The ROI of workplace wellness

One of the most comprehensive studies found that medical costs fall $3.27 for every $1 spent and absenteeism costs fall $2.73 for every $1 spent.  A Harvard Business Review study also concluded thatproperly run wellness programs could save up to $6 for every $1 spent.

Wellness programs are relatively inexpensive to fund. The average business spends about 2 percent of its total health-care claim dollars on them. Yet most program administrators have no clue how well they are performing. Two out of 3 have no measurable program goals, and 60 percent do not know their return on investment.

Some of the bigger payoffs are less obvious. Two types of ROI are typically calculated. “Hard ROI” consists only of direct medical costs. “Soft ROI” also includes productivity gains. The indirect costs of poor health can be double or triple those of direct medical costs. They include productivity losses from absenteeism or attempting to work with a brief illness or chronic condition, also known as presenteeism. The payback rises to as much as $15 for every $1 invested when indirect costs are included.

It typically takes a few years to have adequate information to determine the return on investment. Start-up costs can be substantial, and improving employee health behavior takes time. The long payback period is enough to deter some organizations, especially small businesses with limited resources. Such programs also make less sense in industries with high employee turnover and younger employees, such as hospitality, restaurant and retail.

Businesses prefer to measure the impact of their programs by overall health-cost increases. The most consistent performers have kept cost increases to about 2 percent over the last four years, compared with nearly 7 percent for all companies.

The relentless spread of workplace wellness

A Kaiser Family Foundation survey reflects the rapid increase in wellness programs. Nearly 3 out of 4 businesses offered at least one of the following programs in 2010: fitness newsletter or website information, weight-loss program, personal-health coaching, or classes in nutrition or healthy living. That compares with 58 percent of businesses in 2009.

An Integrated Benefits Institute survey of 500 companies listed 26 health and productivity initiatives that included management of health, disease and disability. Nearly every company provided at least one. The average small company had adopted about 10 of the 26 practices, compared with an average of about 18 for businesses with more than 5,000 employees.

The tip of the spear for most wellness programs is the health-risk assessment. According to a review of three dozen wellness studies, 81 percent of companies offered them. These questionnaires ask employees about their health status and risk factors. Employers use the information to persuade employees to participate in activities that address warning signals. They also hope the information will motivate the employee to act without being prodded.

There is little evidence that HRAs alone change behavior. They rely on self-reported information, and those who volunteer to participate tend to be the healthiest employees. They are more likely to be women, have high-deductible insurance plans and have fewer chronic conditions.

Participation in wellness programs is increasing. About 57 percent of employees were involved in 2009, compared with 46 percent in 2008. Those who did so tended to be successful on a number of fronts. More than 8 out of 10 lost weight, exercised more, improved eating habits, managed stress better, and reduced cholesterol and blood pressure.

Despite the recession, several large businesses have established on-site clinics as a way to control health-care costs. Clinics were common at large manufacturing and industrial companies until the 1980s to handle work-related injuries. As these jobs migrated overseas, the clinics began to fade from the industrial landscape. They are being reborn as patient-centered medical homes for many employees. They offer convenient, inexpensive care tailored to the company’s workforce. They coordinate care with specialists and avoid expensive procedures and tests of marginal value. They lower absenteeism and help retain employees.

Many companies that have taken the plunge have seen a positive return on investment. Pitney Bowes, for example, reports that for every $1 spent on clinics, it saves $1 in health-care costs and gains an additional $1 in worker productivity.

The clinics provide traditional occupational-health and typical doctor-visit care, as well as preventive care, wellness services and management of chronic diseases. These clinics help businesses control prescription costs and specialist referrals, and they proactively treat patients to avoid emergency department visits, hospitalizations and more expensive care later on for untreated complicated conditions.