Economics

Should Companies Invest In a Chief Health Officer?

flying cadeuciiWhile employer-sponsored wellness, health promotion and disease prevention programs have been linked to “human capital,” talent recruitment and retention, improvements in employee morale, reductions in absenteeism, reductions in presenteeism and bending the curve of claims expense, should shareholders care?

After all, according to President Obama’s latest State of the Union Address, corporate America’s pursuit of profits have resulted in greater automation, less competition, loss of worker leverage and “less loyalty to their communities.” According to that narrative, employees are just another commodity on the road to total shareholder return.

Well, according to an expanding body of peer-reviewed scientific literature, shareholders should care.

The latest example of why is this publication by Ray Fabius and colleagues that appeared in the January issue of the Journal of Occupational and Environmental Medicine.

First, some background.  The Corporate Health Achievement Award (CHAA) was created by the American College of Occupational and Environmental Medicine (ACOEM) to recognize companies’ workplace health and safety programs.  It relies on a point-based assessment system of multiple standards in four categories of 1) Leadership, 2) Healthy Workforce, 3) Healthy Environment (including Safety) and 4) Organization.  Many of the companies that have participated in CHAA are household names.

In this study, the authors tracked the stock market performance of companies that applied for the CHAA from 1997 through 2014.  As your humble correspondent understands it, all the privately held companies as well as those that scored 175 or lower in Organization and lower than 350 combined in the Workforce and Environment categories were excluded from the analysis. Of the remaining publicly traded companies, those scoring at or above the 37.5 median percentile in the four categories described above (high CHAA achievers) were placed in six hypothetical stock portfolios of 5 to 22 companies.  The authors then mapped out what would have happened with a January 2001 investment of $10,000. As each year passed, new high scorers were added to “rebalance” the portfolios, while the stock of repeat high scorers were added.

The results? While the benchmark Standard and Poor’s (S&P) return over the study period was 105%, the portfolios easily exceeded that with returns that ranged from just from over 200% to 333%.

This study builds on other studies that used the CHAA as well as other wellness award programs including Mercer’s HERO Employee Health Management Best Practices Scorecard and the C. Everett Koop National Health Award.

Now that’s total shareholder return.

In another demonstration of why peer-review is so important, Dr. Fabius and his colleagues correctly point out that correlation is not the same as causation. As a result, there is no evidence that importing wellness programs into other companies will translate into better stock performance. In addition, elementary statistics tells us that corporate wellness and TSR won’t necessarily correlate over shorter periods of time for individual companies.

Bottom line? I don’t think investors in public companies are necessarily interested in “causation” as they are in market signals. It stands to reason that a commitment to company wellness is an important signal about where to put their money.

Which raises three questions….

1) This was raised by Fabius et al: should investors or regulators demand that companies publicly report whether they have employee wellness programs?
2) Should companies invest in a “Chief Health Officer?”
3) Why isn’t corporate wellness part of the national conversation about capitalism in America?

Jaan Sidorov blogs at the Population Health Blog where this post first appeared.

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DikeDrummondMDPerrywhynobodybeliev Recent comment authors
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DikeDrummondMD
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Wouldn’t it be interesting if Healthcare companies … you know, the ones that employ physicians and nurses and such … had Chief Health Officer positions. Seems like the DUH of the day to me and perhaps a natural extension of the new Quadruple Aim.
Dike
Dike Drummond MD
http://www.TheHappyMD.com

Perry
Member
Perry

If a company has a” Wellness Program”, but has an unhealthy workplace, doesn’t that cancel the wellness program out?

whynobodybeliev
Member

I just did a totally transparent analysis of Koop Award winners and found exactly the opposite. A company that thinks prying, poking and prodding its employees is a good idea is likely to underperform. At Quizzify, we LOVE wellness — for our competitors. If they do really comprehensive programs, that will drive up their costs and cause them to lose quality employees. http://theysaidwhat.net/2015/12/29/koop-award-winning-companies-are-bad-investments/