Several mornings a week, Jeff Henderson, CFO of Cardinal Health, can be found trotting on the treadmill at the healthcare services provider's in-house fitness center. On a stationary bike a few feet away is Carole Watkins, the company's chief human resources officer. Both executives advocate the health benefits of the company's broad-based "Healthy Lifestyles" wellness program. More compellingly from a treasury standpoint, they also tout its financial return.
Cardinal Health, a Fortune 100 company with $96 billion in 2009 revenues, has invested big time in the program. At headquarters in Columbus, Ohio, and at many of its 275 sites across the country, its 32,000 employees can take advantage of on-site fitness centers, pharmacies and medical clinics. In other cases where such facilities are not feasible, the company provides discounted health club memberships and access to nearby pharmacies and clinics.
This is only the tip of the iceberg: Employees also can attend company-paid classes and seminars on nutrition, smoking cessation, exercise and chronic disease management, and receive free on-site medical screenings for cancer, heart disease and other ailments, and free immunizations for whatever flu is in season. There is even a 24x7 nurse hotline for instant health advice and coaching. "Obviously, we take the health and well-being of our employees very seriously here," says Watkins.
But is all this effort and expense worth it? In an era in which corporate health insurance premiums have risen nearly five times faster than the overall rate of inflation, according to the National Opinion Research Center, can wellness programs help control costs--even just a bit? Evidence is slowly accumulating that they just may, indeed, provide bang for the buck. Certainly, this is Henderson's view. "We've had our healthcare costs measured against the rest of the Fortune 100, and it comes out to $500 less per year, per employee," he says. "This is real bottom-line value. But it's only part of the return."
Henderson explains that in addition to improving employees' health, the program nurtures more productive, engaged and satisfied workers. "We've measured a 5% improvement in employee engagement in the last year via our annual workforce surveys," he says. "Our people like working here, care about what they're doing, and are contributing their best to the overall mission of this organization."
Cardinal Health isn't alone in singing the financial virtues of corporate wellness. Although programs differ widely in scope and provisions, more companies are offering them to encourage greater employee health, engagement and productivity, and lower absenteeism rates and overall healthcare costs. A 2009 survey by the Society for Human Resource Management indicates that 52% of U.S. companies currently offer wellness programs, while 72% supply wellness resources and information. "There is growing evidence that much of the country's healthcare costs is preventable, going to pay for diseases closely linked to behavior," says Kathie Lingle, executive director of the Alliance for Work-Life Progress, an organization promoting the benefits of a healthier workforce. "If you can change people's behaviors, you can improve their health."
Her assessment is backed up by the Centers for Disease Control, which reported a few years back that 75% of employers' healthcare costs and productivity losses were related to employee lifestyle choices like smoking, overeating, being sedentary or failing to take prescribed medications. "An unmanaged diabetic employee costs $15,000 a year, compared to $5,000 for someone taking his or her medications," says Seth Serxner, a partner and senior healthcare consultant at Mercer. "That's a big chunk of money."
Many wellness programs are incentive-based, giving employees discounts on their share of healthcare premiums for participating in nutrition seminars and company-sponsored runs and walkathons, getting routine screenings for breast, prostate, and other cancers, and regularly using medications for chronic diseases like asthma and diabetes. A recent survey by Deloitte indicates that more and more employees are embracing the programs, with 65% of workers whose companies offer such programs planning to participate in 2010 "to maximize their health status," up from 48% last year.
Participation in the incentive-based wellness program offered the 600 faculty and staff members at Bryant University has followed this pattern, increasing each year since the program's inauguration in 2007, and jumping an astonishing 280% in the past year. The Smithfield, R.I.-based educational institution offers the customary range of nutrition, smoking cessation, chronic diabetes and asthma management and exercise classes; free blood pressure and other biometric screenings at an on-site clinic, and sponsored walkathons. Family members and students can also avail themselves of the program.
"Physically inactive people cost $1,543 more in annual medical costs, and miss 3 1/2 more days of work each year," says Linda Lulli, the university's associate vice president for human resources, citing data from the Health and Wellness Institute. "We are trying to improve both our annual medical claims costs and absenteeism, as well as the community's overall health," adds Lulli, who's also director of the Rhode Island Business Group on Health, a coalition focused on improving healthcare quality, access and affordability.
