Business of Well-being

Want to Improve Wellness ROI? Think about Where and How to Invest

Employers - particularly large corporations - have widely adopted wellness programs to reduce healthcare costs and improve employee productivity, morale and retention. However, studies have cast doubt on the ability of wellness programs to generate positive wellness returns on investment (ROI).

Although lifestyle interventions have reduced health risk factors, such as physical inactivity, smoking and obesity, wellness programs have not generated net savings, as suggested by a 2013 Report to Congress as well as studies on both the University of Minnesota and PepsiCo programs.

These findings are consistent with the most recent synthesis of past studies. Based on randomized clinical trials -- the gold standard in designing a study -- lifestyle interventions returned 78 cents on the dollar, a wellness ROI of -0.22. Despite this setback, management of chronic conditions generated a net savings of $0.8-$2.8 for every dollar invested, according to studies of the University of Minnesota and PepsiCo programs.

One caveat is that wellness ROI calculations in prior studies often understated potential benefits of improving employee productivity, such as absenteeism and presenteeism, or employee morale and retention. After years of surefire claims about wellness ROI, these less than optimistic findings have shaken employers.

Invest Smartly Based on Evidence

How then do employers improve their wellness programs? Or should they give up any hope that lifestyle interventions can generate a wellness ROI? Should they focus entirely on what has proven profitable, such as managing chronic conditions? Employers could analyze their own programs and more carefully invest in an approach that will benefit their company and employees.

First of all, each wellness program is unique and likely different from the programs that have been studied. One major limitation in previous studies is that researchers were not able to control for the quality. Wellness offerings, program implementation, and outcome measurements may have varied across employers and studies.

Put another way, the results may not suit all wellness programs. Second, regardless of limitations published in these studies, invest based on the existing evidence. In a nutshell, either increase the numerator of wellness ROI, i.e., the net savings, or decrease the denominator, i.e., program costs. Some strategies that could potentially optimize wellness investments and improve ROI are:

Invest in Right Population

To reduce healthcare costs, focus on employees who have a high risk of using services, such as those with chronic conditions, multiple health risks, or a history of high medical expenditures. An annual investment in a wellness program of $150 per individual won't significantly increase ROI on those employees who traditionally spend less than $200 per year on healthcare services.

Published studies point to the same conclusion. Healthcare cost-savings in the PepsiCo and University of Minnesota's programs were generated from their disease management components. However, not every managed chronic condition generates cost-savings.

Prior studies suggest that managing patients with heart failure, diabetes, chronic obstructive pulmonary disease, or multiple chronic conditions are associated with positive wellness ROI. In comparison, managing patients with depression may increase overall healthcare costs. Whether disease management reduces costs for asthma or coronary artery disease remains inconclusive.

Focus on Cost-Effective Preventive Services

Many preventive services are cost-effective, offering high value at reasonable costs. Only some preventive services generate positive wellness ROI. Employers can refer to the U.S. Preventive Services Task Force (USPSTF) for a list of Grade A or B recommendations on effective preventive services.

For a cost-effective analysis, the non-profit Partnership for Prevention provides rankings for common preventive services. These rankings show aspirin to prevent cardiovascular disease among high-risk populations and tobacco-use screening and brief intervention to be cost- saving. Screening for hypertension, problem drinking, and cervical and colorectal cancers and counseling adult women to use calcium supplements to prevent fractures are also cost-effective.

Screening for cholesterol, obesity, diabetes and depression is less cost- effective. Merging these two resources can identify solutions for employers to face these health challenges and select those that are cost-effective. Employers, first, focus on services that are either cost-saving or cost-effective.

For instance, instead of depression screening, employers could allocate resources to assess tobacco-use and problem drinking. Second, employers could eliminate non-essential screenings or preventive services. Many preventive services reduce costs or are cost-effective when limited to a specific population.

Diabetes screening is cost-effective when conducted among adults with high cholesterol or hypertension, which is not the case for healthy populations. Cholesterol screening is less cost-effective for men under 35 or women under 45 than for older men or women, but cost-effective for younger populations at risk of coronary heart disease.

In other words, annual cholesterol screenings makes little financial sense for female employees younger than 45 and without risk of coronary heart disease. Similarly, employees without high cholesterol or high blood pressure should not require diabetes screening. These distinctions can help companies maximize savings while reaching employees that most critically need interventions.

Don't Throw Good Money After Bad By Adding High-powered Incentives

If cholesterol screening is not cost-effective among young and healthy employees, why pay additional money to encourage annual assessments? Lifestyle interventions that return 50-78 cents on the dollar suggest little reason for incentivizing employees participate. Published wellness ROI for lifestyle interventions don't take into account improvements in productivity, morale, or even retention; however, no solid evidence exists along those dimensions.

Incentivizing screenings or lifestyle interventions would likely do little to reduce costs. Employers who need to offer financial incentives to increase participation should think about changing the program. These incentives could be reallocated to make programs attractive and accessible to employees and help develop a culture of wellness, which is critical to sustaining long-term changes in health behaviors.

Employers could also use funds to identify and monitor employee needs and adjust programs accordingly. Building an onsite fitness facility may not be a wise investment for a manufacturer characterized by strenuous manual labor. The funds, instead, could be better invested in identifying employee needs, such as healthy food options or smoking cessation programs.

Leverage Existing Resources to Lower Program Operating Costs

Wellness ROI depends not only on program savings, but also on operating costs. Employers must think twice before buying into fancy programs advertising complex technologies. Do these technologies address the underlying needs of employees? Do they produce tangible results? Leveraging the existing resources of health plans, local healthcare providers and communities is a better strategy to lower costs.

A health plan may already have online wellness tools (e.g., health risk assessment), and education and communication materials. Health plans may also be able to use medical claims to identify employee risks, clinically screen and manage disease. Education may be available at local hospitals or provider groups, community organizations, or local public health departments.

Employers could also utilize free online step-by-step instructions on how to establish and operate a wellness program. While the robust plans of a vendor may sound impressive employers can often find equally effective solutions at a fraction of the cost by looking closely at what is already available.

One Size Does Not Fit All

Research no longer views wellness plans as surefire investments. That does not mean employers cannot find value with the right approach. Employers should look carefully at particular needs of employees rather than expecting savings from a cookie-cutter plan.

Employers should also recognize the successes and failures of their particular plan, and be willing to invest in particular challenges and cost-effective approaches. They could access already available resources, both in their communities and through existing research. With proper attention, wellness programs can benefit employee health and give companies a healthier bottom line.

About the Author

Hangsheng Liu is a policy researcher at the RAND Corporation and the practice lead in technology and population health for RAND Health Advisory Services. Trained in medicine and public policy, he specializes in workplace wellness, population health management, new technology evaluation and healthcare policy.

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