The Hidden Risk That Is Tearing Your Company Apart Acbg 3 30 10

The Hidden Risk That is Tearing Your Company Apart:

Understanding Your Total Cost of Healthcare and its Impact on Your Profits

Presented by: Steve Heussner

March 30, 2010

2

The Pathway To Today’s Health!!!!

33

5 Confidential, unpublished property of CIGNA. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © Copyright 2008 CIGNA.

0 1000 2000 3000 4000 5000 6000

AustriaBelgiumCanada

Czech RepublicDenmark

FinlandFrance

GermanyGreece

HungaryIcelandIreland

ItalyKorea

LuxembourgMexico

NetherlandsNew Zealand

NorwayPoland

PortugalSlovak Republic

SpainSweden

SwitzerlandUnited Kingdom

United States

Per capital health expenditures in US $

Source: Organization for Economic Cooperation and Development (OECD)

Source: Organization for Economic Cooperation and Development (OECD)

0 1 2 3 4 5 6 7

AustraliaAustriaCanada

Czech RepublicDenmark

FinlandFranceGreece

HungaryIreland

ItalyKorea

LuxembourgMexico

NetherlandsNorw ay

PolandPortugal

Slovak RepublicSpain

Sw edenSw itzerland

TurkeyUnited Kingdom

United States

Acute care beds/1,000 population

Source: Organization for Economic Cooperation and Development (OECD)

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

AustraliaAustria

BelgiumCanada

Czech RepublicDenmark

FinlandFrance

GermanyGreeceIcelandIreland

ItalyKorea

LuxembourgMexico

NetherlandsNew Zealand

NorwayPoland

PortugalSlovak Republic

SpainSwitzerland

TurkeyUnited Kingdom

United States

Practicing physicians/1,000 population

0 2 4 6 8 10 12 14 16 18 20

AustraliaAustria

BelgiumCanada

Czech RepublicDenmark

FinlandFrance

GermanyGreece

HungaryIcelandIreland

ItalyJapanKorea

LuxembourgMexico

NetherlandsNew Zealand

NorwayPoland

PortugalSlovak Republic

SpainSweden

SwitzerlandUnited Kingdom

United States

Source: Organization for Economic Cooperation and Development (OECD)

Percent of population over age 65

0 5 10 15 20 25 30 35

% females

% males

% total pop.

United States

United Kingdom

Switzerland

Sweden

Slovak Republic

Norway

Netherlands

Luxembourg

Japan

Ireland

Iceland

France

Finland

Czech Republic

Source: Organization for Economic Cooperation and Development (OECD)

Obesity rate (BMI>30kg/m2)

Obesity

• The effects of obesity is similar to 20 years of aging.

• Obesity is a greater trigger for health problems and increased health spending than smoking or drinking.

• Individuals who are obese have 30% to 50% more chronic medical problems than those who smoke or drink heavily.

National Business Group on Health

Healthy Weight, Healthy Lifestyles Primary Fact Sheet

Obesity

• Overweight and obese individuals are at an increased risk for:

• Type 2 diabetes

• Heart disease

• Hypertension

• Endometrial, breast, prostate and colon cancers

• Respiratory problems

• Stroke

• Osteoarthritis

• Sleep apnea

• Gallbladder disease

• Poor female reproductive health

• Depression

Sleep Apnea

• Sleep disorder that causes excessive daytime sleepiness.

• Upper airway is blocked by relaxing soft tissue causing complete or partial obstruction.

• Breathing can stop from 10 seconds to 2 minutes.

• Episodes can occur from 5 to 100 times an hour.

Sleep Apnea Signs & Symptoms

• 92% of those diagnosed are male.

• Average BMI of 31 (Obese).

• Short, stocky neck (>17 inches).

• Snoring.

• Pauses in breathing at night.

• Waking up gasping or choking.

• Weight problems.

• High blood pressure.

~ 10 to 15% have been diagnosed

85% of OSA patients remain untreated

Obstructive Sleep Apnea United States

~20 million persons17 million

Undiagnosedfor OSA

3 millionTreatedfor OSA

Over 17 Million Undiagnosed Patients

30%

35%

50%

60%

80%

Coronary ArteryDisease

All Hypertension

Congestive HeartFailure

Stroke / TIA

Drug-ResistantHypertension

Logan et al.J. Hypertension 2001

Javaheri et al.Circulation 1999

Sjostrom et al.Thorax 2002

Schafer et al.Cardiology 1999

Bassetti et al.Sleep 1999

Prevalence of Sleep Apnea

• Tracked 339 driver associates with Sleep Apnea

• Evaluated safety performance and health care costs- 12 months before treatment and 12 months after treatment

