February 8, 2017
Shattering the Wellness ROI Myth
by Al Lewis
There is a saying: “In wellness, you don’t have to challenge the data to invalidate it. You merely have to read the data. It will invalidate itself.”
There is a saying: “In wellness, you don’t have to challenge the data to invalidate it. You merely have to read the data. It will invalidate itself.” Indeed, if there is one thing you can take to the bank in this field, it’s that articles intending to prove that wellness works inevitably prove the opposite. Another saying is that the biggest nightmares of leading wellness promoter Ron Goetzel and his friends (the Health Enhancement Research Organization, which is the industry trade association) are, in no particular order:
- their own words.
And Mr. Goetzel, writing in this month’s Health Affairs [behind a paywall], is Exhibit A in support of the paragraph above. To summarize the implication of this article, you, as brokers, need to take ROI off the table as an attribute of wellness. Instead, you’ll need to find wellness vendors who are willing to screen most employees much less often than once a year, just as government guidelines recommend.
No wellness vendor ever got rich by screening according to guidelines. As a result, willing vendors are hard to find. (Examples include It Starts with Me and Sterling Wellness, as well as my own company, Quizzify, whose outcomes don’t rely on screening.) The lower screening frequencies also mean lower commissions. Weighed against that is the advantage of doing the right thing for your customer and their employees.
See also: There May Be a Cure for Wellness
The Collapse of the ROI Myth
The subject of Mr. Goetzel’s article was specifically employer cardiac spending vs. cardiac risks in an employer population. He found that cardiac risks correlated the “wrong” way with cardiac spending, meaning that companies with healthier employees somehow incurred more cardiac-related spending.
But that correlation — and it was only a correlation, not cause-and-effect — by itself didn’t cause the death of wellness ROI, though it didn’t help. As is typical in wellness, and as was mentioned in the first paragraph, the proximate cause of the death of wellness ROI was that this breathlessly pro-wellness author accidentally provided the data proves that wellness loses money.
Specifically, they didn’t separate the average employer cardiac claims spending of $329 per employee per year (PEPY) into “bad” claims (spending on events like heart attacks), vs. “good” claims (spending on preventive interventions to avoid heart attacks).
How big a rookie mistake is combining these two opposite claims tallies — prevention expense and event expense — and calling it “average payment for all cardiac claims”? It would be like saying the average human is a hermaphrodite.
Splitting that average into its two opposite components would have revealed that spending on actual avoidable events is much lower than spending on wellness programs implemented to avoid those events. That, of course, is exactly the right answer, as we showed 15 months ago.
Let’s do the math
How much do employers spend on “bad claims” like heart attacks? Here is the number of heart attacks, spelled out so that people can replicate this analysis using the official government database, tallying all the admissions for heart attack-related DRGs:
- DRG 280 — 12,825
- DRG 281 — 15,404
- DRG 282 — 18,365
- DRG 283 — 1,800
- DRG 284 — 275
- DRG 285 — 160
This totals to 48,829. Roughly 100,000,000 adults are insured through their employers. That means that about 1 in 2000 employees or spouses will have a heart attack in any given year. Let’s double that to generously account for any other cardiac events that could be prevented through screening employees, to 1 in 1000.
Now let’s equally generously assume a whopping cost of $50,000 per heart attack. So of the $329 PEPY that Ron calculated for prevention and events combined, only $50 ($50,000 per event and 1 in 1000 working people suffering one) is spent on events. The rest is spent on prevention and management expense, like putting people on statins, diuretics etc., doctor visits, lab tests etc.—things done specifically to avoid these events.
These latter expenses are not avoidable. Nor are they even reducible through wellness. Just the opposite– wellness vendors are always trying to close “gaps in care” by sending people to the doctor to get more of these interventions.
See also: A Proposed Code of Conduct on Wellness
According to Mr. Goetzel’s own data, a wellness program — health risk assessments, screening, portals etc. — costs about $150 PEPY. An industry that spends that much to get what Mr. Goetzel himself states is at best a 2% reduction in a $50 PEPY expense can’t save money. This mathematical fact explains the industry’s constant need to lie about savings (and about me).
Anyone care to claim my $2 million reward for showing wellness saves money? I didn’t think so…