Questionnaire to evaluate the indirect workplace costs of Illness. J Occup Environ Med. 2004;46(Suppl): S23–S37.

9. Lynch Consulting Ltd. Presentation at IHPM Conference: September 25, 2002.

10. Davis K et al. Health and Productivity among U.S. Workers. The Commonwealth Fund: Issue Brief. August 2005:1–9.

11. Institute of Medicine (IOM). Crossing the Quality Chasm: A New Health System for the 21st Century. Washington, DC: National Academy Press; 2001.

12. Midwest Business Group on Health. Reducing the costs of poor-quality health care through responsible purchasing leadership. 2002.

13. Dudley RA. Pay-for-performance research: how to learn what clinicians and policy makers need to know. JAMA. 2005;294:1821–1823.

14. Burton, W, et al. The association between health risk change and presenteeism change. J Occup Environ Med. 2006;48:252–263.

15. Edington DW. Emerging research: a view from one research center. Am J Health Promot. 2001;15:341–349.

16. Loeppke R. The 3 R's of healthcare: responsibilities, risks and rewards. Health Prod Mang. 2002;5–19.

©2006The American College of Occupational and Environmental Medicine


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