Wellness vs. Disease Management ROI for Employers
How employers can get the best bang for their buck on employee health programs
Why Do Employers Care About ROI?
Many digital health companies sell their products to employers, citing benefits like reduced absenteeism or improved employee engagement.
Maybe you work for one of them (disclosure: I work for Verily Life Sciences, which certainly falls into this category).
In the early 2010s, when the the hype around digital health was growing at an unprecedented pace, it was much easier to hold a conversation (and perhaps even make a sale!) to an employer with nothing more than a vision and a prototype.
But now it’s 2020, and the conversation has changed. If you’re trying to sell your digital health solution to employers these days, the conversation is much more likely to eventually turn to an important but tough topic - Return on Investment (ROI):
As you can see, the ROI formula is by default measured in units of money, and doesn’t easily make allowances for softer metrics like “time spent in app” or “user satisfaction.”
It simply asks “If I put in X dollars today into your business today, will I get (X + something) dollars in return at some point in the future?”
This is, surprisingly, a question that many digital health companies don’t seem to have a good answer for. See, you could go on and on about things like how your solution improves “employee engagement” or incorporates “cutting edge technology” and a lot of it would be good and fine, but at the end of the day, if I am the Director of Benefits, I need to know that what you are selling me actually works for the business in the time frame I care about.
What Actually Works?
So, what evidence exists around what types of health programs actually work for employers from an ROI perspective?
Before we dive into that, let’s look at how employers currently spend their money on employee health:
In fact, the employer wellness space is a $6 billion dollar-a-year industry in the United States! Most of you have probably encountered it in one way or another - especially in the spammy email blasts that most of us get in January at the end of Open Enrollment.
Given the amount of money that’s poured into these employee wellness programs, you would expect that they have a very clear ROI. Right?
The real story is much more nuanced.
To that end, I’d encourage everyone to take 10 minutes to read this research paper by the RAND Corporation called “Do Workplace Wellness Programs Save Employers Money?”. This study involved over 600,000 employees at 7 large employers and is the most comprehensive and persuasive study that I know of on this subject.
To summarize the key findings:
Disease Management Programs have a much faster ROI vs. Wellness/lifestyle Management Programs
Takeaway: You have to know the average employee tenure and turnover rate of the employer you are trying to sell to. An employer that has a two-year average employee tenure is probably going to get much less value out of your Wellness/lifestyle program.
Disease Management Programs have a much higher ROI vs. Wellness/lifestyle Management Programs
Takeaway: The best way to deliver ROI to employers via a health program is to help them take care of their employees who already have chronic diseases - and then figure out how to keep them out of the hospital.
Most companies and employees tend to focus on the Wellness/lifestyle programs
Takeaway: Employers and employees are still investing mostly in Wellness/lifestyle management programs, even through the ROI evidence doesn’t seem to back it up.
This all seems a little backwards, doesn’t it? If I were the Director of Benefits at one of these large Fortune 500 companies, and I saw the data above, I would strongly consider shifting much of my budget and internal marketing to focus on Disease Management Programs, which would clearly seem to get me a much bigger bang for my buck.
So why the investment in Wellness/lifestyle programs in spite of the data? My hypothesis is simply that the Wellness/lifestyle industry has been selling to employers for a longer period of time, and there is a lot of institutional inertia despite the lack of clear ROI. I expect that we will see employers shift more and more of their benefits budget to Disease Management in the next decade, especially as new innovative digital health companies offer more integrated and clinically-validated products (e.g. Livongo, Propeller Health).
I also expect that there will also be an increasing trend of employers buying solutions that can use the data they have (claims submissions, health program participation, absenteeism, etc.) to identify employees that could benefit the most from disease management programs and help with targeted outreach to prompt program enrollment. I do acknowledge that there are privacy implications to be worked through here, but I think that this overall trend is here to stay.
Build a Digital Health Product with a Clear ROI
If you are building or thinking about building a digital health product today with a target market of employers, I would challenge you to think about:
How will I measure and demonstrate the ROI of my product?
Should I gear my product more towards the Disease Management category (as opposed to the Wellness/lifestyle category) where there has been a greater demonstrated ROI?
As Benjamin Graham said:
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
If you’re building for the long run, make sure you think about ROI so that your business comes out on the positive end of the scale.
If you like what you read, please subscribe below: