The “wellness” market is looking increasingly attractive to many hospitals and physicians. This is partly because Medicare’s need to hold down its spending as the number of beneficiaries inevitably and dramatically increases is making the “sickness” market look pretty dismal in prospect. But it is also the case that the wellness market offers a totally different kind of payment system as well as sources.

A recent article [P. Betbeze “Shifting the Payment Stream” Health Leaders Magazine May 2007] describes examples of market opportunities and ways providers have already exploited them. Northwestern Memorial Hospital, Chicago, for example, has created a “Wellness Institute” as an experiment for proactively managing people’s health, as well as proactively preparing for declines in sickness care revenue.

Its program combines capabilities in the key wellness challenges that affect most people: weight, diet, stress, and exercise management. These are the areas where both most consumers and most employers are focusing their concern, as both present and future health and expense challenges. Physicians are moving more into “retail” extras where consumers will pay out-of-pocket for services that insurers rarely cover, particularly “aesthetic” services, with plastic surgery, medical spas, sleep centers, and similar programs addressing “quality of life” issues that consumers are looking for help with.

Neither hospitals nor physicians need look only to consumers as sources of revenue, however. If hospitals and physicians can figure out ways to deliver cost-effective disease management that saves insurers and employers money – and ways to market such services to payers – they can generate profitable revenue at the “wholesale” level, as well as “retail”.

When Family Physicians of Western Colorado, a family physicians group in Grand Junction, CO adopted the Chronic Care Model for its diabetic patients, it was able to kept costs down to $114 per patient per year. And it was getting $120 per patient per year for the program. Unfortunately, it applied the DM program to all its diabetic patients, and less than half were members of the HMO that was the only one paying for it, so it ended up losing over $25,000 a year thereby. It chose to continue the program, however, given the significant benefits it delivers to patients. [P. Mohler & N. Mohler “Improving Chronic Illness Care in a Private Practice” Family Practice Management 12:10 Nov/Dec 2005, 50-56]

Of four diabetes management centers that opened in New York since 1999, in one of the nation’s “capitals” in the increasing incidence and prevalence of this disease, only three survive, and two of these depend largely on charitable donations to do so. [I. Urbina “In the Treatment of Diabetes, Success Often Does Not Pay” New York Times Jan 11, 2006] The combination of finding enough payers who will pay enough, and keeping costs within what they are willing to pay, will necessarily be the biggest challenge for providers that seek to serve the wellness market.

In sickness care, providers have always been “commercially handicapped” by professional/mission commitments to offering nothing but the best quality, hang the expense, together with regulatory and payer insistence on the same. This is not the case in the wellness market, where “normal” market dynamics apply. Payers are looking for positive returns on their wellness investments. Whether this is achieved through top performance at top prices, or adequate performance at affordable prices matters little, as long as ROI is optimized.

With consumers, the wellness market is also normal, at least when consumers are paying the bill themselves. Already the MDVIP organization of roughly 150 physicians in 16 states is doing quite well marketing their $1500-1800/year retainer practices on the basis of VIP = Value In Prevention. Many of its patients end up actually saving money in out-of-pocket sickness care costs, thanks to proactive management of their chronic conditions, as opposed to reactive treatment thereof.

Hospitals, too, have long offered wellness services to the high-end market, in the form of “executive health” or “health vacation” programs. Many of these include up to year-long follow-up health coaching, after a comprehensive assessment and consultation stay of from one day to one week. But these tend to be even more expensive than the MDVIP full-year retainers, so have had limited market penetration so far.

The best wellness market for both hospitals and physicians should be employers. While large numbers of employers are cutting their health benefit investments in order to reduce their operating costs and offer more competitive prices, many large employers, particularly, are moving in the opposite direction, investing in employee wellness to improve their health, and thereby not just cut sickness care costs, but improve employee productivity and overall performance, gaining a competitive advantage not based solely on price.

Because employee wellness programs have been shown to yield from two to five times as much economic benefit (counting both reduced costs and increased revenue), employers are in a position to “gainshare” with providers two to five times as much as can insurers, which only save on reduced sickness care costs. If hospitals and physicians can enable their employer clients to accurately and confidently measure the full benefits of wellness services they offer, these providers should be in a strong position to manage wellness programs that deliver great value and warrant generous payment.

Doing so will require taking a different approach to “quality” – identifying the most “cost-effective” means to promote health, reduce risks, and manage existing chronic conditions. They will have to “customize” both the “treatment” and its costs to the risk-reward potential and reality of particular conditions found in individual patients in light of individual employer clients’ expectations. This will be a major paradigm shift from insisting on professionally-determined standards of quality that apply to all patients. But it will be the only way that wellness can yield the wealth that so many providers will need to survive.