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Should Employers Give Up on Wellness ROI?

by Corporate Wellness Magazine

ROI in the wellness industry is a contentious topic, so what should employers do?

Wellness programs have evolved over time—what was once a company softball team has been replaced by an onsite wellness center with physicians and employees in the workplace donning wearable devices that count steps. The growth within the wellness workplace from its earliest beginnings to the current state, specifically the influence of return on investment or ROI, could fill a book of 100,000 words or more. Corporate Wellness Magazine approached Dr. Dee Edington, author of the book, Zero Trends: Health as a Serious Economic Strategy and his colleagues about the history of wellness programs and what they have in common, where he believes the industry is heading, and what it is that wellness professionals should really focus on.

CWM: What are the early precursors to corporate wellness programs and how have they evolved? 

A: The field we now call “wellness” dates back to the earliest human records relating to their definitions of total health. The early Greeks and Chinese among others were champions of a healthy and well-rounded life. The concepts were never lost; the armies of the Middle-Ages valued the physical aspects of wellness; the English valued the playing fields of England as did the German’s participation through gymnastics. Jumping ahead several centuries to America in the early twentieth century, workplace recreation programs—precursors to modern wellness programs—kept physical activity at work alive.

Halbert Dunn gave a series of speeches to the Unitarian Church in Virginia in the late 1950s and wrote a book and several scientific articles discussing high-level wellness. According to Dunn, high-level wellness is “an integrated method of functioning which is oriented toward maximizing the potential of which the individual is capable, within the environment where he is functioning.” Also around that time was the advent of the Framingham studies and the rising awareness of the risk factors for heart disease and eventually diabetes. By the 1970s, American companies began to feel the pressure of competition from the rest of the world, and began to pay attention to the cardiovascular health of their executives first, eventually spreading to their total population with exercise facilities and gym memberships.

Corporate responsibility also became a part of American culture. These events, along with the introduction of a computerized health risk appraisal by the Centers for Disease Control and Prevention and contributions of the members of the Society of Prospective Medicine, led to a more complete program of risk reduction and health promotion.

Over time, worksite wellness evolved from fitness to risk reduction—including prevention, self-care and nurse lines—to health and productivity management, next to population health management and finally to total worker health. In the 1990s, wellness started to integrate into the mainstream and became more visible within an organization. The rapid increase in healthcare costs led organizations to direct their programs toward prevention and the risk factor precursors to chronic diseases like diabetes. Most programs continued with an emphasis on risk reduction via behavioral change programs which is no surprise given that most wellness professionals were trained in health, fitness or psychology.

Publication of the book Zero Trends: Health as a Serious Economic Strategy was a turning point for the field, helping it turn away from an exclusive strategy of behavior change and adding the business case for wellness. Perhaps more important, however, was the introduction of a complementary organizational environmental and cultural strategy.

CWM: Measuring results with credible data can be a tricky endeavor. How can an employer connect the dots between measuring employee behavior and lowering their healthcare cost? 

A: Even the most experienced investigators fell into the trap of proposing a simplistic connection between health behaviors and short-term healthcare cost reduction. This is complicated further when investigators assume employees will participate in these programs while knowing that participation and engagement are typically very low to achieve a population improvement. In their defense, making the connections between risk factors and unhealthy behaviors to chronic diseases is an easy leap.

We now know the relationships between risks and costs are not simplistic; costs correlate to the combinations of risks rather than individual risks.

In addition to the complex relationship of risks and costs, there are other hidden relationships completing the costs related to demographics like age, gender, genetics, and length of time living with the risk factor. The most frequently overlooked factor is the time between behavior change and change in risk level for a disease. In the case of smoking, the time it took to return to costs to the level of a non-smoker was between five and seven years. Some investigators made the mistake of using these savings, which is actually cost avoidance, as early as in the first year of being a non-smoker, despite the fact that ex-smokers typically have higher costs than current smokers.

Most employers are not knowledgeable enough to connect the dots and thus have to rely on a benefit consultant, the wellness provider, or a third party evaluator to conduct these studies. However, these professionals are the same sources who underestimated the complications of unhealthy health behaviors, CHD risk factors, and especially the dangerous combinations of risks and context within the environment.

If there is a safe path forward for the employer it is to beware of those individuals or entities promising financial returns—especially positive ROIs— within a two-year or shorter window. The possibility of a positive ROI uncovers a basic assertive question: “Why would one expect a lifestyle change to result in lower healthcare costs in each individual in the population?”

For example, if a 30-year-old male quit smoking, it is highly unlikely that his healthcare expenses would change or decrease within the next two to three years. If a 30-year-old female quit smoking while pregnant it is possible her healthcare expense would not increase or even decrease in the short term. If a 60-year-old male or female quits smoking they may have a chance to avoid a spike in the cost of their healthcare over the next several years. Those with existing diabetes or other chronic diseases raise additional considerations for interventions.

