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Total Value/Total Return(TM) Tells the Pitney Bowes Experience: Healthier Employees Translate into a Healthier Bottom Line

Posted on: Monday, 17 April 2006, 15:00 CDT

WASHINGTON, April 17 /PRNewswire/ -- For several years now, Pitney Bowes has been pushing the envelope on health care and benefits design with radical ideas such as increasing access to appropriate health care, including preventive tests and measures as well as reducing copayments on certain prescription drugs used to manage chronic diseases. The company's philosophy reaches beyond mere altruism; it's about recognizing that healthy employees lead to a healthy bottom line.

"Benefits have become an exercise in cost management, and we're not looking at the impact of [such measures] on the asset, the human asset," notes Jack Mahoney M.D., corporate medical director and global health care management director. "One of the most popular buzz words right now is evidence-based medicine; we're striving for evidence-based benefits."

Mahoney, along with David Hom, vice president in the strategic H.R. initiatives department, led the benefits revolution at Pitney Bowes. Now they're sharing their experience in a book unveiled today at the World Health Care Congress 2006. Total Value/Total Return:(TM) Seven Rules for Optimizing Employee Health Benefits for a Healthier and More Productive Workforce, recounts the innovative approach to health and benefits design at Pitney Bowes, a leading provider of office technologies. Moreover, the rule-based guide is written to challenge CEOs, CFOs and HR executives to rethink their benefits plans and strategies. Rather than focusing on cost cutting, Total Value/Total Return outlines how to gain competitive advantage by investing in employee health and removing barriers to effective treatment.

The biggest challenge facing both employers and employees is understanding the true costs and benefits of health, which are significantly more than direct costs for insurance, hospital stays and pharmaceuticals. When Hom and Mahoney dug into the data on total health care cost, their findings prompted them to propose a radical change in approach at Pitney Bowes: invest in items such as preventive care and prescription medications for chronic conditions. The gamble paid off for Pitney Bowes, and the company's employees and bottom line are healthier.

Mike Critelli, CEO of Pitney Bowes, introduced the book and candidly talked about his company's experience and the raised eyebrows he received from benefits consultants for allowing Hom and Mahoney to turn the company's health and benefits design inside out. For example, Pitney Bowes has discovered that barriers such as shifting insurance premiums to employees, carving out preventive practices from health plans and raising copays on prescription drugs across the board simply don't reduce costs over the long-term, but do adversely impact the bottom line.

The Pitney Bowes Experience

Pitney Bowes has lowered copays and removed barriers to better health for its 34,000 employees. By lowering copays on medications for diabetes, the company decreased pharmacy costs by 7 percent and direct health care costs for employees suffering from diabetes by 6 percent over three years. These results are convincing other organizations to join the movement.

The evolution of this maverick approach to benefits design started with the realization by Pitney Bowes executives that health care is the only aspect of American business where companies repeatedly spend more money each year for less value. Moreover, sinking more money into health benefits doesn't seem to correlate with improvement in the health of employees or the company's bottom line.

In response, Pitney Bowes implemented a number of "healthy" practices including preventive care and participant incentives. These are the same benefits that consultants often target for cuts. Through its onsite health improvement program, Health Care University, Pitney Bowes provides incentives and rewards for employees who engage in healthy behaviors ranging from wearing seat belts to quitting smoking, nutritional counseling, health screenings and more. At the same time, Pitney Bowes expects its employees to take responsibility and be accountable for their own health.

"We provide a health benefit," Mahoney says, referring to items such as healthy foods in the cafeteria and wellness programs. "We also provide a health care benefit, and they are inextricably linked. The key is how do you move the individual to invest in the health benefit, so that none of us are paying a disproportionate amount for the health care benefit."

Rule 1: The health of your organization begins with your people. Rule 2: To realize total value, you must understand total costs. Rule 3: Higher costs don't always mean higher value. Rule 4: Health begins and ends with the individual. Rule 5: Avoid barriers to effective treatment. Rule 6: Carrots are valued over sticks. Rule 7: Total value demands total teamwork.

The first rule offered by Total Value/Total Return is that health should be a core value for any organization because "The health of your organization begins with your people." While this may sound warm and fuzzy, esoteric even, Mahoney and Hom back it up with numbers, which leads to Rule 2 -- understand total costs.

