Invest in Your Employees

Companies should account for proactive healthcare programs as investments in their employees, not as operating expenses.

Technology and healthcare are complimentary approaches to increasing worker productivity: the former makes you more productive while you're working, and the latter increases your ability to work. Yet only technology is treated as an investment. When corporate healthcare outlays were small, that probably made sense; now however, doing so not only fails to provide insight into just how much output is being lost, but also creates the backwards incentive to minimize and delay healthcare expenditures.

Effective, proactive health management is a significant wellness upgrade for most people, and increases their value as employees. And in financial accounting, asset upgrades are investments. The ledger entries to do so seem fairly straightforward; working life span and incident probabilities are existing actuarial computations, and the right depreciation method could be determined by medical math. I expect there are some companies already making very similar calculations to understand the performance of tuition reimbursement programs.

But why go to the trouble? Because measurement is a strong driver of behavior, and changing healthcare accounting could make a big difference in how those cash flows are managed.

There are other elements to consider, such as tax accounting and the potential increase in earnings volatility for companies with high employee churn. However, those seem like minor concerns when the potential benefits extend not just to the profitability of individual companies, but to our society as a whole; productivity is, after all, the ultimate determinant of increases in our collective standard of living.