|
|||
|
|
|
||||||
|
A Healthy Bottom Line
How do you document a return- on-investment from your wellness programs? It's not easy, but a number of companies say they've done it. For a growing number of human resource and benefits executives, wellness is not just about better health. It's about money saved because employees do not get major diseases and illnesses.
David Kasiarz is a realist. The vice president of compensation and benefits at Pepsi Bottling Group Inc. knows that creating a corporate culture of health has long-term benefits. He also knows it costs a lot of money. "I have to be able to demonstrate a good return- on-investment in comparison to other things the company might be spending money on," Kasiarz says, referring to the organization's "Healthy Living" wellness program. "We don't have a blank check. We have to do careful actuarial modeling." The beverage bottler and distributor, based in Somers, N.Y., offers its 34,000 U.S. employees generous wellness benefits -- on-site screenings, health appraisals, Weight Watchers discounts and health coaching, to name a few. It also closely tracks their health and financial outcomes. "Everything we do is ROI-based," Kasiarz says. "Our ROI for healthcare is as good as for other investments and sometimes better." Pepsi Bottling Group's care-management programs saved about $119 in medical costs per participant per month over a two-year period -- a total of $21.7 million. For a growing number of human resource and benefits executives, wellness is not just about better health. It's about money -- the money saved because employees do not get major diseases and illnesses that land them in hospitals, doctors' offices and pharmacies. Pepsi Bottling Group and other large employers are measuring ROI to show that wellness programs make good economic sense. But, as with disease-management ROI before it, there's a lot of confusion as health economists, benefits consultants, wellness companies and others debate the best approach. "It's still a developing practice," says Gregg Lehman, CEO of Minneapolis-based wellness company Health Fitness Corp. "There's no [one] right way to measure wellness ROI at the employer level."
Quantifying Common Sense As healthcare costs continue to rise, companies maxed out on cost-shifting have turned to wellness programs to try to prevent illness instead of simply treating it. Sixty-eight percent of employers offered wellness benefits in 2007, compared with 57 percent in 2003, according to the Society for Human Resource Management's 2007 benefits survey. For many employers, it's enough to know that these initiatives improve employee health. After all, many studies have linked lower health risks to lower medical costs. Wellness programs just make sense. "The notion of wellness is a no-brainer," says John Hammond, HR director at Jewish Hospital & St. Mary's HealthCare, a health network that employs 8,100 in Louisville, Ky. "If you give people the tools to be healthier, they'll be healthier. Ergo, you'll see lower claims." However, other employers want to know more: How much do wellness programs really save? Are some programs more effective than others? Are vendors' ROI promises creditable? Companies are all over the map in how they quantify their wellness programs' financial outcomes -- if they do it at all. Eighty-seven percent of the 464 U.S. and Canadian plan sponsors surveyed by the International Foundation of Employee Benefit Plans in 2006 did not know the ROI of their wellness promotion efforts. "This may be due to the fact that there is no standardized, widely accepted methodology for measuring the savings from a wellness program," the survey report notes. A 2007 report by the Alliance for Wellness ROI Inc., a coalition of five large employers (Schlumberger, Kraft Foods Inc., MasterCard Worldwide and Henry Ford Health Systems), concludes, "This lack of consistency has not helped the benefits community effectively prove the value of wellness programs." The Alliance is working to standardize how wellness benefits are defined and plans to launch a calculator for wellness ROI early this year. ROI is a simple-enough concept: It's the money gained or lost on an investment relative to the amount of money invested. In this case, it's the ratio of avoided medical (and sometimes productivity) costs to the internal and external costs