Workplace wellness as a field allowed increasing healthcare costs to nearly dominate its “reason for being” from approximately 1985 to 2010. Given the rapid rate of increase in healthcare costs in the early to mid-1980s, the field shifted its emphasis on outcome measures from disease prevention and health promotion to healthcare cost containment or even cost-reduction. This shift in programming was necessary since the desired outcome measures of choice shifted to cost containment or reduction. The outcome measures shifted again in the early 2000s when productivity measures were introduced as a legitimate outcome measure for wellness programming. Since the beginning of wellness and workplace wellness, there has also been a tension between the importance of physical risk factors, such as smoking, exercise, and body weight. Psychological risk factors include stress and life satisfaction.

CWM: Tell us how the perspective of ROI began within the corporate wellness industry and how it is looked upon today? 

A: Benefit consultants and wellness program providers convinced wellness program managers to focus measurement and evaluation on healthcare costs as the primary outcome measure. This, of course led to the ROI era where the emphasis was on financial returns. Not everyone agreed that this was prudent or necessary, but the benefit consultants required an ROI calculation in requests for proposals. There was no general consensus about the methods to calculate the benefit to cost ratio, which led to unchecked claims of high ROI, an emphasis that continued throughout the first decade of the 2000s.

Benefit consultants and experienced medical evaluators brought some of their clinical research practices to the wellness field, like ROI technology. The wellness field accepted the ROI approach even though a pure ROI analysis requires clean control groups and the inclusion of complete costs and savings, neither of which are available in a workplace setting. Additionally, the closer one gets to a true clinical trial, the lower the ROI and the less scalable the results, due to strict subject selection which does not translate to the general population. Finally, wellness programs are addressing socio-behavioral issues that are several times more complicated than medical and pharmacological issues.

The ROI fad was generated by benefit consultants, wellness providers and evaluators as a way to justify their fees for designing or implementing health management interventions. Rapidly increasing healthcare costs led employers to listen to those promising savings— actually cost avoidance—through behavior change and risk reduction. Each organization and culture has a different value proposition and values different benefits. It is a mistake to assume that ROI is the greatest benefit of wellness programs. The financial benefits to wellness programs should promote and measure the health and high performance of employees. The field sold itself short when it focused so much attention on ROI and cost reduction. There is so much more potential in impacting organizations and individuals in a variety of ways that are valued by the organization and especially the people. 

CWM: Do you think ROI is dying? Is it still credible to pursue within a wellness program?

A: There are two responses to this question. Yes, it is dying, if the ROI calculations continue to be conducted without more attention to all of the necessary factors for a credible measure. Also, using company financial savings—again, cost avoidance— as the primary reason for pursuing a wellness program is likely to backfire since employees quickly see this as a strategy for the company to avoid paying expected healthcare costs or other employment benefits. However, ROI is not dying if companies awaken to the real requirements for calculating a credible ROI.

Since 2010 many organizations have turned away from calculating a financial ROI and instead use population metrics such as total spend on the various outcomes like medical, drugs, time-away-from-work, among other outcomes as valued by the employer and employees. This shift in the definition of ROI came about as companies realized that it is too much to expect the outcomes from wellness programs to impact healthcare costs. These costs are due to many and varied uncontrollable influences on the costs and the fixed percentages of the many vendors: hospitals, physicians, insurance carriers, benefit consulting companies, pharmaceutical companies and all the others contributing to the gigantic healthcare-disease enterprise. Companies are now awakening to the true value of health by measuring and communicating what matters to the employees and to the organization with more emphasis on engagement, quality, safety, retention, recruitment, trust, respect and meaningful work for all.

CWM: What are the common misconceptions about ROI? 

A: The most obvious misconception is that a wellness program will generate a positive ROI, anywhere from 1.0 to 6.0. A second misconception is the ROI will remain high as long as the wellness program stays effective. This is highly unlikely, if not impossible, since there is only so much money to save, pre inflation. Recalculating as cost avoidance (i.e., beating the natural flow of the population towards higher number of risks and higher costs) could produce a constant high ROI. Another misconception is the expectation that a positive ROI always would be generated within a one to two year timeframe.

CWM: What is VOI and how does it compare to ROI in today’s wellness marketplace? 