Like other organizations sprouting wellness programs, Bryant has only begun to collect and measure data on the return on investment (its costs range from about $1.60 to $2 per employee a month, Lulli estimates). So far what the university has discovered is highly encouraging. "While a lot of this is subjective, we've been able to measure overall reductions in health insurance premium increases since the program took effect that we believe are attributable to our wellness program," says Barry Morrison, Bryant's treasurer and vice president for business affairs. "The increases up until three years ago typically ranged from 11% to 20%. For 2010, the increase was 5.6%, which we attribute in part to reductions in inpatient hospital costs and emergency room usage, in addition to people relying more on their primary care doctors."
Morrison also cites perceived enhancements in employee productivity. "The emphasis on chronic disease management--encouraging employees with asthma, diabetes and other chronic diseases to use appropriate medications--is assisting us to reduce absenteeism, as well as curb healthcare costs," he says. "There would seem to be a definite return on our investment in the program. We believe the program has bottom-line value."
Some of the other statistics gleaned by the university include a reduction in physical inactivity from 55% in 2008 to 41% in 2009, and an increase in the percentage of individuals managing asthma with appropriate medications from 84% to 100% over the same period.
Key to the program, Lulli believes, is its incentive-based focus. "We give users the opportunity to earn $75 for participating in the annual health risk assessments and agreeing to a follow-up visit with a primary care provider to discuss the results," she says. "If they submit to a biometrics screening, they get $25."
Lingle, who previously served as national work-life director at accounting firm KPMG, says its wellness program was also incentive-based. "We implemented a Health and Wellness Passport that we ran almost like a mileage club--with points given employees for participating in the health risk assessment, taking seminars and screenings, attending the fitness center--that they could then redeem for money or prizes," she says.
Extracting data on the financial efficacy of wellness programs is no different than measuring the benefits of other company endeavors. One way is to tabulate the results of annual health risk assessments (HRAs) voluntarily and anonymously taken by employees. HRAs are a prime tool for evaluating lifestyle habits like alcohol and drug use; diet and smoking; personal and family medical history; physiological data like height, weight, cholesterol and blood pressure metrics; and overall employee willingness to modify their behavior to reduce health risks. Assuming workforce demographics stay relatively stable year-to-year, much can be gleaned through comparing annual HRA analyses.
Another way to determine bottom-line value is to measure annual healthcare utilization rates, or simply add up health insurance premiums, subtract inflation and compare with previous years. Making both those calculations difficult of late has been a proliferation of layoffs and renewed hiring, not to mention that some companies and industries have higher-risk employee populations. For example, someone stuck at a desk all day does not have the exercise opportunities of, say, a forester or postal worker in the field.
Still, companies like AstraZeneca are sanguine that investments in wellness will pay off. "Our analysis of the health incentive program indicates that folks who participated in 10 or more wellness activities like smoking cessation, exercise and cholesterol reduction showed a 1.4% annual reduction in healthcare risks per participant, and an estimated $293 annual reduction in short-term disability costs," says Dr. Joe Henry, U.S. senior director of health and well-being for the London-based biopharmaceutical company. In terms of healthcare claims, "participants' healthcare costs were on average $896 less than non-participants' on an annual basis," he says.
Nevertheless, Henry concedes that the cost of the wellness program slightly exceeds the return on the investment. "We did the ROI and it came out to a 97-cents return per dollar spent," he says. "But the hike in employee satisfaction and engagement plus the benefit it has for us in terms of reputation more than make up for this."
Although Serxner, who has written extensively about corporate wellness programs, acknowledges that hard numbers on their financial return are hard to come by, he is convinced there is a payoff. "I've been publishing and doing literature reviews on this subject for 30 years, and it seems clear to me that most programs won't break even in year one, many will break even in year two, and by year three most should definitely be in the black," he says. "After that, a solidly administered, broad-based and serious program should generate between a 1.5% and 2.5% annual return. This excludes a growing body of data indicating reduced short-term disabilities and absenteeism, and greater 'presenteeism'--employees who are much more engaged in their work."
For companies like AstraZeneca and Cardinal Health, reducing healthcare utilization--assuming the wellness programs indeed do just that--resounds at the cash register. The former self-insures 90% of the health insurance plan it provides employees, while Cardinal Health self-insures the whole shebang (Cigna is the plan's third-party administrator). "We pick up 65% of the cost of employee healthcare and they pick up 35%, so when we are able to reduce the premium, we share accordingly," Henderson explains.
But like all things in business, hard money is only part of the game. "This might be seen as a soft benefit by some, but we truly believe that our wellness initiatives echo our mission of making healthcare most cost-effective," he says. "That's the job we focus on every day for customers. Having the wellness program exist within our company is really an extension of our brand. I believe in the program."
With that, he toweled off and headed for the shower.