of wellness, including incentives paid to participants, such as insurance premium discounts or cash. A 1.5:1 to 3:1 ROI -- the range commonly cited for wellness programs after three to five years -- means that for every dollar invested in wellness, employers saved -- or can expect to save -- between $1.50 and $3. Dip into the statistical nitty-gritty, though, and matters quickly get complicated. For many reasons, it's difficult to produce a single, accurate, valid ROI for wellness. "People want this to be easy, and it's not," says epidemiologist Thomas Wilson of the Cincinnati-based Population Health Impact Institute, which is developing standards to evaluate ROI methodologies. There's not even agreement on what "wellness" programs are. The Alliance for Wellness ROI counts 12 components, including disease management and work/life balance. A tendency to throw in the kitchen sink muddies ROI results and comparisons, Wilson says. "Every approach has its weaknesses, and you have to adjust for those weaknesses," adds Dale A. Rayman, who leads consulting firm Towers Perrin's healthcare- measurement practice. Despite the lack of consensus, some general agreement on how to measure wellness ROI has emerged, say HR executives, consultants and other health experts: Start measuring right away. It takes time for behavior changes to impact medical costs, so employers generally shouldn't measure financial returns for at least three years after starting a wellness program. But up front, they can gather information to build the data warehouse necessary for analysis. That information includes a few years of medical and pharmacy claims; employee demographics; baseline workforce health status, shown by the results of health risk assessments and biometric screenings; and program participation rates. Many employers also survey employees to gauge satisfaction with wellness programs. Don't underestimate the importance of participation, because it drives ROI in a big way. "If you spend all your time on ROI and not enough time marketing to get people to participate, you won't succeed," says Fred R. Williams, director of health benefits management at Quest Diagnostics Inc., a 42,000-employee diagnostic testing company based in Madison, N.J. Go for global ROI. Generally, it's more meaningful, not to mention a heck of a lot easier, to measure the ROI of all wellness programs than of individual programs. Experts say programs designed to work together should be evaluated together. Also, many employees participate in more than one program, making it difficult to isolate the impact of one program versus another. Still, it's logical to ask whether some wellness programs have higher ROIs than others. A program-specific ROI can be accurately calculated for 5,000 or more participants, Rayman says, though some employers use fewer with proper adjustments. Ron Z. Goetzel, Thomson Healthcare's vice president of consulting and applied research, says, "We're beginning to develop statistical methods to parse out the effects of [individual] programs. It's difficult." Compare participants to nonparticipants. It's impractical to randomly assign employees to wellness programs, as a true scientific study would do. The next best thing is a "quasi-experimental" design that pilots wellness programs at certain work sites, then compares participants' results with those of eligible nonparticipants at other locations. Midland, Mich.-based Dow Chemical Corp., for example, has studied the impact of wellness interventions at nine sites against a control group of three sites, looking at differences in participation rates and health risks such as poor nutrition and tobacco use. Participant and nonparticipant groups should be matched as closely as possible in age, sex, health status, job tenure and plan design to ensure valid results, says Adam Long, vice president of research and informatics at Gordian Health Solutions Inc., a wellness company based in Franklin, Tenn. The closer the match, the more accurate the ROI will be. Before-and-after studies of the same group are possible, "but there may be other things going on at the same time," such as plan-design changes, that could affect results, Goetzel says. Regression to the mean -- in this context, the tendency of sick people to become better regardless of any wellness program -- must be considered, too.
