A multi-employer database that links medical, prescription drug, absence, and short term disability data at the patient level was analyzed to uncover the most costly physical and mental health conditions affecting American businesses. A unique methodology was developed involving the creation of patient episodes of care that incorporated employee productivity measures of absence and disability. Data for 374,799 employees from six large employers were analyzed. Absence and disability losses constituted 29% of the total health and productivity related expenditures for physical health conditions, and 47% for all of the mental health conditions examined. The top-10 most costly physical health conditions were: angina pectoris; essential hypertension; diabetes mellitus; mechanical low back pain; acute myocardial infarction; chronic obstructive pulmonary disease; back disorders not specified as low back; trauma to spine and spinal cord; sinusitis; and diseases of the ear, nose and throat or mastoid process. The most costly mental health disorders were: bipolar disorder, chronic maintenance; depression; depressive episode in bipolar disease; neurotic, personality and non-psychotic disorders; alcoholism;, anxiety disorders; schizophrenia, acute phase; bipolar disorders, severe mania; nonspecific neurotic, personality and non-psychotic disorders; and psychoses. Implications for employers and health plans in examining the health and productivity consequences of common health conditions are discussed.