PepsiCo’s Wellness Program Falls Flat

PepsiCo’s Wellness Program Falls Flat

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For those of us who actually think wellness outcomes should be evidence-based, a landmark study was released today:  the first evidence provided by a major organization voluntarily (as opposed to being outed by us, like British Petroleum and Nebraska) that wellness doesn’t work.   January’s Health Affairs features a case study of PepsiCo, authored by RAND Wellness Referee Soeren Mattke and others, in which a major wellness program was shown to fall far short of breaking even.

The specific highlights of the PepsiCo study are as follows:

  • Disease management alone was highly impactful, with an ROI of almost 4-to-1;
  • Wellness alone was a money sink, with each dollar invested returning only $0.48 in savings;
  • The wellness savings were attributed to an alleged reduction in absenteeism, as self-reported by participants.  There was no measurable reduction in health spending due to wellness.

Even though the wellness ROI was far underwater, we suspect that the ROI was nonetheless dramatically overstated, for several reasons.  First, the authors acknowledge underestimating the likely costs of these programs, focusing only on the vendor fees without considering lost work time, program staff expense and false positives.  Second, no matter how hard one tries to “match” participants with non-participants (the wellness industry’s most utilized measurement scheme), it simply isn’t possible to compare mindsets of the two groups.  We learned from one of Health Fitness Corporation’s many missteps that participants always outperform non-participants, simply because they are more motivated.  Third, the absenteeism reductions were self-reported, by participants.

Finally, PepsiCo’s human resources department, having made the mistake of accepting Mercer’s advice to implement one of these programs, was already taking some political risk by acknowledging failure.  Had they incorporated the adverse morale impact, lost productivity due to workers fretting about false positives, Mercer fees and staff costs, participant bias, and self-reporting bias, the ROI could easily have turned negative (meaning the program would have been a loser even if the vendor had given it away) and the HR staff could have been taking serious career risk.

Therefore we suspect the reason for the nuanced finding lies more in the politics than the economics.   It’s to his great credit that Dr. Mattke got PepsiCo to do even a nuanced mea culpa.

This result, of course, will surprise no longtime THCB readers.  It might raise the eyebrows of Harvard health economists Katherine Baicker and David Cutler, whose 3.27-to-1-ROI mantra helped turbocharge the current mania, and Emory University’s Ron Goetzel, the wellness industry’s go-to guy for defending the indefensible, or in the case of Nebraska’s program, giving awards to the indefensible.   (Expect to hear from Mr. Goetzel in the next few weeks furiously spinning this into something positive, having bet his career on wellness saving money.)

Another surprised party will be the Business Roundtable, whose Health and Wellness Committee has lobbied noisily for more corporate wellness to “empower workers to live longer, healthier lives,” even as Committee Chairman Gary Loveman, CEO of Caesars World, knowingly and purposefully exposes his employees to more second-hand cigarette smoke than all but two or three companies in the country.

But then again, wellness is nothing if not ironic, since employees usually resent and sometimes revolt against programs designed to “help” and “empower” them, so that — in a further irony — corporations can save money through reduced healthcare expenses, though none including PepsiCo ever has.

Al Lewis is the author of Why Nobody Believes the Numbers, co-author of Cracking Health CostsHow to Cut Your Company’s Health Costs and Provide Employees Better Care, and president of the Disease Management Purchasing Consortium.

Vik Khanna is a St. Louis-based independent health consultant with extensive experience in managed care and wellness.  An iconoclast to the core, he is the author of the Khanna On Health Blog.  He is also the Wellness Editor-At-Large for THCB.

Vik and Al will be the first authors of THCB’s new e-publishing venture.  Their jointly authored book, Surviving Workplace Wellness: With Your Organs, Dignity, and Finances Intact, will be released in the late winter/early Spring 2014.  Vik’s solo e-book, Your Personal Affordable Care Act: How To Make Yourself Scarce In The Dysfunctional US Healthcare System will be simultaneously. Pre-orders are being taken now at this link, where you can also sign up to receive additional information.

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41 Comments on "PepsiCo’s Wellness Program Falls Flat"


Guest
Apr 9, 2014

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Guest
Jan 29, 2014

Hi Al,

It took me a minute but I finally remembered who said that Kate Baicker said that “no expenditure is too large to save even one life.”