• Findings:- Preventable crashes were reduced by 30%- Median cost of crashes reduced by 48%- Retention rate improved by 60% over fleet avg.- Health care costs reduced by over 50%- Health care savings of $539.00 per driver / month

• Expanded study in 2006 to 788 drivers – Similar results- Statistically analyzed by 3rd party

Schneider Study, 2004 - 2006

• For every dollar invested into the program, their return on investment was a two to three dollar savings on medical and accident expenses

• A 200% increase in employee retention for those in their program as compared to the company overall

• Drivers treated for sleep apnea had a 73% reduction in accidents

• A 91% reduction in hospital admissions

• And an overall a 57% reduction in healthcare costs.

Schneider Study, 2004 - 2006

¹ Kryger, et al. OSA Patients Use More Health Care Resources Ten Years Prior to Diagnosis. Sleep Research Online 1998:1(1):71-74

$5,000

$4,000

$3,000

$2,000

$1,000

$0

$7,500

$6,000

$4,500

$3,000

$1,500

0

Avg. Physician Visit Costs

Avg. Hospitalization Expenses

NON-OSAGROUP

$1,969

OSAGROUP

$6,176

NON-OSAGROUP

$3,734

$6,176

$3,734

OSAGROUP

$3,972

$3,972

$1,969

Individual Impact of OSA on Utilization Costs

• Diabetes affects nearly 21 million Americans (7% of population)

• Diabetes is the 6th leading cause of death in US

• 50% of people with type 2 diabetes also suffer from sleep apnea

1Centers for Disease Control and Prevention, National Diabetes Fact Sheet, 20052Babu, Ambika, R., et al. Type 2 Diabetes, Glycemic Control, and Continuous Positive Airway Pressure in Obstructive Sleep Apnea. Arch Intern Med 2005:165:447-452

The Link Between OSA and Diabetes

Diabetes

• 23.6 million people or 7.8% of the population of the United States has diabetes.

• Cases of diabetes doubled from 1990 to 2005.

• Cases are expected to double again by 2030.

• The incidence of Type II Diabetes in adolescence has increased 10 times over the last decade and now constitutes just over 1/3 of new pediatric diabetes cases.

• Diabetes is the 7th leading cause of death nationally, over 233,000 deaths per year.

• According to the National Center for Health Statistics, diabetes is the only major disease besides Alzheimer's with a death rate that continues to rise.

• Diabetes deaths have climbed 22% since 1990

Cost of Diabetes in the U.S.

• Total cost is $174 billion a year.

• Direct medical cost are $116 billion a year.

• Indirect costs are $58 billion a year (Disability, Work Loss, Premature Death).

• Annual health cost of a person with Type II Diabetes is 3.2 times the average American without diabetes.

Complications of Diabetes

• Of those with diabetes:

• 3 out of 5 people have 1 other serious health problem.

• 1 in 3 has two other serious health problems.

• 1 out of 10 has three other serious health problems.

• 1 out of 13 has four or more other serious health problems.

• Diabetes is the leading cause of adult blindness, lower limb amputation, kidney disease and nerve damage.

Diabetes Sources:National Diabetes Fact Sheet of the National Center for Chronic Disease

Prevention and Health Promotion; NCHS; CDC; ADA; AACE

“Behaviors drive 80% of disease, premature deaths, healthcare and productivity costs.”

Michael D. Parkinson, MD, MPH, FACPMFormer EVP, Chief Health and Medical Officer

Lumenos/Wellpoint

UM HMRC Wellness in the Workplace Annual ConferenceMarch, 2009

70% of medical & Rx claims are from poor lifestyle choices

48

71%

63% 61%54%

44%

32%22% 21%

16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Po

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Nu

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No

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Hig

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Alc

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New England Journal of Medicine

Coca Cola (12 oz. can)

Calories Sugar (g) Sugar (teaspoons)

140 36 7.2

#1 Source of Calories in the U.S. = Soft Drinks

#1 Vegetable in the U.S. = French Fries

Calories Sodium Total Fat (g)

500 350 25

McDonald’s Large Fries

Common Lunch???

McDonald’s Value Meal

Calories Sodium (mg)

Total Fat (g)

Sugar (g) / Tsps

Big Mac 540 1,040 29 9 / 2.25

Large Fries 500 350 25 0

Large Coke 310 20 0 86 / 21.5

TOTAL 1,350 1,410 54 95 / 23.75

Is Cancer Preventable by Behavior?

• “…one-third of the more than 500,000 cancer deaths that occur in the U.S. each year is attributed to diet and physical activity habits, including overweight and obesity, while another third is caused by exposure to tobacco products.”

