Scott MacStravic, PhD
It appears that employers in general, while increasingly adopting employee health management (EHM) as a strategy, tend toward reluctance when it comes to evaluating the returns they gain from their investments therein. A recent survey of 242 major U.S. companies found that 75% of them offered some kind of EHM program, with 88% of those offering general wellness programs, 70% offering risk condition or behavior reduction, and 52% offering chronic disease management (DM).
These employers were not reluctant about offering their employees incentives to participate. Two-thirds of those offering programs included incentives to entice participation, with higher rewards for completion of programs. Incentives for completing health risk assessment surveys or for wellness participation tended toward the low end, from $75 to $100. Rewards for risk reduction were a bit more generous, in the $200 - $250 range, while those for completing a DM program were as high as $600.
Because such incentives often add significantly to the cost of each EHM program, they threaten the ability to achieve a positive ROI in each investment. They address what survey respondents reported as the number one challenge in EHM, namely motivating employees to join and remain participants in specific programs. But since the second most important challenge mentioned was assessing the cost effectiveness of such programs, and another was justifying them to senior management, measuring results is clearly as important as gaining participation.
Despite this, 62% of responding companies had made no attempt to measure the ROI from their EHM investments. Of those that had, only 14% had succeeded in measuring it, while 8% had failed in the effort, and 16% were still waiting for results. Only one in seven would be able to report on the cost-effectiveness of their investments, and depending on such results, justify continuing investments. [K. Capps & J. Harkey “Employee Health & Productivity Management Programs: The Use of Incentives” IncentOne.com 2007]
There may be a natural reluctance to measure actual results, given the risks, once investments have been made. Those who championed the idea may fear being made to look foolish, lose promotion opportunities, increases in compensation or even their jobs. The firms may lose money, as well as the time it takes to develop a more successful EHM program. Sometimes not knowing is safer.
Despite the relative dearth of data, respondents to the survey were generally optimistic about the results they were getting. Only 8% indicated they expected less than a 1:1 or breakeven ROI ratio; 32% expected a breakeven result, while 63% expected better than that. Since EHM results often improve from early to later years when they are examined, there may be an unexpressed wish not to measure results too soon, lest they be lower than would produce satisfaction or delight among those who review the investments.
When GlaxoSmithKline examined the savings in combined medical/hospital care, workers compensation and disability cost reductions over four years, for example, it found it took a while for the best results to occur. Average savings per participant were only $233 in the first year, for example, which might not even cover the costs of incentives, much less program costs as well. But they increased to $375 in the second year, then jumped to $944 in the third, before leveling off at $950 in the fourth. [G. Stave, et al. “Quantifiable Impact of the Contract for Health and Wellness” JOEM 45:2 2003 109-117]
If ROI evaluations are made too early, many EHM investments that will pay off handsomely, eventually, may never be continued past the first year of disappointment. On the other hand, respondents in the IncentOne survey were only talking about ROI in terms of reduced medical/hospital costs. Since indirect savings in reduced absences and turnover, as well as increased productivity, have been found to be from two to five times as great as medical/hospital cost savings alone, ROI evaluations that include these indirect savings would almost surely be far better than the modest expectations reported.
While it is a good thing that employers seem to be optimistic about EHM payoff, it would be far better if they were as confident in their ability to measure actual ROI, and over as broad a range of performance metrics as are likely to be affected. This is where HCOs might make a significant contribution to the development of EHM in the U.S. HCOs are major employers, often the largest single employer in many smaller communities, and among the major industry category in even large metropolitan areas. They have at least as much to gain from successful EHM as any other employer.
In fact, they probably have even more. U.S. firms worry about their competitive disadvantage in the global economy related to their medical/hospital care costs alone. Their disadvantage is only compounded by the indirect costs of employee sickness, and the lack of the positive effects good health can have on employee performance. HCOs generally operate in local markets, though suffer from chronic miserliness among payers of all kinds, including the growing amount of the cost burden being carried by un- and under-insured consumers.
HCOs have a strong motivation to master the measurement of the full range of economic effects that EHM can have on overall performance. For one thing, they are increasingly offered opportunities to increase their revenue by improving their performance. Since their overall performance primarily reflects their employees’ performance, any ROI they gain from EHM would be augmented by the direct revenue impacts of improved performance. And in order to manage employee performance, HCOs will surely have to measure it, so they may be in one of the stronger positions to adapt their P4P measurement systems to EHM uses.
It seems likely that both the difficulties and the costs of measurement are major reasons for employers reported above being so slow to measure their EHM results. By overcoming these barriers, HCOs may become local leaders in empowering employers to learn whether their investments work, which measurement techniques and EHM interventions work best. This could, in turn, put HCOs in a strong position to gain their own added revenue through becoming preferred EHM providers in their local markets, or even nationally.