ROI in Real Life Employers use a variety of ROI measurement techniques, from the application of ROI calculators to intense number-crunching. Because the task is so complex, almost all companies turn to outside experts, including wellness vendors, consulting firms and organizations such as RAND Corp. and the University of Michigan Health Management Research Center. "If you're spending millions of dollars on these programs, then you should spend 5 percent to 10 percent [of the wellness budget] measuring and evaluating the program," Goetzel says. The basic questions to ask are: Did wellness programs help employees prevent sickness and injury? How did they impact the medical-cost trend? Less-often measured is ROI related to productivity. To measure health outcomes, employers use the results of health-risk assessments and clinical screenings to sort workers into low-, medium- and high-risk groups, based on their number of risk factors such as obesity and high blood pressure. Then they track annual changes in risk status. Crown Equipment Corp., a 6,000-employee forklift manufacturer based in New Bremen, Ohio, began its "HealthWise" program in 2004. In two years, the percentage of high-risk employees, who have more than four risk factors, fell from 21.6 percent to 15.3 percent. At the same time, the percentage of low-risk employees, who have up to two risk factors, rose from 46.3 percent to 54.1 percent. Dr. James Heap, Crown's corporate medical director, credits the positive changes to an incentive-driven participation rate of more than 90 percent. Crown hasn't yet calculated the ROI for HealthWise, but has held its medical cost trend to 9 percent. "Nobody's on my back" about ROI, Heap says. "[Senior managers] feel this is the right thing to do, so they're willing to spend the money." Hard Dollars vs. Soft Many senior executives want more proof. Wellness ROI rests on translating health outcomes into financial returns. Though ROI estimates may be based on industry benchmarks and peer-reviewed studies, company-specific data is best, experts say. Quest Diagnostics has taken a relatively simple approach to finding the ROI for its "HealthyQuest" program, begun in 2005. Williams says he used calculators from his company's Blueprint for Wellness risk-assessment summary and tobacco-cessation vendor Free & Clear to calculate an overall wellness ROI of 1.9:1 in Year 1 and 3.2:1 in Year 2. "It's not intuition and it's not anecdotal," he says of this method, which is based on research from the Centers for Disease Control and Prevention, the Health Enhancement Research Organization and others. The 4:1 tobacco-program ROI is based on net savings of $3.5 million, a 36-percent quit rate among nearly 2,500 participants since 2005 and Free & Clear's estimate of higher productivity from avoided smoking breaks, Williams says. The issue of "hard" savings versus "soft" savings is a hot one in wellness ROI. It's hard enough to calculate the impact of wellness programs (as opposed to a multitude of other variables) on medical and pharmacy costs, let alone estimate how losing weight and exercising affect productivity. Most companies don't bother, but some do figure savings attributable to lower absenteeism, presenteeism and disability and workers' compensation claims. "It's the new wave of health-management ROI methodology," Lehman says. Dow Chemical, with the help of Thomson Healthcare and a four-year federal grant, is evaluating its obesity prevention and management program at 12 sites, including three "control" sites. In addition to changes in program participation and health risks, it has measured changes in productivity, according to a presentation by Goetzel in October. "We are beginning to see indicators of financial improvements," although the results are preliminary, he said at a National Business Group on Health conference in Washington. Based on self-reports, employees at sites where weight management programs were introduced were absent 1.2 days less than non-participants after one year, representing savings of $373 per employee per year. The effort helps Dow's health-services team justify its programs to senior executives, says Dr. Catherine M. Baase, the company's global director of health services. In making the business case in 2003, she even estimated health improvement's impact on share price. Productivity estimates are based largely on self-reports, gathered in employee surveys such as the Health and Work Performance Questionnaire and the Work Limitations Questionnaire. They pose questions such as, "During the past four weeks at work, how often was your performance lower than that of most workers on your job?" Documenting the link between wellness and productivity is difficult, admits Long of Gordian Health. "It's an imperfect science, but it's the best we have right now," he says. Even worse is the application of productivity ROIs from published studies because they are not specific to an employer's population and programs, he adds. Lillian Petty of the Alliance for Wellness ROI says her group decided not to include productivity savings in its upcoming wellness ROI valuation tool. "It's so lacking in standards between companies that we'd be compromising our results. Maybe we'll get there one day," she says. Soft savings bolster wellness ROIs as high as 5.93:1, according to the nonprofit Partnership for Prevention in Washington, citing studies on its Web site. Some wellness vendors claim even higher returns, a challenge for HR to confirm. Until the Wild West of measuring wellness ROI is tamed, employers must figure out which approach makes sense for them and how much time and money they're willing to spend to prove that wellness programs improve the bottom line as well as workers' health. "What's not OK is people not looking at it," says Kasiarz. "The pressure's always on."
January 1, 2008 Copyright 2008© LRP Publications |
||||||
Print
Email
Write to the Editor
Reprints
|
||||
|
||||
|
||||
|
© Copyright 2010 LRP Publications. All rights reserved.
|
||||