It was your buddy Vik Khanna. See his post above.

Also, you still have not answered my question so I will ask it again.

Do you disagree with what you say she said that no expenditure is too large to save even one life?

Guest
Jan 28, 2014

People turn to comfort in food, alcohol, television and other outlets to avoid and/ or manage stressors on their life. If you don’t manage the mind, the rest is moot.

Part of this comes from engaging with people. People you like and people you don’t. Even in your family. Ever had a boss that sucked where happy hour gave you a bit of respite from the ongoing bullying?

Understanding the way you are hard wired and what your triggers are for stress is the first step, then understanding where people are coming from is the next. We just piloted a new tech that accurately predicts how people will interact on a team. The results were not only stunning, but they also helped minimize stress which will potentially lead to an openness toward lifestyle change. (We are monitoring this now.)

Everybody wishes they were well. But everyone knows that means change. And we know how much everyone loves that!

Guest
Jan 28, 2014

Al,

I never claimed that Kate Baicker never said that “no expenditure is too large to save even one life.” I never asked her this if she believed it or not so I would not have commented on it.

I happen to think that life is valuable and I know that many wellness companies save lives each and every year. That is one of the most rewarding things that we do.

Maybe you can clarify your position on what you say Kate Baicker said. Do you disagree with what you say she said that no expenditure is too large to save even one life?

John

Guest
Jan 28, 2014

Al,

Haven’t you discredited yourself enough. Now you pretend that the author of the Rand PepsiCo study “specifically asked that you stop misrepresenting it.”? (I am sure you meant “you” to mean us.)

Not sure if you are trying to be funny or are just intentionally looking to annoy people but here is the actual conclusion from this article:

“What are the implications for employers?

We recommend that employers take three lessons from these findings. First, employers need to be clear about their goals for the wellness program. The RAND Wellness Program Study has shown that lifestyle management can reduce health risks such as smoking, obesity, and lack of physical activity. Our analysis of the Fortune 100 employer’s program also shows that lifestyle management can reduce absenteeism. Thus, if an employer wants to improve employee health or productivity, an evidence-based lifestyle management program can achieve this goal. But employers who are seeking a healthy ROI on their programs should target employees who already have chronic diseases.

Second, given the lack of financial return from the lifestyle component, employers need to pay attention to cost. Screening all employees for health risks and offering one-to-one counseling and coaching to those with such risks is expensive, but other interventions, such as offering healthy food choices and launching educational campaigns to use the stairs, are not.

Third, execution really matters. The findings presented here are derived from leading employers with a strong organizational commitment to wellness and substantial experience with running programs. Learning from them how to engage employees and achieve fundamental behavior change would be prudent for employers who want comparable results.”

Oh and the facts still have not changed:

“Disease management drives return on investment from workplace wellness programs.

Overall, the two component programs reduced the employer’s average health care costs by about $30 per member per month (PMPM). But disease management was responsible for 87% of those savings. Employees participating in the disease management program generated savings of $136 PMPM, driven in large measure by a nearly 30% reduction in hospital admissions. Furthermore, only 13% of employees participated in the disease management component, compared with 87% for the lifestyle management component. Put differently, the much higher participation in the lifestyle management component contributed only slightly to the overall savings. (Figure 2)

Our return-on-investment (ROI) calculations bear this out: Considering the ratio of reductions in health care costs to program costs, including the fees of the program vendors and the cost of screening employees for health risks, the overall ROI was $1.50 — that is, a return of $1.50 for every dollar that the employer invested in the program. But the returns for the individual components differ strikingly: $3.80 for disease management but only $0.50 for lifestyle management for every dollar invested. ”

Regards,

John

Guest
Jan 27, 2014

So many of the wellness companies anymore are just subsidiaries of insurance companies and supply a nice avenue to collect and scrape data for sale, the epidemic continues. This is another reason to be a skeptic of what’s out there when you have the likes of Walgreens making about a billion a year or more selling data for one example. In addition you have Blue Cross and United buying your MasterCard and Visa purchase records from the banks, 30 years worth of data about, depending how old you are and when you got your first credit card.

