By Dan Cook
As the debate over return on investment in corporate wellness plans
rages on, a voice of reason called out the other day.
Writing for Human Resource Executive Online, Ronald J. Ozminkowski, senior vice president and chief scientific officer at Optum, tackled the subject with refreshing candor.
Why, he asked, are corporations expecting a higher ROI from wellness programs than from other investments
? Maybe it’s time, he suggested, to get real about what wellness programs can and cannot deliver.
“It’s time to rein in expectations about wellness program ROI. Some employers — and health management companies — anticipate savings to be three or more times as high as program costs. This is much higher than returns from other corporate investments and may be unrealistic, particularly in the initial years of a wellness, disease management or high-risk case management program, which tend to produce returns over a longer-term horizon,” he wrote.
He then offered comparison ROI from the financial-services industry:
“A respectable 10-percent return in the stock market corresponds to an ROI ratio of $1.10 per dollar spent. Over three years, that ROI will be $1.10 to the third power, or $1.33. According to the U.S. Department of Labor, the annual investments made by every U.S. company and individual since World War II has yielded approximately a 3 percent gain — an ROI of about $1.03,” Ozminkowski said. “Expectations for health management program ROI should be in line with the ROI from all other investments, such as personnel, equipment and employee benefits.”
Ozminkowski suggested that executives who are serious about assigning a realistic ROI to wellness programs should assess the ROI of other investments in order to establish a useful benchmark, “thereby leading to a more thorough discussion of expectations, financial risks and returns. Once the comparison is made, employers can refine investments accordingly — in health management as well as other programs — in order to maximize returns overall.”
He suggested that such programs such be evaluated from two perspectives. First, how the programs affect employees personally in the following ways:
• Quality of life (job satisfaction, morale, family life, relationships);
• Net health risk reduction;
• Job safety and ergonomics;
• Individual health care expenditures;
• Health-benefit-program satisfaction.
Second, how the programs impact business performance in such areas as:
• Company stock price, total revenue per employee, shareholder value, earnings multiples;
• Return on invested capital;
• Accident rates, other safety metrics, disability program use;
• Health care costs (medical, Rx);
• Industry-specific operational business metrics (through-put, claims handling, inventory turnover);
• Health care utilization (emergency room, inpatient stays, readmissions).
“Linking these business-performance metrics to health-management programs is important for an often overlooked reason. For many executives — chief operating officers, sales vice presidents and business-unit general managers — medical-cost savings may not be a priority because it doesn’t seem relevant to their business goals. As a result, human resource departments often struggle to attract their interest in these programs,” he wrote.
“By demonstrating how health management programs can help improve business performance metrics, however, human resource leaders can build greater support across the organization. Consideration of both sets of metrics will lead to a more complete valuation of health management programs.”
Originally published on BenefitsPro.com