• “Although genetic inheritance influences the risk of cancer, most of the variation in cancer risk across populations and among individuals is due to factors that are not inherited.”

American Cancer SocietyCancer Journal for Clinicians

January 28, 2010

Behavioral Causes of Death

Mokdad, A.H., Marks, J.S., et al. Actual causes of death in the United States. JAMA. 2004; 291:1238-1245.

Actual Cause No.(%) in 1990 No.(%) in 2000

Tobacco 400,000 (19) 435,000 (18.1)

Poor diet and physical inactivity 300,000 (14) 400,000 (16.6)

Alcohol consumption 100,000 (5) 85,000 (3.5)

Microbial agents 90,000 (4) 75,000 (3.1)

Toxic agents 60,000 (3) 55,000 (2.3)

Motor vehicle 25,000 (1) 43,000 (1.8)

Firearms 35,000 (2) 29,000 (1.2)

Sexual behavior 30,000 (1) 20,000 (0.8)

Illicit drug use 20,000 (<1) 17,000 (0.7)

Total 1,060,000 (50) 1,159,000 (48.2)

Current tobacco use

Reported use of medications

Sedentary lifestyle

Rate Health as poor or fair

Absent 5 days or greater in the past year

Blood pressure 130/85 or greater

Cholesterol 220 or greater

Greater than 20% over ideal body weight

Report high stress on the health risk appraisal

Glucose 110 or greater

HDL less than 40 mg/dl

LDL greater than 100

Triglycerides 150 or greater

Family history of heart disease

Family history of diabetes

High fat intake

Current Diabetes

Alcohol use

Master List of Risk Factors

There is a direct relationship between the number of risk factors an individual has and their propensity to be a low, medium or high spender of the health care system.

0 – 1 risk factors = low risk

2 – 4 risk factors = medium risk

5 or more risk factors = high-risk

Source: University of Michigan Health Management Research Center

University of Michigan Health Management Research Center

Less than 45 45 to 64 Greater than 650.0%

20.0%

40.0%

60.0%

80.0%

100.0%

3.00% 10.50%18.60%9.50%

32.00%

61.40%

25.30%

56.40%

80.00%

Low Risk

Excess Self-Reported Major Diseases Associated with Excess Risks

Percent with Disease

Med Risk

Age Range

High

Musich, McDonald, Hirschland, Edington. Disease Management & Health Outcomes 10(4):251-258, 2002.

University of Michigan Health Management Research Center

Medical/Drug Cost Comparison by Risk Status

Yen, Witting, Edington. AJHP. 6:46-54, 1991

University of Michigan Health Management Research Center

Low

19-34 35-44 45-54 55-64 65-74 75+$0

$3,000

$6,000

$9,000

$12,000

$1,776 $2,193 $2,740

$3,734 $4,613

$5,756

$1,414$2,944

$3,800

$5,212

$6,636

$8,110

$2,565

$3,353

$4,620

$6,625

$7,989

$8,927

$5,114 $5,710

$7,991

$10,785

$11,909 $11,965

Costs Associated with RisksMedical Paid Amount x Age x Risk

Annual Medical Costs

Med Risk

Age Range

High

Non-Participant

Edington. AJHP. 15(5):341-349, 2001

Spill Over Medical Costs

• Work Comp

• LTD & STD

• Absenteeism

• Presenteeism

• Productivity

University of Michigan Health Management Research Center

Relative Value of Health to the Organization: Total Value of Health

Presenteeism AbsenteeismSTDLTD

Medical & Pharmacy

Edington, Burton. A Practical Approach to Occupational and Environmental Medicine (McCunney). 140-152. 2003

Worker’s Compensation

Time-Away-from-Work

Health and Presenteeism

• The Institute for Health and Productivity Management coined the term “presenteeism”.

• The time when employees continue to work despite the presence of illness that reduces their productivity.

• Good health optimizes employee functionality; in other words, individuals who feel better also work better.