You have Red Brick out there that is basically financed by United Health care running their software with trying to get employees to commit to biometric monitoring to get a discount on their insurance policies on the employee contribution side. Just go out and search Red Brick on the web, not a lot of happy campers as participants and I get them emailing me too, they hate them.

Then we had the Penn state WebMD story a while back to where they were going to penalize all who did not participate in the portal and enter data…all about collecting and selling data. Even the CEO of Mayo seems to be doing commercials to entice all others to give their data to United Labs. Last year Mayo took in almost $9B and had $367 M profit, $300 of that was donations and they want to build a new wing..so bond issue time and look for more money.

http://ducknetweb.blogspot.com/2013/11/mayo-clinic-receives-67-million-dollar.html

Wellness got away from wellness and was quantitated down to profit and thus a lot context and focus changed. Quantified justifications a very dangerous thing..and it’s in media too as reporters now on pay for performance too with the threat of the journobot. So when reading news today and see some really good soap opera type stuff that just jerks your emotional jugular, well that’s what it’s supposed to do, quality or not so the news agencies that are struggling for revenue streams get more ad exposure revenue.

http://ducknetweb.blogspot.com/2013/12/quantitated-justification-for-believing.html

The journobot has another twist to it as Eric from Nanex and I were talking from the stock side of things as stock bots read news so if there’s something you can create and automate to for the stock bots to react with, well the journobot would be it,..it’s at bot bot world..

Guest
Jan 10, 2014

Yep Al,

This is the smartest thing you said so far:

“Maybe you’re right. I guess I need to apologize. We totally lack the qualifications to make these statements.”

The bottom line is you love attacking people who dedicate their life helping others. You misrepresent the facts and when confronted with the facts you do everything in your power to try to change the subject.

I asked you to correct the facts that you are reporting as they are inaccurate and you respond with more attacks. So have at it. I love what I do, I help thousands of people each and every year and have the testimonials to prove it.

We are simply on opposite sides of the same coin. I love helping people and you hate people who help.

Guest
Al Lewis
Jan 28, 2014

RAND just asked that you stop misrepresenting their views on wellness http://www.rand.org/pubs/research_briefs/RB9744/index1.html and, while we’re on the subject, Kate Baicker did indeed clarify that she never said “no expenditure is too large to save even one life.”

So please, please stop misrepresenting people’s statements and positions. When people like you and Ron Goetzel say things that they know not to be true (like Nebraska’s vendor lied by mistakes so they get to keep their award) it makes our whole industry look bad.

Guest
Al Lewis
Jan 10, 2014

Maybe you’re right. I guess I need to apologize. We totally lack the qualifications to make these statements. You’re the one who has written the books, won four awards (3 from Forbes, one from the Center for Healthcare Consumerism), been published in the Wall Street Journal and Harvard Business Review, taught economics at Harvard, been a partner at Bain & Co., and exposed fraud in the C Everett Koop Award and North Carolina Medicaid.

All we do is run a pathetic little company that pokes people with needles in disregard of USPSTF guidelines and are really worried about what happens to our job security if people start reading the literature and give up biometric screens and other worthless and intrusive interventions.

Guest
Jan 10, 2014

Vik,

Sorry you get so upset with people who help others.

It is truly a sign of success to see all of the unfounded criticism. Especially when the truth has to be twisted so far from reality in order to criticize something.

I will ask again for Al to retract his inaccurate statements in this article and to show some character that you both are simply looking to point out the deficiencies in the wellness field and that you are not simply rabid critics of something that you really do not understand. There is a big difference between the two. I, and many others, would have respect for you and your work if you did truly report on the actual issues that exist in the wellness industry from the viewpoint of helping to fix it.

The wellness industry does help hundreds of thousands of people each year become healthier, happier and live a more fulfilling lifestyle. No amount of criticism will stop that from happening.

Guest
Jan 9, 2014

And there lies part of the problem. You make assumptions about the wellness industry that are simply not true of the ENTIRE industry but are true of a small portion of the industry and then draw incorrect conclusions.

You lack any practical experience in this area. If you had any experience running wellness programs you would know that what you just said is not true in the least.

