Monday, March 24, 2014

The ROI of Wellness

There has been a lot of talk about the ROI of wellness programs lately. Some of the most discussed studies being the one published in 2010 by Harvard economist Katherine Baicker, the 2013 RAND corporation study of employee wellness and the 2014 PepsiCo disease management and wellness study. In the simplest terms: 

  • The Harvard study showed ”medical costs fall by about $3.27 for every dollar spent on wellness programs.” 
  • The RAND study concluded that "Participation in a wellness program over five years is associated with lower health care costs and decreasing health care use. The average annual difference is an estimated $157, but the change is not statistically significant." 
  • The PepsiCo study demonstrated: "When we looked at each component [disease management and lifestyle management] individually, we found that the disease management component was associated with lower costs and that the lifestyle management component was not. We estimate disease management to reduce health care costs by $136 per member per month, driven by a 29 percent reduction in hospital admissions." 

Here's my take. First, wellness programs are the right thing to do. And, no one disagrees that done well, they send a strong message that you care about your employees. There is also a lot of agreement that they have a positive impact on engagement and help you recruit and retain people that want to work in a healthy environment. Wellness programs may positively impact attendance and productivity too, but the evidence there is not as strong.

Second, you have to know your workforce. Carol Harnett reported that another thought leader, Dee Edington concluded"on average, the best-performing wellness program in terms of return-on-investment was a smoking cessation initiative. The caveat, however, was that it takes -- on average -- about eight years before a positive ROI is captured. For all the other wellness-related schemes, approximately 16 years must go by before you realize a return on the money spent." When I look at those numbers, I'm not so quick to shrug them off. Our average tenure is 8.5 years, so we have a lot of staff members that have been at ASHA more than 16 years. We also provide health insurance coverage to our retirees, so we have a very long term investment in the health of our staff. We focus on making the healthy choice the easy choice and implementing wellness initiatives that are tailored to our staff and our needs. Matter-of-fact, that's what James Sumortin from Twitter and I just talked about during our presentation at the Health and Benefits Leadership Conference

Third, there is general agreement that 20% of the members of a health plan are responsible for 80% of the claims in any given year. There are valuable programs like disease management (if you believe the PepsiCo study) and Centers of Excellence that target this 20% and direct them toward high quality care (which is also cost effective.) But, 59% of the next years top 20% are in this years 80%. We have to develop interventions that stop the migration of people from the healthy 80% into the unhealthy 20%. Aaron Davis and I discussed this over lunch last Friday and this is what his company Switchbridge is focused on.

My take on all this is filtered through a population health mindset. I just read What Great Corporate Wellness Programs Do. In the introduction, the authors suggest that workplaces have a unique power to reframe the mindset around health. That got me to thinking about the effect smoke-free workplaces have on smoking behavior. Studies prove that smoke-free workplaces encourage smokers to quit or reduce consumption.
"Totally smoke-free workplaces are associated with reductions in prevalence of smoking of 3.8% ... and 3.1 ... fewer cigarettes smoked per day per continuing smoker... If all workplaces became smoke-free, consumption per capita in the entire population would drop by 4.5% in the United States and 7.6% in the United Kingdom..."
I'm a believer that it takes a village. Employers have the opportunity to create little Blue Zones within their workplaces and influence what goes on in the communities where they're located. If we do, maybe we'll see obesity trends start to fall the way that smoking has declined.

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1 comment:

Bob Merberg said...

Great post, as always, Janet. And thank you for referring readers over to my blog.

There are a lot of arguments on both sides of the ROI debate, and it doesn't seem like to0 many people are prepared to changing their views.

There are so many facets to the discussion, though. Here's one, chosen almost at random: Whether wellness generates a positive ROI, or doesn't -- does it matter? National Business Group on Health surveys have consistently shown that large employers spend about 1-2% of their overall healthcare budget on wellness. My guess is that smaller employers pay a lot less. But, let's say an employer spends $5 million a year on health care costs, and accordingly spends around $100 thousand on wellness. The health care dollars pay for important expenses, but also unnecessary (sometimes harmful) treatments, which will include some unnecessary spinal surgery, C-sections, and questionable preventive screenings, as well as "lifestyle drugs" like Viagra. If the employer is spending $100K on wellness and $4.9 or $5 million on health care, does it make good business sense to obsess over the $100k (i.e. the 2%)? If we're so concerned about ROI, wouldn't our efforts be better spent chasing the ROI of the 98%?

In fact, most organizations have no idea what their ROI is for any of their health benefits, or retirement benefits, or for training, professional development, EAP, etc. At the HRE Conference, did the topic of ROI come up in the context of any benefit other than wellness? Perhaps wellness isn't an investment -- it's an expense. And, when done well, an important one.

The fact that wellness is so consistently singled out for a higher level of scrutiny should give us pause to consider what really motivates the ROI obsessives on both sides of the debate.