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Promoting Success vs. Participation in EHM Programs

by Scott MacStravic

As I mentioned in an earlier posting (“Promoting Participation in Employee Health Management Programs” Sep 26, 2007), the “cascade” effect of paying participants in employee health management (EHM) programs can greatly multiply the costs of each success in such programs. When a low percentage of participants actually make the health behavior changes needed to improve their health, only this low percentage yields any economic benefit to their employers. If only 20% of smokers quit while participating in a smoking cessation program, or 10% lose significant weight and keep if off among participants in a weight management initiative, the costs per success will be five and ten times that of the costs of participation, respectively.

This makes it far more logical to concentrate costs on those who deliver benefit, i.e. those who succeed. If EHM program costs per participant amount to even $50 apiece, and a participation incentive of $100 is offered, the costs per participant will be $150. If only 20% succeed in yielding any economic benefit, these costs become $150 divided by 20% = $750 per success. If only 10% succeed, these costs become $150 divided by 10% = $1500.

By contrast, if EHM program costs are $50 per participant, and no incentive is offered for participation, but one is offered for success, the effective costs per success become $50 divided by the success rate, plus the success incentive costs. If a success incentive of $500, for example, is offered to smokers who succeed in quitting and remaining abstinent for a year, and this raises the success rate to 40%, the effective program cots would be $50 divided by 40% = $125, to which will be added the incentive of $500, so total costs will be only $625 while twice as many people deliver benefit.

Success rates can be improved through offering or increasing an extrinsic reward such as a cash incentive, but also through promoting the anticipation, awareness, appreciation, and attribution of intrinsic benefits to those who succeed. For smokers who quit, such benefits can include:

  • Personal/household financial savings, thanks to not having to pay $5.00 per pack and more for cigarettes times as many packs a year the successful participant formerly smoked
  • Personal satisfaction, self-esteem and respect by others gained from having succeeded in overcoming a strong addiction
  • Personal rewards gained through increased productivity and performance enabled through no longer having to waste time in “smoke breaks” – both pride and performance-based bonuses, raises or promotions

For those who lose weight successfully, and keep it off, similar intrinsic benefits would be common, except for the savings from buying cigarettes or other tobacco products. While the health benefits of such successes, to either employers or employees, may take years to arise, these personal benefits often occur during as well as after participation. When the EHM program includes competitive team efforts, peer support and similar group involvement, there are built-in social benefits, for example. These can emerge as soon as participants truly engage in the program, such as join in exercise efforts with their peers.

In ideal circumstances, EHM providers, in order to increase confidence among their clients, and clients in order to gain greater confidence in their providers, may include success-based pricing in their contracts. For example, Healthways, Inc. in Nashville, signed a ten-year contract with Minnesota Blue Cross/Blue Shield where its “price” depends on how successful it is in reducing participants’ healthcare costs, though reductions in lost work days are also recorded. [“American Healthways, Blue Cross and Blue Shield of Minnesota Win National Partnership Award” AmericanHealthways.com Mar 17, 2004]

Marathon Health, an EHM provider in Colchester, Vermont, offers to directly connect its prices to the degree of success it achieves for its clients. “We’ll even put a portion of your fee at risk – if your goals aren’t met, we’ll match the discrepancy with a percentage of your total cost.” [“Better Health Means Better Business, Guaranteed” Marathon Health 2006 (www.marathon-health.com) Marathon Health’s website does not mention whether if clients goals are more than met, the client agrees to pay more than the originally agreed-upon fees, but that would be a reasonable companion to the sharing of costs, in my view.

Since it has estimated the total value of EHM success as averaging $1977 per employee per year, counting all the cost-savings involved, compared to its estimated costs of $333 per year, i.e. an average ROI ratio of $5.94, and net savings per employee of $1644, there is plenty of room for sharing such savings between provider and client.(comments by David Demers to my “Measuring Population Health Management Results” World Health Care Blog July 2, 2007, comment dated Sep 25, 2007]

Marathon is one of the few providers of which I am aware that recognizes and incorporates as complete a picture of the total economic benefit available through EHM. It apparently relies on averages taken from published research to estimate what it calls the “soft” benefits of absence, “presenteeism”, disability, and turnover reductions, while relying on measured reductions in healthcare costs. EHM providers and clients may be able to obtain objective measures of these benefits in some cases, and there are well-validated estimators when this is not possible.

Moreover, thanks to employers in the UK, that have measured or at least estimated revenue gains attributable to EHM success, as well. While none have measured or estimated the full range of such gains, individual employers have counted improved quality, customer satisfaction and loyalty, as well as new business results, that they at least partly attribute to EHM success. These may be even harder to measure, and particularly to link directly to EHM improvements, but they tend to build in a “cushion” effect, indicating that total benefits are, if anything, probably at least somewhat greater than current estimates.

The combination of minimizing costs that are incurred at the “pre-success” stages of individual programs and focusing costs at the “success” stage itself, together with the potential for providers to offer risk/reward pricing for their services, can greatly improve the probability of success and total benefit achieved through EHM investments. Employers and providers who also look for the full range of benefits, rather than only healthcare cost reductions, or even just these plus disability, workers compensation and absence cost reductions as well, are likely to find even greater total benefits. The $5.94:1 ROI ratio suggested by Marathon Health is by no means assured, but it at least indicates what is available to be achieved.

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