Is There More Than One Way of Calculating Return on Investment for Corporate Wellness Programs?
Measuring the return on investment (ROI) has been an extremely controversial topic among wellness professionals for quite some time. I am not convinced that there is any real industry standard formula -and that becomes the challenge. Studies support that worksite wellness programs do influence healthy behaviors and improve risks.
However, the key to this is changing lifestyle behaviors and sustaining these for the long haul. We do know that with a healthier employee culture, the employer's bottom line will be impacted. We also see that the line becomes "blurred" when an employer has implemented both a disease management and wellness program.
When an employee is enrolled in the disease management and wellness program, to which program do we attribute the savings? Does it really matter, as long as the employees and employers are realizing benefits and are healthier? Return on investment can also be realized in many intangible ways.
Attracting and retaining good employees by offering wellness programs as an employee benefit, job satisfaction and increased morale, just to name a few. On the risk management side, healthier employees tend to be more safety conscious, less distracted by disease symptoms and put in fewer worker's compensation claims.
Aggressive, action-oriented wellness programs will offer a return on investment in lower health plan utilization. A strong wellness coaching program that includes outreach calls, along with the goal setting action plans and disease-specific wellness tools should be an integral part of every wellness program.
Larry Chapman, Senior VP for WebMD Health Services poses his theory on ROI: " Dr. Anderson and his colleagues in a recent edition of the American Journal of Health Promotion found that approximately 25% of all outpatient and inpatient health plan claims for 44,000+ employees over six years, were related to seven major health risks-the health risks that make up the core of most wellness programs."
So, we know from this study that a large proportion of claims are potentially modifiable if organizations implement interventions that address these issues-things like poor nutrition, lack of exercise, excess stress, etc. In addition to the study done by Dr. Anderson and his colleagues, we also have vendors in the field who do lifestyle-oriented medical claims analysis.
These analyses generally show us that somewhere between 21% and 58% of medical claims are associated with about a dozen risk factors-again, things like poor nutrition, lack of exercise, and high stress.
Therefore, what you end up with is reliable estimations that 30% to 60% of health plan costs could potentially be modified or avoided altogether. For most organizations, that's a ton of money. Jim Fries, a colleague from Stanford University has written for years that about 70% of health costs are in fact potentially preventable. So there's a big chunk of economic return possible when looking at potential savings in regard to health plans.
"I want to present another aspect of return on investment that is seldom mentioned in the literature. What is the value of identifying potential large claimants as a "benefit" of having a wellness program? Do you see ROI calculated on avoidance of services? The following are several stories we have experienced first-hand in our wellness coaching practice.
One of our coaching participants was diagnosed with hot and cold thyroid nodules. She had a scan, and was told she would be needing radiation treatments. She started the radiation treatments, which were horrible. The Wellness Coach, a Registered Nurse discussed the fact that hot are not malignant and sometimes even cold are not either, that maybe a biopsy should be requested before proceeding.
The participant went back to her doctor and requested a biopsy to confirm that the nodules were malignant. She found out no malignancy and had no more treatments and no more claims expenses. During the course of a coaching session, the participant described certain abnormal symptoms he had been experiencing. The Wellness Coach was intuitive enough to recommend that the gentleman go to his physician and request a total body scan.
The gentleman had stage one cancer. This probably would not have been caught in the early stages had he not been enrolled in the company wellness program. We have seen countless incidents at wellness screenings where participants had extremely high blood pressure readings.
Sending them to their physicians for management of hypertension has avoided potential strokes and heart attacks. Return on Investment can potentially be tied to financial metrics. This way of calculating returns was very well presented by Ronald J. Ozminkowski, Senior VP at Optum in his June, 2014 article "There's More to Wellness Program ROI than Medical Cost Savings": "Revenues: companies with highly effective wellness programs have achieved industry-adjusted average revenues that were up to forty percent higher than companies with less effective programs, yielding a difference of $132,000 per employee, according to a 2011/2012 Towers Watson and National Business Group on Health report.
Shareholder Returns: Employers with the most effective health and productivity programs have experienced twenty-eight percent higher shareholder returns, according to the 2009/2010 Health and Productivity Advantage report by Towers Watson and the National Business Group on Health.
Of course, we need to understand if these financial metrics are higher because of successful health management programs or because more successful firms offer better health management programs or both. It is time to rein in expectations about wellness ROI. Some employers and health management companies anticipate savings to be three or more times as high as program costs.
This is higher than returns from other corporate investments and may be unrealistic, particularly in the initial years of a wellness, disease management or high risk case management program, which tend to produce returns over the long-term horizon.
In this article, I have offered three different ways of calculating return on investment for wellness programs: claims savings, early intervention to avoid potential large claims, and financial metrics. Each has tremendous value by itself, but combined; offer an opportunity for financial benefits for employers.
About the Author
Karen L. Andalman C.W.C. is the President and Founder of WellChoice, Inc., established in 1992, a leader in Corporate Wellness Coaching, Risk Management and Wellness Incentive Programs, Biometric Screening Events, Tobacco Cessation Programs, Disease Management, On-Site/Near-Site Clinic Wellness Programs, Case Management and Utilization Management Programs.