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We Concede the HERO Report is right–wellness does lose money

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The HERO Report concludes that wellness loses money.  We agree.  We also think it loses much more money than they will admit to, but the news here is not about us.  The news is that more than 3 dozen self-described experts and industry leaders representing more than 2 dozen companies have reached consensus that their industry loses moneySlide1

Count us more shocked now than we were by the report’s admission that wellness adversely impacts morale, (This is covered in Installment 1.)

Together, the HERO findings — and our broad consensus with those findings — have serious Affordable Care Act policy implications.  The entire basis for the ACA “Safeway Amendment” allowing large fines for (among other things) failure to lose weight is that the cost savings from skinnier employees merits invading their privacy, dignity and automony through medicalizing the workplace (“companies playing doctor” as some have called it).  Senate committee hearings, proposed new legislation, and EEOC lawsuits around this provision have all been based on the assumption that wellness saves money.  The Senate committee never even lobbed a softball question about that assumption, and even the more hostile witnesses didn’t challenge it.

Recently there was even an eyeball-to-eyeball encounter between the Business Roundtable’s (BRT) Gary Loveman and President Obama.  Even though his company (Caesar’s) went bankrupt while embracing wellness as essential to their profitability, Mr. Loveman argued that corporations should be allowed to fine workers who don’t lose weight because the benefit to corporate bottom lines would trump both privacy concerns and the substantial health hazards of these programs.

gary loveman

Gary Loveman, Business Roundtable

 

Apparently, though, Mr. Loveman’s company went bankrupt slightly faster because of wellness.  Yes, along with employees, employers would be better off without forced (highly penalized or incentivized) workplace medicalization.  If you fire your wellness vendor, everyone benefits.

Everyone, that is, except the wellness industry denizens who make their money off this.  That’s why we think HERO spoke the truth unintentionally.  Very few people (I was one of them, having switched sides in 2007 when I saw that data failed to support wellness/disease management) willingly undermine their own incomes for integrity’s sake.  So this posting will proceed on the basis that is was a gaffe on their part.

Curiously, this is the second time in recent months wellness industry leaders have accidentally admitted wellness loses money, and the third time they’ve accidentally told the truth and had to walk it back.

Equally curiously, wellness economics information disseminates very slowly if at all — testament in large part to the absolutely brilliant and flawlessly executed strategy by the Wellness Ignorati of ensuring that facts get ignored (hence their name).  So even as the vendors are admitting that wellness loses money, benefits consultants and HR executives have once again pushed participation incentives/penalties to new highs, a whopping $693/employee/year, according to a new report.

As for the figures themselves, we are also attaching a spreadsheet so that you—as an employer—can figure this out on your own in your own population, rather than just take HERO’s word for it that wellness loses money.

The costs, according to the HERO report’s own screenshots

First, review the screenshot from the first installment, showing the costs of wellness.   The list of cost elements is fairly exhaustive –down to the level of a space allocation for a health fair — though the Committee conveniently left out consulting fees.   No surprise there, given that Mercer consultants sit on the committee.

HERO list of costs

Then, compare the list of costs in that screenshot to costs in this second screenshot, from Page 15 of the HERO Report.  That comparison won’t take long because only one program cost is listed:  “$1.50 — Cost of EHM [Employee Health Management] PMPM fees.”

HERO list of costs

The two lists of costs are totally inconsistent.  Suddenly, when it comes time to measure ROI on page 15, most of the costs on Page 10 have disappeared…

The reason for that?  The savings from wellness – in the HERO committee’s own words below – are so trivial that in order for wellness to produce savings, the second screenshot has to ignore most of the costs listed on the first one.  Whereas the first screenshot listed three categories of costs covering 12 different line items (13 if you count the AWOL consulting expenses), the second screenshot says you should only count one item:  vendor fees.

And by the way, the vendor fees themselves self-invalidate.  At about $40 per employee per year, biometric screening fees alone cost more than the stated $1.50 per person per month, or $18/year.  Yet $18/year is the total they list for all fees combined, including the $40 screenings.

Rather than point out the many cost elements on the first screenshot missing from the second, we’ll invite you to use our spreadsheet and enter your own data instead of theirs.  Simply fill in your own direct costs of wellness.

