Sick Workers Impact the Bottom Line

The Milken Institute, a Santa Monica, Calif.-based think tank, presented their findings at an event held at The Heldrich Hotel that was sponsored by the New Jersey Health Care Quality Institute of Trenton. The study focused on “presenteeism,” which the institute defines as chronically ill workers who “show up for work to avoid losing wages” but “perform far below par.”

New Jersey could save $31 billion against projected costs of $113 billion in 2023 (and the U.S. could save $1.1 trillion against $4.1 trillion) if reasonable improvements in therapies and people’s health-related behaviors were started today, the report said.

Chronic diseases, such as hypertension, cancers and mental disorders, could be better managed and, in some cases, potentially averted through more effective treatments and preventative measures such as weight control and smoking cessation programs, according to the Milken Institute.

“There are a lot of larger companies that have been looking at these issues and trying to implement wellness programs because it has a real impact on the bottom line,” says Christine Stearns, who overseas health and legal affairs for the New Jersey Business & Industry Association, a Trenton-based trade group. “The challenge that we face is trying to figure out how we can translate some of these initiatives to smaller businesses, which perhaps don’t have the same kind of resources and large populations of employees [as big companies].”

Chronic diseases cost New Jersey a total of $39 billion in 2003, the last year for which data was available, with $31.5 billion, or 81 percent, in lost productivity and $7.5 billion in treatment costs, said the Milken Institute.

With more than 4.6 million cases of chronic diseases, New Jersey ranked 32nd in the country in seven areas—heart disease, diabetes, pulmonary conditions, stroke, cancers, hypertension and mental disorders, according to the report, which was first released in October. Utah, which had the lowest number of cases, ranked first and West Virginia came in last.

Nationally, the diseases cost the U.S. a total of about $1.3 trillion in 2003—more than $1 trillion, or 79 percent, in lost productivity, and $277 billion in treatment costs, according to the group’s report. Of the $1.05 trillion, $828.2 billion was lost due to presenteeism.

Smaller firms may be able to take some lessons from supermarket operator Safeway Inc. of Pleasanton, Calif., says Joan Verplanck, president of the New Jersey Chamber of Commerce in Trenton. “Safeway has undertaken a whole preventative approach to dealing with obesity in the workplace. I think we can use the Safeway model to export to smaller companies because we can demonstrate that with their data, it actually does work.” Safeway operates 1,761 stores in the U.S. and Canada and had 207,000 employees at the end of 2006, according to the company’s Web site.

“Small-business people are not the ones to be leaders in things that are not supported by data because they don’t have the time or energy to invest in something that might not pan out,” adds Verplanck.

It took Safeway about three or four years to see a return on its investment in workplace health and wellness programs, says Ross DeVol, director for regional economics at the Milken Institute. “Today, their health care expenditures are almost 25 percent lower than they would have otherwise been without the changes.”

Other large companies such as Marriott International, Inc., and Pitney Bowes Inc., have also launched health and wellness programs in their workplaces, says DeVol. “They’ve actually used various incentives, whether it’s cash prizes as low as $200 or television sets, where they’ll team employees together in groups and set a challenge to change some behavior, whether it’s to reduce smoking rates by so much or to reduce the body mass index by a certain percentage.

“Those companies have seen their health care costs either rise much slower than they did previously, or in some cases actually decline,” he says.

There’s an economic incentive for all companies to stick by their sick workers and help them to get healthier, says John Galandak, president of the Commerce and Industry Association of New Jersey, a trade group based in Paramus. “It’s very costly to recruit, train and maintain employees. They’ve made that investment and they want to continue to invest.”

DeVol says it will take a combined effort from employers, insurers and government agencies to change people’s health behaviors for the better. He calls obesity “public enemy number one” when it comes to chronic diseases, saying it contributes heavily to rising rates of cardiovascular disease, diabetes and cancers.

Pointing out a Swanson Hungry Man All-Day Breakfast, a frozen-food product made by Pinnacle Foods Group Inc. that tips the scales at 1,170 calories and 61 grams of fat, DeVol says the food industry should also take responsibility for its role in the nation’s health problems. “I’ve heard some lawyers say there may be as much potential litigation involved with the food-processing industry as there have been for tobacco companies,” he says. “Obviously it’s a little more complicated. We all need to eat. We need calories to live. We don’t need to smoke.”

E-mail to tgaudio@njbiz.com