Do Workplace Wellness Programs Make Business Sense?

The press and trade publications strongly endorse workplace wellness programs as a good investment for employers. Soeren Mattke, a physician and RAND senior scientist, explains why his work tells a different story.

Why are workplace wellness programs so popular?

Because employers think the programs make business sense. They are supposed to improve employees’ health, increase their productivity, help control their chronic conditions, and reduce their risk of developing a chronic disease in the longer term. Employers believe that the dollars they spend on these programs will come back to them in avoided health care costs. For example, a recently published review suggested that employers gained three dollars in health care savings for every dollar spent on a workplace wellness program.

What does a typical workplace wellness program look like?

They usually have two components: lifestyle management and disease management. Lifestyle management focuses on employees with health risks such as smoking or obesity. The goal is to help employees reduce those risks, thus steering clear of serious disease down the line. In contrast, disease management is intended to support employees who already have a chronic disease by helping them take better care of themselves, e.g., reminding them to take their medications.

So are the programs living up to their press?

Perhaps in part. We recently published a study that included almost 600,000 employees at seven firms. We found that lifestyle management reduced health risk, like smoking and obesity, but no evidence that it lowered employers’ health care spending. Our new analysis extends that finding. Looking at 10 years worth of data from a Fortune 100 employer, we found that its program generated a reduction of about $30 per member, per month in health care costs. But disease management was responsible for 87 percent of the savings.

How does this disparity translate into return on employer’s investment?

The return on investment is strikingly different. For the disease management component, the employer earned a $3.80 return for every dollar invested in the program. For lifestyle management, the return was only $.25 for every dollar invested.

Why does disease management have such a disproportionate effect?

Because successful disease management can help avoid health care costs in the near term — e.g., keep people out of the hospital. And only employees who already have a chronic disease participate in the disease management component. In contrast, lifestyle management may improve overall employee health, but not all employees who have a health risk, such as obesity, will develop a serious disease, such as heart failure. In addition, it takes a long time for costly diseases to develop. But an employer has to cover the cost for every program participant, today, and all employees can participate in the lifestyle management component. Put another way, for a program to be a good investment for an employer, the risk of a costly disease has to be high in relation to the cost of the program.

What does all this mean for employers?

I think they should take away two important lessons. First, they need to be clear about the goals of their program. If they want to improve overall employee health and reduce absenteeism, then lifestyle management may be an appropriate choice. But if the goal is to get a good return on dollars invested in the program, employers should target employees who already have a chronic disease and help them control it. Second, given the lack of financial return on the lifestyle component, employers should watch program costs carefully and look for low-cost options, such as leveraging community resources, and offering employees healthy food choices.

Soeren Mattke is a senior scientist at the RAND Corporation and the Managing Director, RAND Health Advisory Services. This post originally appeared in The RAND Blog.

6 replies »

  1. In my experience as chief human resource officer I was sceptical of vendor claims that wellness programs would be cost effective….at best I thought they were a “feel good” employee relations program. On the other hand, early intervention with high users of health care (chronic disease and other) did seem promising….although I never came across of vendor of such services that convinced me they had the right tools/programs. Your thcb contribution sheds much light on my intuitive suspicions and I am glad to see that my instincts seem to have been right. Thanks.

  2. Dr. Mattke, I appreciate the contribution you and your team have made to the study of employee wellness and the voice of reason you’ve introduced into the debate. For me, the surprise to your Pepsico study was not that wellness programs don’t save money. As many of us in the industry often remind our colleagues, 1) there is no logical reason to expect wellness programs to save money 2) any employer that thinks that cost savings is the purpose of health promotion doesn’t understand and probably should get out of the “business” of health promotion 3) any employer that doesn’t feel a responsibility to support the well-being of its employees should consider getting out of the business of employing people.

    For me, the real surprise of the PepsiCo study was that you found a disease management program that worked. I think you’d be hard-pressed to identify many large employers that are satisfied with measurable outcomes achieved by disease management programs. The PepsiCo study describes the disease management program as a series of phone calls with a nurse designed to achieve control of a specified list of chronic conditions. I understand that the Health Affairs article was limited, but the description leaves open many questions about the nature of this model. Further, as you caution readers, we must be careful about the generalizability of the outcomes and your conclusions, based on this one company.

    I do have one burning question: The PepsiCo study included an analysis of hospital admissions (and you note that reduction of admissions is an example of how successful disease management programs can save money). Yet, the program did not reduce absenteeism. This seems counter-intuitive. I haven’t reviewed data on this specific topic, but we might expect that there is some correlation between hospital admissions and absenteeism. Is there anything you can share regarding whether, indeed, reduced admissions contributed to the PepsiCo savings? And, if so, how it might happen that there was no improvement in absenteeism rates?

    Thank you.

  3. As a worksite wellness program practitioner, I would personally like to say thank-you Dr. Mattke for posting your findings and thoughts on a forum easily accessible by the practitioner. We are the ones that desperately need to hear directly from the researchers like yourself.

    When your work only gets published in a subscription based format, that leaves out most of the practitioner community from getting direct access to what you have to offer us. We are then left to read someone else’s interpretation, which can certainly be problematic of course.

    So again, just a quick note of thanks!

  4. I may be the most quoted guy in the field, but you are the most misquoted guy. Thanks for clearing this up. Hopefully no one will misquote you again but as you know the wellness ignorati have very selective views of facts, so they will probably find one sentence from this posting to prove that you didn’t really mean what you said.

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