Whatever number you get will dramatically understate your true costs because there are three elements of cost that we aren’t counting on this spreadsheet:

  • What their spreadsheet call the “indirect” costs, which we have listed as “$0”,
  • What their spreadsheet calls the “tangential” costs of damaged reputations and employee morale—ask Honeywell whether they brag about their wellness fines and lawsuit in their recruiting (and, ironically, I just returned from a consult for Penn State itself, where the adverse morale impact still overhangs employee relations);
  • The massive costs of overscreening, overdiagnosis, and overtreatment generated by biometric screens – all of which are conducted far more often than the USPSTF recommends and most of which (as in the examples we occasionally post on this site) include screens that no one other than a wellness vendor or consultant would ever propose.

The financial benefits

Against those costs are the benefits. Page 15 lists some alleged benefits of wellness that leave us scratching our heads.

Generic substitution?  How does that have anything to do with wellness?  Quite the contrary, obsessing with wellness might take your eye off the generic substitution ball, and cause you to miss some tiering opportunities.  (The company that is best at tiering its pharmacy benefit, Procter & Gamble, is also known for its current employee-friendly wellness program, sort of the anti-Honeywell.)   And has anyone ever seen one health risk assessment (HRA) or participated in one health screen that even mentioned generic substitution?

Outpatient procedures?   Try to find one person in your organization whose outpatient procedure could have been prevented by eating more broccoli.

ER visits?  Maybe they decline.  But maybe they increase, due to sports injuries sustained by newly activated employees.  And someone who really is eating more broccoli might slice their finger chopping the crowns off the stalks.  (Anybody who voluntarily eats the crowns with the stalks still attached doesn’t need a wellness program.)

And then the catch-all:  savings through “overall wiser use of healthcare.”  Come again?  This is an industry that — as well documented by their own words captured on this website — makes its living telling employees to do exactly the opposite:  go get checkups you don’t need and won’t benefit from, submit to screens far in excess of USPSTF guidelines so that vendors can brag about how many sick people they find, yo-yo diet for “biggest loser contests” and weigh-ins, like ShapeUp’s get-thin-quick 8-week crash-diet programs, and avoid eating fat and cholesterol and load up on carbs instead.

cerner cholesterol

Perhaps what the HERO committee intends is that since employees largely don’t trust their employers, they will do the opposite of the recommendations.

The savings from wellness

Quizzify 4

When wellness doesn’t add up, Quizzify does

We are going to leave out respiratory savings.   To capture those, charge a smoking differential and make smoking cessation available.  Done.  You don’t need an intrusive and expensive wellness program for that.  (We are big believers in a “smoking differential” for employee-paid premiums.  It makes sense for all the reasons weight loss and other wellness programs don’t.)

Instead let’s focus on people who have cardiometabolic issues.  In order to lose weight and reduce their risk, they need to switch to a low-fat, low-cholesterol diet.

Oh, my bad!  That is sooo 2014!  While most of us not in the wellness business already knew the dangers of eating too many simple carbohydrates long before now, even the most ardent card-carrying member of the Wellness Ignorati learned in March that all their dietary advice has been wrong — to go along with their incorrect screening and checkup advice.  Yet recommending exactly the wrong things hasn’t stopped most vendors from claiming massive savings.  See “On the (Even) Lighter Side” and The Smoking Guns for examples.

Now let’s look at all the hospitalizations that can be avoided through wellness – heart attacks, angina, hypertension, and…um, hmm…did we mention heart attacks?   You’re thinking: “What about diabetes events?”  OK, we’ll add diabetes, only because the HERO report lists it and we want to be true to the report.  But diabetes complications admissions (like CHF, which they also list) are a disease management issue, not a wellness issue — you can’t prevent or manage diabetic neuropathy or left-ventricular heart failure by eating more broccoli. The $1.50 PMPM price would not be high enough to also include disease management, and in any event what one does in disease management for complex cases is much different from a typical “pry, poke, prod and punish” wellness program.

