The True Cost of Poor Worker Health is a C-Suite Issue

Jan. 26, 2016
Dr. Ron Loeppke explains why the cost of absenteeism and presenteeism should be of great concern to employers.

Does your employer want to grow top-line revenue? It seems like a dumb question; what employer doesn’t want to make more money? And yet, says Ron Loeppke, MD, MPH, many employers essentially are throwing money away by not addressing employee presenteeism and its causes, or recognizing that an integrated approach to employee health and wellness can reduce the number of absences and days lost to presenteeism.

“For employers, every $1 in direct costs – medical, pharmacy – there typically are $2.30 in health-related productivity costs,” he noted. When chronic conditions – like diabetes, asthma, allergies, hypertension and depression – are not being well-managed, and that contributes to presenteeism, absenteeism and a loss of productivity and associated costs.

The concept of reducing presenteeism as a way to boost productivity and lower costs is nothing new. Loeppke, in an interview with, shared information from an article that he published in the International Journal of Workplace Health Management in 2008. In that article, “Value of Health and Power of Prevention,” Loeppke shared the experience of a large employer that wanted to present a business case to its executive team by estimating the total health-related costs paid by the company (medical, pharmacy, presenteeism and absenteeism) and considering if an integrated approach to health management would reduce those costs.

According Loeppke, the employer was losing the equivalent of eight days of productivity per full-time employee per year to absenteeism or presenteeism. Loeppke, who is vice chairman of U.S. Preventive Medicine Inc. and a member of the UL Workplace Health & Safety Medical Advisory Board, said that the cost of the loss to the employer amounted to $2,598 per full-time employee per year. When the employer added it up, it came to $153 million per year.

If the employer could reduce that productivity loss by one day per year per full-time employee, it would add $18.8 million to its EBITDA, said Loeppke. For that employer to generate that same impact on EBITDA by growing their top-line revenue, the sales revenue would have to grow by $76.6 million, he added.

To put that cost-savings in terms the C-suite understood, the company CFO translated that number into shareholder value. Based on the 13 times EBITDA multiple that the company was trading at in the public market, that $18.8 million converted to a $244.4 million market cap value improvement, which translated to $.84 per share.

“Most companies struggle to add a nickel to their value per share,” said Loeppke. “By eliminating one of those lost days per employee per year – one out of eight – that company could add nearly a dollar per share in value.”

Related article: "Phoning It In: Do You Know How Much Presenteeism Costs Your Business?"

Should the cost of absenteeism and presenteeism be a C-suite concern? EHS Today Chief Editor Sandy Smith discusses why this issue should be of greater concern to manufacturing executives on IW's Manufacturing Voice

Loeppke noted that while physical ailments – diabetes, obesity – contribute to presenteeism, depression has been identified as one of the greatest contributors. “In a study published in the Journal of Occupational and Environmental Medicine, “Health and Productivity as a Business Strategy: a Multiemployer Study”, we found that depression was the No. 1 cause of presenteeism,” he said. “Unfortunately, depression is often underdiagnosed and undertreated. Chronic stress is a huge issue and can be a contributor to depression. In fact, stress may be one of the most toxic hazards in some workplaces. Too many times I have seen sick workers because of sick, toxic workplaces.”

And depression can be a double-whammy for employers and employees. Often, workers suffer stress and depression if they’ve been diagnosed with a physical issue, like diabetes. The diabetes is treated, and the depression often goes untreated because of the way companies set up their healthcare and wellness programs. When seeing a physician, employees might have to pay a low co-pay or a small percentage of the total cost of the visit. With EAP programs, the go-to for emotional or mental issues, three visits to a counselor might be covered under the healthcare plan, but after that, the employee is on his or her own to pay for treatment and medication.

“We have to address the whole person – physical, mental, emotional, social and even financial domains impacting their well-being– to have a healthy workforce. Health impacts work and work impacts health.. Research has shown that workers suffering from some physical or mental health conditions can have twice the likelihood of an on-the-job injury,” said Loeppke.

He recommends that companies integrate their health promotion (wellness) and health protection (safety) strategies. Too often, different aspects of these programs are in silos: workplace injuries are handled by the EHS department and an outside workers’ compensation provider; wellness issues – smoking cessation, exercise – are handled by human resources and a different provider; employee healthcare is handled by human resources and a third provider; and mental health issues are handled through an EAP (fourth provider) and often, employers aren’t even aware that employees are utilizing them. But as Loeppke pointed out, the outcomes from these programs impact each other and employees. Injuries and illness can contribute to depression and stress, while wellness programs can help prevent injuries and illnesses, while depression and stress can contribute to employee distraction, which contributes to on-the-job injuries.

When these various program providers offer conflicting messages, it leaves workers – the patients – at a loss as to what to do, Loeppke said.

“As a physician, I was struck by a comment from a patient. She said, ‘My employer has different providers for workers’ comp, health insurance, EAP and wellness programs. When they carved out these services [into different silos], I got carved up. What should I do, doctor?’”

Loeppke suggests that employers encourage providers to hold “grand rounds,” particularly if employees are using more than one service at a time. The more integrated the care and the messaging, the more likely the employee – the patient – will have a successful outcome. By managing the whole person, those presenteeism days will decrease, saving money in the long run for the employer and improving the health and well-being for the employee. He said that when a nurse at his company is on the phone talking to an employee about a healthcare issue and the employee is showing signs of additional issues such as depression or financial stress because of healthcare expenses, they suggest what Loeppke calls “a warm transfer.” The nurse suggests to the employee that he or she connect the worker to a counselor with the EAP program, so that the employee can get help immediately, something that only can be done when programs are integrated and providers know they need to work together to provide employee health and wellness services.

“The bottom line is that good health is good business--from the exam room to the board room. Furthermore, evidence based integrated health and safety is a strong dose of preventive medicine that is good for the individual as well as the employer—and can lead to a positive sustainability strategy at both a personal as well as an organizational level,” said Loeppke.

About the Author

Sandy Smith

Sandy Smith is the former content director of EHS Today, and is currently the EHSQ content & community lead at Intelex Technologies Inc. She has written about occupational safety and health and environmental issues since 1990.

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