Guest
Jan 10, 2014

If your precious wellness industry, which was birthed at the same time as the much-heralded managed care industry, had any history at all of beneficial impact, our population health status would not be in its present state. In fact, if wellness had worked — at all, anywhere, anytime, in any way that a rational person could measure — we might even be able to argue that health reform, the wellness industry’s major propellent, would have been unnecssary.

In the last three major papers on national health spending trends, two in Health Affairs and one in the NEJM, the health economists writing them don’t even use the word “wellness” in describing why health care spending has slowed. The fact is that serious people don’t take wellness seriously, but you and your crowd do, which will tell readers of this thread everything they need to know.

Guest
Jan 9, 2014

Vik,

Sorry it took me a while to put two plus two together but I have a question.

The whole point of Al’s article is to trash wellness programs based on PepsiCo’s lifestyle management portion of their wellness program only produced a ROI of 48 cents for every dollar spent on that part of the program.

Their lifestyle management program included weight and nutrition management, fitness, stress management and smoking cessation.

So, then why did you brag about the John Hopkins research that shows the four behaviors known to reduce mortality by 80% entails no health care spending? Did you realize that the 4 behaviors are the exact same 4 components of the PepsiCo lifestyle management program?

Guest
Jan 9, 2014

Yes, and do you know the difference between a program and measuring behaviors and mortality that occur naturally in a population, which is what JHU scientists did and what the AHA has done in establishing its 7 standards of ideal cardiovascular health?

People who are motivated enough to achieve the four standards will pursue them without regard to programs or incentives and people who are disinclined to pursue them won’t. It’s the classic wellness lament: if we just had enough (time, money, incentives, rewards, penalities), we could (control) and change everyone. No, actually, you can’t.

Guest
Jan 8, 2014

Vik,

Yes, Johns Hopkins researchers verified that regular exercise, eating a Mediterranean-style diet, keeping a normal weight and, most importantly, not smoking decreases the risk of cardiovascular disease by 80%.

No surprise there for anyone in the wellness industry.

You might be surprised to learn that many well run wellness programs focus on increasing exercise, proper nutrition, weight loss and smoking cessation.

Hey, maybe we are on to something.

Guest
Jan 8, 2014

Wow, way to not stay on topic.

Maybe I am right, you hate it that people are doing something that just might help someone.

Guest
Jan 8, 2014

Vik, it is sad.

How do you put a price on the value of someone’s life? Or put a price on creating better quality of life for an entire corporate population?

I fully agree with Mrs. Baicker… “No expenditure is too large to save even one life.”

It is clear that you do not understand and/or value helping others become healthier and helping others live a more productive and rewarding life.

I bet helping others makes you rather upset and you would do anything you can to stop that from happening.

Guest
Al Lewis
Jan 8, 2014

Just in case any other economist is reading this thread, it is NOT the case that everyone who teaches or in my case, taught, economics at Harvard doesn’t understand that the value of a hypothetical life saved is not infinite.

Guest
Jan 8, 2014

So wellness should be the arbiter of overall health spending and a Quixotic search for disease in mostly healthy people will save money in the long run because we’ll predominantly find things that no one has? This reasoning is why serious health thinkers believe wellness is a joke.

Guest
Jan 8, 2014

Yep, Vik, Al is misquoting the PepsiCo article. As stated above!

I know your just trying to sell your book that comes from the prospective that prevention is a waste of time and money. You have every right to do so.

There is far more information proving that wellness programs are beneficial to corporations at every level. But you would not know as you have never run any wellness programs to see any of the results.

There is also far more positive information about the success of the wellness industry to deny.

Good luck with your new book!

Guest
Jan 8, 2014

Prevention is not the same as clinical preventive care. The former is primarily non-clinical while the latter is not only clinical but costly and frequently harmful. Prevention, such as striving for the four behaviors known to reduce mortality by 80% entails no health care spending (you’ll have to research them yourself…hint…Johns Hopkins epidemiologists).

I know wellness people don’t do much in the way of reading or analysis, because doing do would too self injurious, but you certainty have down pat the wellness fantasy of saving money and improving at health at nocost to anyone. Good luck with that.