Frost & Sullivan: Wellness a Critical Factor for Healthy Corporate Wealth

SINGAPORE, May 10 /PRNewswire/ -- Corporate companies bear approximately 25% of the total nation's health expenditures in the USA. With rising direct and indirect costs, up to 50% of corporate revenues are spent on managing ill health of employees.

(Logo:  http://www.newscom.com/cgi-bin/prnh/20081117/FSLOGO)

Yet, it is evident that there is no correlation between healthcare expenditure and productivity since despite this growing expenditure on employees' healthcare, globally, the workforce pool is riddled with more health issues and problems than ever before. Additionally, productivity costs due to poor health is estimated to be double that of the direct costs.

Dr Pawel Suwinski, Principal Consultant, Frost & Sullivan says that only 31% of healthcare expenditure in organizations are spent on direct medical costs, whilst 69% of medical costs are due to productivity loss.

Only a portion of total health care costs is direct: medical, pharmaceutical, worker's compensation and salary continuation. The majority of health related costs faced by organisations are indirect, e.g. absenteeism, temporary staffing, training interim employees, administrative re-work and presenteeism – which is being at work, but not being fully functional.

Absenteeism and presenteeism and are used to measure productivity losses that are related to personal and family health problems, stress and unhappiness. In 2004, in the US, this cost employers $1,685 per employee per year, amounting to a total annual loss of $225.8 billion.

Not only does productivity shrink in tandem with increased expenditure, compounding the issue is that the pool of productive employees is shrinking as people start work at a later age, whilst the retirement age remains unchanged. Additionally, even though life expectancy has increased, the age people are afflicted with chronic and debilitating diseases is moving downwards, hence people start getting sick earlier; and claims for medical and death insurance begin at a younger age. The combination of these factors means that the draw on a country's GDP is higher.

Suwinski says that at least 50% of medical costs are preventable by lifestyle adjustments, and 75% of all medical costs caused by chronic diseases are best prevented and treated by lifestyle adjustments.

"The irony of our time is that although we live longer and have access to more technology and conveniences than previously, we are busier, more stressed and unhappier than before. This is primarily due to the changes in the environment and lifestyle, coupled with bad habits such poor diet, alcohol consumption, smoking and physical inactivity," Suwinski states.

The top five biggest contributors of health complications are attributed to obesity, high blood pressure, high cholesterol, smoking and poor diet. "Causes of poor health are caused by ageing; which increases chances of chronic and age related diseases, changing disease patterns which may are lifestyle induced and chronic in nature, and stress brought about by lifestyle demands," Suwinski elaborates.

In Malaysia, the Ministry of Health has reported that by 2035, the percentage of old people 65 years old and above will surpass 10%. "One of the best ways to judge how unhealthy a nation is to check its percentage of population obesity. In 1996, Malaysia's obesity was at 4.4% whist the US was at 13.4%; however, in 2006 Malaysia was at 14% whist the US was at 33.8%. That Malaysia's obesity level is growing at a faster rate than the US is an alarming indication that this is an area to be concerned about and paid attention to," Suwinski comments.

Suwinski says, "The most essential and valuable asset and resource of companies of the 21st century, are its employees, yet whilst companies recognise the importance of maintenance and regular checks for maximum performance of assets such as machinery, most companies approach healthcare as a 'benefit' to battling symptoms, instead of addressing the causes of poor health. Corporate healthcare management programmes are retrospective and fragmented in nature. The fact is, poor health leads to productivity loss, and indirect costs are twice as expensive as direct medical costs, thus directly impacting corporate profitability."

States Suwinski, "50% percent of all diseases can be avoided and prevented by lifestyle changes, and 50% of all medical costs can be saved with integrated and comprehensive health management. Typically, 80% of medical costs are driven by 20% of the employees."

Suwinski elaborates that wellness has to be holistic and encompasses physical, spiritual, social, emotional, intellectual and environmental wellness. For effective implementation, companies have to employ wellness programmes that are holistic, integrated, compulsory, strategic and evidence based.

Wellness programmes reduce medical costs by preventing the occurrence of poor health that negatively impacts productivity. Health Risk Assessments is the single most important tool used in wellness programmes to determine the pre-existing conditions that make person vulnerable to poor health.

"For every Dollar lost to total medical costs more than 50% could be easily prevented (recovered) by wellness interventions. In Malaysia, currently, the average employee's direct medical cost is around RM 1,200.00 per year and this constitutes 30% of the total medical costs. RM 2,800.00 is lost to indirect medical costs in the form of loss productivity caused by presenteeism and absenteeism. The total savings achieved by implementing a corporate health management programme will amount to at least RM 2,000.00 per employee per year," he asserts.

Suwinski explains that significant opportunity exists to reduce long-term cost of health benefits by improving productivity through appropriate health management programmes. "As healthier employees are more productive, aligning employee health management with corporate strategic plans creates competitive advantage," he affirms.

Employers in the knowledge economy who invest in health management and not healthcare management, realise employee health is a long term investment that will support corporate growth as employees' good health is the central and essential quality that determines level of productivity. "Through Integrated Health Management (IHM), investing in your most valuable assets is a viable business strategy that delivers sustainable benefits," Suwinski finishes.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com.

SOURCE Frost & Sullivan