"When people don't feel well, they don't perform well and that has a significant cost now and for the future of your company," Hom says. "It's not rocket science, just good old common sense backed by a tremendous amount of data."

Data-Driven Benefits Design

While most organizations look at health care according to traditional dashboard metrics-measurable direct costs such as hospital costs, doctor fees and lab and diagnostic expenses -- they totally ignore the fact that up to two-thirds of the costs to an organization are indirect. Mahoney and Hom spent considerable time and care collecting data on the disease and injury incidents affecting Pitney Bowes employees. They looked at the direct monetary expense of providing care as well as the hidden costs that often carry long-term impact such as absenteeism, presenteeism (the employee is at work, but not 100 percent effective because of ill health), workers' comp and short-term disability.

Chronic conditions such as asthma, allergies, diabetes and irritable bowel syndrome all lead to absenteeism and reduced productivity. The key is to figure out what conditions drive their health care costs. If it's diabetes, they have to mine the data further to see what the true overall costs are -- sick days, poor performance, etc. -- not just the out-of-pocket medical expenses.

Knowing costs is an important step in the process because it allows companies to design benefits that provide the highest value. Mahoney and Hom caution in Rule 3 that higher costs often don't translate into higher value. "The bottom line is that health is an investment," Hom says.

Rule 4 calls for engaging the individual employee to take responsibility for his or her health. This reaches beyond explaining health insurance benefits to encouraging employees to taking responsibility for healthy behavior and lifestyle choices. It's a two-way street, however, that Mahoney and Hom point out cannot be achieved if a company's benefits plan revolves around removing choices and offering no incentives for making healthy decisions.

Knocking Down Barriers to Healthy Decisions

Perhaps the most critical rule, No. 5, calls for "removing barriers." The Pitney Bowes experience proves that a company can remove barriers and still reduce costs. The reason is simple: when people adhere to a prescribed treatment, they better control their health. A case in point is pharmaceutical benefits. Like many companies, Pitney Bowes uses a tiered system for prescription drug copays. Tier 1 has the lowest co-pay of 10 percent while tiers 2 and 3 are 30 percent and 50 percent respectively. Three years ago, the company placed all medications -- name brand and generics -- for asthma, diabetes and hypertension in tier 1.

This move again bucked the standard trend of pushing employees toward generics, a strategy that Pitney Bowes believes backfires because it reduces the likelihood that the individual will fill the prescription or take it as advised. Hom and Mahoney cite a survey that showed a 23 percent decrease in adherence to treatment when companies doubled the copayments for diabetes medicines.

They point out that their company spends more than $1 million a year to improve adherence to medications on these three chronic diseases, and saves at least that much in return. One of the biggest benefits, they write, is the return for showing employees "we are willing to invest in their health where it matters." It was a leap of faith to lower copays on the medications for chronic conditions, but the move proved it could drive behavior to higher adherence.

The City of Asheville, North Carolina, experienced impressive cost-savings when it reduced copayments on diabetes related care. The city realized a 24- percent average decrease in medical costs for employees with diabetes as a result of improving access to appropriate care.

Modifying behaviors requires an organization to value health and provide incentives to change. Rule 6 simply states "Carrots are valued over sticks." Providing negative reinforcement to smokers, for example, hasn't been as effective as providing financial and benefit incentives to stop smoking. Incentives aren't just for employees. Providers also need to see that there is an expectation and reward for them to deliver higher value.

Finally, Rule 7 emphasizes, "Total value demands total teamwork." The Pitney Bowes experience shows improvement and cost-savings don't happen in a vacuum. It takes teamwork from all parties involved. Moreover, building a healthier company isn't a destination.

"It's a journey," says Hom, who also credits GlaxoSmithKline, sponsor of this publication, for leading the way to understanding the important role employers play in managing today's health care crisis.

"If more employers and health care plans placed value on health as Pitney Bowes does, I believe we could begin to reverse the current trends of health care inflation and strengthen our country's position in the global economy," Critelli said.

Total Value/Total Return, supported by GlaxoSmithKline, was distributed to the media and executives attending the World Health Care Congress 2006 in Washington, D.C.

Total Value/Total Return(TM)

CONTACT: Jamie Buelt, Spokesperson for Total Value/Total Return(TM),+1-515-248-1797, or, +1-515-249-1857

Web site: http://www.worldcongress.com/events/NW600/index.cfm

Source: PRNewswire

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