A: Value of Investment (VOI) is a calculation that includes factors such as employee morale, workplace productivity, employee absence and workplace safety, in addition to health care cost. VOI is an umbrella concept representing the ultimate savings the organization and evaluators now assume. It is calculated as the total savings—cost avoidance in all of those areas—divided by total cost of the initiative. Until recently, the typical savings used in ROI calculations was primarily related to healthcare costs and thus a subset of the VOI. Recently, we are seeing companies that define ROI in terms of what they view as their return, such as overall trends for healthcare, time away from productive working hours, engagement, etc. Essentially, each organization would like to know the answer to this question: “Are we spending our money wisely to achieve a valued goal?” In this case, the result from a credible VOI calculation could be a valuable indicator of success.

CWM: Is there any good news? Is there a solution? 

A: The good news is, “Wellness Works!” However, problem statement is that both words wellness and works are undefined. Therefore, for the statement to make sense it needs definitions such as:

  • What constitutes wellness
  • Purpose of the wellness program
  • Context of the application
  • Target population
  • Inclusion and exclusion criteria
  • Quality of the implementation
  • Measurement metrics relevant to the context
  • Timeline for the measurement
  • Meaningful metrics
  • Appropriate communication
  • Appropriate revisions

Likewise, the statement, “Wellness does not work” is equally misleading without more detail of how one came to that conclusion. Even with clarification of the above factors, it is impossible to prove this type of statement true or false because one would have to test every possible situation, which we all know is impossible to do. It only takes one exception to negate these dogmatic statements.

More good news is that every situation is different, and thus the experienced wellness professionals have the opportunity to design custom wellness programs for each organization. The bulleted list above is a good beginning set of criteria to follow in designing a program that allows one to claim that “Wellness Works,” meaning that it works under these defined conditions

CWM: In the short-term, what should employers be looking to do? 

A: Senior leaders may want to communicate to employees the process of considering a wellness program or the process of reviewing the success of the current wellness program to employees. Whether the wellness program is ongoing or in the design stage, employers should consider creating an exploratory team with members from across the organization who use systems thinking to consider the goals or expected goals of the initiative for the employee population. The exploratory team would take the opinions of each of the members to construct the Why, What and How of the initiative. The team may want to get additional information via interviews, surveys, focus groups, or other sources of information and opinions. A thoughtful strategic plan guided by a careful synopsis of the gathered information should guide the next phase.

Finally, the exploratory team should be careful to avoid advice from any source with a conflict of interest such as driving the advice to promote their business solution, remembering that most advice is only advice, and not a definitive pathway to a solution.

CWM: What are the key questions employers should be asking themselves in order to build foundational data? 

A: This is the magical step of the wise employer. A crucial question to ask is, “What is the value of health to the organization and to the employee, their family and the surrounding community, while realizing that value comes in many forms beyond financial?” Essentially, each organization should ask, “What is important to us?” It could be outcomes or process measures and most likely ROI or cost reduction will be relatively far down the list for employees. Both the list from the company and the list from the employees should be considered and common values should be agreed upon to generate engagement from both the company and the employees.

CWM: What are the best practices to ensure a successful wellness program? 

A: First, utilize systems thinking to set the scope of the proposed program. Second, engage and involve as many employees as possible—and from diverse areas of the organization—to participate in the design thinking process. As soon as possible, describe both the mission and vision for the initiative. From then on the initiative should custom fit the expectations of the organization and employees.

Understanding the organizational environment, culture, climate and other influences are key components, and foundational information for organizational and individual health behavior change. The wellness field is entrenched with individual methodology, with interventions for individuals, when, in many cases, an environmental and a cultural solution would work best. For example, if an employee is at high risk for stress, they are often provided with a stress management intervention that won’t be very effective if the organization has a culture of 24/7 availability with little support for work-life integration. A good foundation of organization policies is critical and includes these and other topics including management style, what is reinforced and what is punished, administrative structure that supports initiatives and communication (top down and bottom up). Too many wellness stakeholders get protective about encroaching instead of collaborating and recognizing that we are all working together for a common goal and we can benefit from each other’s efforts.

There is a lot of discussion in our field about incentives. Some organizations have gone off the deep end with incentives, offering large financial rewards to encourage behaviors employees should already be doing. Many people forget that an incentive can be more than financial; an incentive can be social or simply feeling good. Once you start providing financial incentives, you better be prepared to continue them. Financial incentives would be irrelevant if we create an amazing experience for people.

CWM: What does the future of Corporate Wellness hold?

A: Own our research and experience and the knowledge of our contributing interviewees shows that corporate wellness has a bright future. A person’s health is still his or her most important possession and each corporation’s most important asset is their employee population. However, wellness must embrace the shift from exclusive individual, risk-reduction interventions to integrate with organization-wide approaches that seek to create health-supporting environments, cultures and climates. The top priority of this integrated initiative is healthy and high-performing people and organizations. Explore all avenues and work toward that goal, relying on the utilization of systems and design thinking to create a unique strategy that works best in each organization.

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