healthcare-costsThere’s a simple formula employers and consultants should remember when they’re devising ways to keep healthcare costs low: excess costs follow excess risks.

Zero Trends' Business Concept and Cost Savings

This is the central concept behind our model of care, popularized by Zero Trends: Health as a Serious Economic Strategy, the landmark book by Dee W. Edington, PhD, former Director of the University of Michigan Health Management Research Center. In this book, Edington draws from his 30 years of research and experience to explain how organizations can control health management and disability expenditures while keeping their workforces healthy and productive. 

Zero Trends business concept (excess costs follow excess risks) encapsulates the population health risk management model. Population risk management looks at all the factors impacting an individual’s health, including genetic predisposition to disease, environmental conditions such as air and water quality, and, in particular, lifestyle risks such as tobacco use, alcohol and substance abuse, eating habits, and levels of physical activity. Population health risk management also embodies whether people with chronic conditions such as diabetes and asthma are able to manage their condition and are at the standard of care, an important factor in preventing serious complications.

Therein lie the “risks.”

Consider, for example, how much excess healthcare costs are tied to employees with high health risks. In a population of 2,500 employees, the U.S. Centers for Disease Control and Prevention estimates that 629, or 31 percent, will have hypertension. The added cost of hypertension is $3,864 per case per year, according to Integrated Healthcare Information Services. Reducing the number of hypertension cases by 10 percent can save an employer $243,873 annually.

However, the key to population health risk management is working with patients of all risk levels, not just medium and high-risk patients. Because as Edington’s data and other research indicates, when workers move out of the medium- and high-risk categories, others are already moving in. Companies need programs that prevent the upward flow from low-risk to medium- and high-risk. “Not getting worse” is imperative in containing costs for employers.

Employers can and should begin looking at their healthcare costs as the end product of a system absolutely within their control. Healthcare should be thought of in the same way as production, distribution, and other business systems: a set of interdependent parts that can be measured, benchmarked, and improved. Improvement will not occur without managing a total population’s health – from the fit and healthy to the obese – and providing a lasting health and wellness culture.

Download: Population Health Management 2.0

Topics: Cost, Health Insurance, Corporate Health