University of Michigan Health Management Research Center

Total Disability Cost by Risk Status

Wright, Beard, Edington. JOEM. 44(12):1126-1134, 2002

University of Michigan Health Management Research Center

Estimated Loss of Productivity by Risk Status

*p<.05, **p<.01

Burton, Chen, Conti, Schultz, Pransky, Edington. JOEM. 47(8):769-777. 2005

University of Michigan Health Management Research Center

$840 $1,261

$3,321

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Low Risk (0-2Risks)

HRA Non-Participant

Medium Risk (3-4 Risks)

High Risk (5+Risks)

Excess Costs

Base Cost

Excess Medical Costs due to Excess Risks

$2,199

$3,039$3,460

$5,520

Edington, AJHP. 15(5):341-349, 2001

University of Michigan Health Management Research Center

$175 $292

$757

$0

$500

$1,000

$1,500

Low Risk (0-2Risks) N=685

HRA Non-Participant

N=4,649

Medium Risk (3-4 Risks) N-520

High Risk (5+Risks) N=366

Excess Costs

Base Cost

Excess Disability Costs due to Excess Risks

$491$666

$783

$1,248

Wright, Beard, Edington. JOEM. 44(12):1126-1134, 2002

36% of Absence, STD, Worker’s Comp

University of Michigan Health Management Research Center

Excess On-The-Job Loss Due to Excess Risks

12.2%

6.2%

0%

5%

10%

15%

20%

25%

30%

Low Risk (0-2 Risks)n=17,947

Medium Risk (3-4 Risks)N=6,959

High Risk (5+ Risks) n=3,469

Excess CostBase Cost

University of Michigan Health Management Research Center

Outcome Measures

Low-Risk

Medium-Risk

High-Risk

Excess Cost Percentage

Short-term Disability $ 120 $ 216 $ 333 41%

Worker’s Compensation

$ 228 $ 244 $ 496 24%

Absence $ 245 $ 341 $ 527 29%

Medical & Pharmacy

$1,158 $1,487 $3,696 38%

Total $1,751 $2,288 $5,052 36%

Association of Risk Levels with Corporate Cost Measures

Wright, Beard, Edington. JOEM. 44(12):1126-1134, 2002

2007 Duke University Medical Center Study Findings

• Study includes 11,728 employees from 1997 to 2004

• Obese employees:

• Filed twice as many WC claims as non-obese.

• Had 7 times higher medical costs from those claims.

• Lost 13 times more days from work injury or work illness.

72

Business Impact of Today’s Poor Health

Source: The McKinsey Quarterly, Dec 2008 Arch. Of Internal Medicine, April 2007

0%

200%

400%

600%

800%

1000%

1200%

18.5 - 24.9 BMI (Recommended)

30 - 34.9 BMI (Obesity class I)

35 - 39.99 BMI (Obesity class II)

?40 BMI (Obesity class III)

100% 118% 155% 191%100%

236%

347%

755%

100%

430%

729%

1194%

Medical Claim Cost Workers Comp Cost Productivity/Lost Time

Other Areas Impacted by Poor Health

• Insurance premiums

• Retained losses

• Stop loss deductible payments

• Self-insured claims

• Internal administrative expenses

• Risk, safety & claims staffing

• HR workload

Direct and Indirect Burden of Illness Study

• Institute of Health and Productivity, Cornell University

• Using The Medstat Group’s database

• The study included 374,799 employees from 1997 to 1999

• Reported on the financial consequences of the top 10 most costly and prevalent conditions

Direct and indirect burden of illness, by condition and service area (using $23.15/hour wage estimate).

JOEM, Volume 46, Number 4, April 2004

Cost of Excess Risk

Low Risk Med Risk High Risk

STD $222 $400 $616

WC $422 $452 $918

Absenteeism $453 $631 $994

Med & Rx $2,143 $2,752 $6,841

Presenteeism $4,860 $6,353 $14,054

Total $8,100 $10,588 $23,423

Excess Cost/Risk $0 $2,488 $15,323

Excess Risk Impact on Profits

Number of Employees 500

Low Risk Med Risk High Risk

Risk Distribution 35% 35% 30%

Ex Cost From Ex Risk 0 $435,313 $2,298,375

Total Excess Cost $2,733,688

Profit Margin 0.05

Revenue Needed to Cover Excess Risk $54,673,750

10% Improvement

Number of Employees 500

Low Risk Med Risk High Risk

Risk Distribution 45% 30% 25%

Ex Cost From Ex Risk 0 $373,125 $1,915,313

Total Excess Cost $2,288,438

Profit Margin 0.05

Revenue Needed to Cover Excess Risk $45,768,750

20% Improvement

Number of Employees 500

Low Risk Med Risk High Risk

Risk Distribution 55% 25% 20%

Ex Cost From Ex Risk 0 $310,935 $1,532,250

Total Excess Cost $1,843,188

Profit Margin 0.05

Revenue Needed to Cover Excess Risk $36,863,750

“The problem is that no entity in the current U.S. health care system makes any money until people get sick.”

- Dee W. Edington, PhD

Health Management Research Center, University of Michigan

HR Magazine, June 2009

Thank you.

Steve HeussnerPresident & CEO214-420-7101steve@acbg.net

www.acbg.net