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Redefining the value of wellness

Using a value-on-investment metric lets employers assess more than just dollars

Redefining the value of wellness

Employers have long used return on investment to demonstrate how much a dollar spent on workplace wellness saves on medical costs, but the results often are disappointing because ROI fails to capture the broader effect of employee health interventions on the overall business.

That's why some companies are looking, instead, to measure value on investment, which assesses how an employer's wellness strategy affects business goals, such as improving employee health, safety, productivity and engagement.

“We need to step back and look at the whole enchilada,” said Ron Leopold, Atlanta-based national practice leader of health outcomes at Willis North America Inc., on measuring wellness programs' value on investment.

Beyond reducing medical costs, wellness programs improve employee morale and engagement and reduce absenteeism, presenteeism, and workplace injury, he said, so “let's recognize that the work that we do impacts the entire pie.”

Many employers, including Fortune 500 giants such as Dow Chemical Co., General Electric Corp. and PepsiCo Inc., believe that a healthy employee population is a business advantage, said Shelly Wolff, health and workforce effectiveness leader at Towers Watson & Co. in Stamford, Connecticut.

However, as Rand Corp. concluded in a recent study of workplace wellness programs, not all generate a positive financial return, and a reduction in health care costs should not be the only indicator of an effective wellness program. The study linked participation in “lifestyle management programs” that promote healthy living to improved health risks and reduced absenteeism.

The challenge for benefits leaders is proving the value of wellness programs to top executives, Ms. Wolff said. With value on investment, “you're starting to get at broader business metrics (CEOs and chief financial officers) already believe in.”

Where the term originated isn't clear. It may have seeped into workplace wellness from the information technology sector. In 2001, IT consultant Gartner Inc. described value on investment in a research paper advising companies to capture the “soft” benefits of their investments, beyond the easily quantifiable cost savings or revenue generation.

“We've always recommended to clients that they think about ... the value of the change that they're trying to bring about and think about it in a broader, more qualitative way,” said Gartner Vice President and analyst Carol Rozwell, a co-author of the report.

Employer organizations, providers and consultants are leading the charge to help businesses think beyond ROI.

The National Business Group on Health and Eden Prairie, Minnesota-based Optum Inc. surveyed 275 large companies last year to identify top reasons for investing in wellness. Reducing employee health risks and health care costs and improving productivity ranked highest, while other key drivers included reducing disability claims, improving employee job satisfaction and improving business performance.

Yet only one-third of employers said they have the metrics to justify investments in health and wellness, the survey found.

It's not that they don't have the data; it's that the data resides in different departments or with external providers. The difficulty is “being able to pull those data sources together and to understand what it's telling you,” said Karen Marlo, a vice president at the NBGH in Washington.

This year, the Health Enhancement Research Organization and Population Health Alliance published a guide to help employers measure and evaluate their workplace wellness programs. One chapter proposes a value-on-investment framework by calculating inputs — wellness program costs, incentives, and outcomes or employers' goals, such as reducing presenteeism (ailing employees working at reduced capacity) or improving job satisfaction.

“Just as we easily think of the price of a gallon of gas or a loaf of bread, we can now talk about the price of an ex-smoker or a pound of weight loss,” said Craig Nelson, co-leader of the research organization's and health alliance's value on investment work group and Minneapolis-based director of health services research at American Specialty Health Inc., the parent of the Healthyroads wellness program. Healthyroads provides fitness, nutrition, weight management and other services to health plans and employer groups.

While there's no single proven method to measure value on investment, companies are beginning to gather data points and set up dashboards to track variables such as employee absence, disability and turnover. Most, however, are far from spitting out numbers tying wellness efforts to specific outcomes.

“We're talking about taking some qualitative data and turning it into something quantitative, and that can be a little bit tricky,” said Tami Simon, managing director of knowledge resources at Buck Consultants at Xerox in Washington. “How do you measure "I'm happier. I feel better. I like coming to work more?' How do you quantify that for a CFO?”

What's more, 47% of U.S. employers in Buck's 2014 Working Well survey said they had not measured specific outcomes of their health promotion programs.

But Seth Serxner, Optum's chief health officer in San Francisco, said the value-on-investment exercise is useful because it opens a conversation about where wellness fits into a company's human capital and well-being strategy beyond cost containment.

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