Traditionally, the benchmark for demonstrating return on investment of population health management programs has been medical cost savings. This concept is starting to change, however, as employers are discovering that several other measures of program success are also in their grasp.
Optum recently partnered with the National Business Group on Health to understand why employers offer health and wellness programs. The study revealed three primary reasons and a cluster of emerging ones which provide new insights for benefit managers making the business case for these programs.
Our research shows that while employers initially implement wellness initiatives to save health care costs, other reasons emerge over time. Key findings of the study include:
- Ninety-one percent of employers offer health and wellness programs for reasons beyond medical cost savings.
- Employers invest in these programs for three primary reasons: reducing employee health risks; reducing health care costs; and improving employee productivity.
- Employers cited several other reasons for investing in a health and wellness program, including:
- Manage/reduce disability claims
- Improve employee job satisfaction
- Impact business performance and profitability
- Improve employees daily health decisions at work
- Attract and retain talented employees
- Reduce the number of sick days
- Decrease presenteeism
By pairing primary and emerging drivers for health and wellness programs, employers can begin to view the benefits of these programs more broadly.
For example, companies with mature health management programs six years or more are more likely to value employee productivity as well as cost savings, according to the survey. The key is for employers and their health management vendor partners to start building metrics to demonstrate results.
Without question, achieving health care cost savings is a key priority for employers. That said, our research shows employers are starting to cast a wider net in order to build a more complete story. In fact, many employers and vendors are seeing the need to shift the conversation from return-on-investment (ROI) to value-of-investment (VOI).
VOI articulates the total value of employee health and wellness programs by capturing emerging metrics (such as those listed above) in addition to medical cost savings. This is the beginning of a trend that is, frankly, long overdue.
VOI attempts to recognize all the benefits derived from employers investments in population health management. While ROI is still important, it is often difficult to quantify when applied to certain benefits programs. VOI goes one step further than ROI and includes both tangible and intangible outcomes.
We are seeing growing interest in VOI among employers. While some leading companies have already figured out how to quantify the value-of-investment of their programs, most companies are still in the early stages of identifying how to measure VOI.
Why the shift to VOI?
For many years, employers have tried to measure the ROI of their health and wellness programs. For some, returns have not been as high as expected perhaps because the drivers of health care costs are multi-faceted, including ever-rising medical inflation, unwarranted practice variations among providers and high utilization among sicker populations.
It is critical to understand exactly what programs are being measured, how they are measured and in what context they are implemented.
Consider two companies with similar demographic characteristics offering the same wellness program to their respective populations. Company A has poor incentive design, minimal communications and little executive support, while Company Bs well-designed program is firmly embraced by leadership as an integral part of its culture of health. Its a safe bet that Company B will have strong results, while Company A will not.
Concerned that they havent been measuring all the things they should be, many employers are taking a different approach by embracing VOI. They understand that improved wellness can mean healthier employees who are more productive and less likely to be absent.
Capturing VOI metrics will vary by employer, but some of the key metrics should include health care costs, risk factors such as obesity and tobacco use, absence patterns, and worker safety such as workers compensation claims and short-term disability claims.
Additionally, employers should look at productivity and engagement measures. An example of linking health to operational and business performance would be comparing the number of units produced at a manufacturing plant to wellness program participation.
While it is harder to make such connections with knowledge workers, companies are using creative methods to measure engagement and job satisfaction such as:
- Measuring the rate of employee turnover.
- Surveying employees to measure overall engagement at work.
- Gauging employee satisfaction by asking, for example, Would you recommend our company to others who are looking for a job?
Looking ahead, the challenge for employers is linking metrics back to employee wellness. Only one-third of the companies surveyed by Optum and NGBH reported that they had the metrics they need to justify their investment in health and wellness programs. Employers need to move beyond health care cost savings as a sole indicator of program success, and start making the connection between outcomes and emerging metrics.
Seth Serxner is chief health officer at Optum.
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