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Growing Adoption of Health Management Not Evidence-Based

by Scott MacStravic

While “worksite wellness” programs have been around for decades, major investments in employee health management (EHM) are relatively new.  They have been made primarily as a “last-ditch” effort to control employers’ health benefit costs, and involve a mix of insurer, supplier, and self-operated programs.  Many large employers include onsite medical clinics which combine traditional medical care, saving employees time-costing trips to their own physicians, emergency rooms or retail clinics – with wellness, risk reduction and disease management services.

Many such programs offer employees incentives – premium reductions, contributions to health spending accounts, cash, gift cards, or other rewards – for enrolling, participating in and completing such programs.  These range from modest amounts such as $50-100 for completing a health risk assessment up to $600 for completing a disease management program.  Incentives can make a big difference in the proportion of employees who participate, from as few as 10-20%, and often the already healthy ones, with no incentives, to as many as 95% or more with significant bonuses such as $50 per month.

A recent survey by the National Association of Manufacturers and the ERISA Council found that 75% of responding employers, mainly large firms, offer EHM programs to their employees, with 2/3 of those offering incentives for participation, meaning roughly 50% of them offered incentive-based programs.  Of those offering EHM, 88% included general wellness motivation and support, while 70% offered risk condition or behavior reduction, and 52% offered disease management.

They cited as the most important challenges to their success: 1) the difficulties of maintaining employee motivation; and 2) assessing the cost effectiveness of their programs, even though most would be satisfied as long as their investments broke even in terms of reducing healthcare costs enough to cover costs of the program.  This would probably be acceptable because responding employers were persuaded (rating themselves as 8.0 average agreement on a 10-point scale) that in addition to healthcare cost reductions, EHM would also produce improvements in employee productivity.

Despite the fact that assessing and being able to show senior management that their EHM investments deliver positive ROI, the employers surveyed add to the difficulty of achieving such an ROI by adding to program costs the incentives they offer for employee participation.  This automatically decreases the chances of getting positive ROI ratio, though it increases the chances of getting a greater net savings, by increasing the numbers of employees who participate.

And despite the fact that being able to justify EHM investments by showing positive ROI is such a major challenge, the vast majority of employers surveyed have not been able to measure the ROI they are getting.  Even when returns are limited to healthcare cost savings, 62% of those surveyed have not even attempted to measure their ROI thus far.  Of the 38% that had made the attempt, 16% had not yet completed the measurement, 8% had not succeeded, and only 14% had succeeded at the time of the survey. [K. Capps & J. Harkey “Employee Health & Productivity Management Programs: The Use of Incentives” IncentOne.com 2007]

Employer faith in EHM is probably justified, considering the many published and scientifically rigorous studies that have shown positive, often dramatic ROI levels achieved.  Thanks to the fact that employers’ savings include reduced absenteeism, presenteeism and turnover, for example, rather than merely reduced healthcare costs, they tend to save from two to five times as much as do commercial and government insurers in healthcare cost reductions.

But the fact that only a minority of employers are even attempting, and so few succeeding in actually measuring their ROI bodes ill for the future of EHM.  Not only does the lack of measured results make it more difficult to justify maintaining EHM investments – it also makes it impossible to develop evidence on which employee targets, which wellness or risk dimensions or diseases yield the best results, and which approaches to managing them work best.  While faith in EHM’s value seems justified, it is no substitute for useful evidence of why, how, with whom, and through what interventions it works best.

It is an unfortunate, though unavoidable reality that measuring the results and ROI from EHM investments adds to the costs of programs, and thereby decreases the chances of a positive ROI and the net savings achieved.  The difficulty and costs of measuring ROI are clearly the major barriers to rigorous evaluation, and the apparent willingness of employers to continue EHM investments on faith. 

Among employers surveyed that offered incentives, for example, only 8% believed that their investment would yield less than a breakeven return, while 21% expected a breakeven, and 70% a better than breakeven return.  Those without incentives had only slightly less positive expectations, with 5% expecting a loss, 32% expecting breakeven and 63% expecting better than breakeven returns.  But if expectations are relatively low, it is understandable that employers are reluctant to invest even more in measuring results, knowing that the costs of measurement, themselves, could threaten positive returns.

Fear of failure is always a major barrier to taking risks, and one that naturally applies to EHM investment decisions.  The risks include the potential consequences of being wrong: social (they’ll think you an idiot), quality/performance (you won’t get what you paid for), physical (may incur damage), time (lost in getting it right the next time), psychological (you’ll feel like an idiot) and financial (you lose the money you spent, perhaps lose revenue, incur other costs as well), and personal (you may lose your job or career prospects).

In such cases, and when learning the truth will add to costs as well, it is perhaps understandable that only a minority of the employers studied even attempted to measure results.  Moreover, it has been shown in a number of EHM studies that results tend to improve over time, so evaluations after only one year may mislead investors.  One study, for example, found savings of only $233 per participant in the first year, then $375 in the second, and dramatic improvement to $944 and $950 in the third and fourth years. [G. Stave, et al. “Quantifiable Impact of the Contract for Health and Wellness” JOEM 45:2 2003 109-117]

But for EHM to achieve both wider adoption and the most appropriate levels of investment, it must be rigorously evaluated, and as frequently as possible.  With ample cost savings available through reduced absences and increased productivity, to say nothing of positive quality, customer satisfaction and revenue potential, employers should not fear bad results.  Hopefully, more employers will invest in careful measurement and report both which measurement methods and which EHM interventions worked best for all of us to learn from.

1 Comment »

  Mike Clarke wrote @ June 28th, 2007 at 4:35 pm

I personally believe that EHM programs are wonderful, but even with incentives to keep employees interest in the program is very tough. For companies that are stuggling financially and cannot afford a cash incentive, the only hope is by force (increased deductibles and or premium dollars for none compliant employees)Every carrier offers EHM programs now but the problem is there are alot of loose ends. You may get a weight loss progam in the package, but no nutritional conuseling. IF you are aware of any programs are currently successful I would really love to talk with the administrator.. Wellness programs that is the DM programs are alittle different, but if you have a really strong wellness program you will keep the healthy employee healthy alot longer.. Another thing I heard was once the Wellness program really kicks off, your prescription cost increase. As more employees become aware and take meds to treat their sickness..

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