And “straight” diabetes admissions are usually the result of diabetic employees pushing their blood sugar too low by over-medicating themselves—often in a good-faith effort to hit Hba1c “targets” that your wellness program set, no doubt on the advice of your consultants.   Low blood sugar won’t do much for productivity either.  Without the advice of a company specializing in diabetes, you’re likely to get this result.  (And if this is the first you are hearing about the likely causes of “straight” diabetes ER visits and admissions, you should consider such an option.)

So we are now adding all ischemic and hypertensive heart events and diabetes as what they call “potentially preventable hospitalizations.”  How many of your hospitalizations are for those items?  Simply run the primary codes for those events, being careful not to double-count professional fees, to see how many you had.  Here’s what happens when you do it for the United States as a whole.

HCUP WSMEs non-respiratory

Next, divide the relevant figure (Private insurance, 432,065) by the total number of privately insured discharges in the US (7,360,684)

HCUP US as a whole

So—using the HERO Committee’s own acknowledgment of the undeniable fact that wellness can only impact wellness-sensitive medical events (WSMEs) and using the diseases that the report says to use — less than 6% of admissions are WSMEs.  If your non-birth-event admit rate is, as the report says, 45 per 1000, then you have 2.6 admissions per 1000 in non-smoking-related WSMEs.  Once again, don’t take our word for this.  Run this analysis on your own admissions.  You won’t be surprised by how few there are.  Do you even know anyone admitted to the hospital for these things, especially where the admissions could have been prevented with a few more screens, HRA and servings of broccoli?

Shameless plug:  We are happy to do this WSME analysis for you.  We do these all the time.  It’s $4000.  We can also tell you your savings, ROI, trend, comparison to others over time, and more.  We also adjust for the major secular decline in cardiac events that has been taking place anyway for decades that the Committee seems to be unaware of, sort of surprising given their alleged expertise in cardiac risk reduction.

Let’s say you run this analysis with or without our help, and a rate/1000 similar to the US average pops up.  The HERO report says you need to reduce this rate by “only 1 or 1.25 admissions.”  But that’s almost half of your total 2.6/1000 WSMEs!  And in any event, you’ve probably seen by now – if you downloaded the spreadsheet – that Page 15 seriously underestimates your wellness program expenses, meaning your breakeven reduction needs to be much higher than “only 1 or 1.25.”  It’s probably higher than the number of admissions you have available to be reduced.

You can enter both your admissions per 1000 and the reduction in that figure you achieved directly into the spreadsheet.

But for now let’s very generously assume their expenses are right, and you only need to reduce admissions by 1 to succeed. How hard would it be to go from 2.6 to 1.6 WSMEs per 1000, a reduction of 39%?  Here are five things to keep in mind:

  • Your true engagement rate itself is probably much lower than that aforementioned 39%, not including people who simply participate for the money, and the people who are engaged generally aren’t the ones who would crash anyway;
  • A big chunk of all heart attacks can’t be predicted at all, and certainly not now that law prohibits asking about family history;
  • Even events that can be generally predicted can’t necessarily be prevented (we all know people who are “walking heart attacks” and have been ignoring advice for years);
  • “Straight” diabetes admissions are more likely to be for over-control than under-control;
  • In 7 years of measuring this, we have never seen a reduction in WSMEs remotely approaching 39% after adjusting for secular declines in cardiac events that take place even without a wellness program (which the report overlooks)

See The Million Dollar Workplace Wellness Heart Attack Screen in Health Affairs for a more in-depth view of the math. But the entire committee writing this HERO report insists wellness saves money, right?  So, it’s us against them, right?  A he said-she said?  Wrong.  Here’s the denouement.  On Page 23, the report’s own example shows that wellness only saves $0.99 PMPM!   That figure, by the way, is grossly overstated for reasons we will get to when we deconstruct Page 23.  But for the time being, here it is.

hero page 23 99 cents  

So even their own comparison of their own overstated savings estimates to their own understated cost estimates reveal:  wellness is a loser financially.  They have already admitted it is a loser for employee relations.  Funny — if we had made these two arguments, they would attack us.  But they are making these two arguments themselves.

Once again, the Surviving Workplace Wellness mantra applies:  “In wellness, you don’t have to challenge the data to invalidate it.  You merely have to read the data.  It will invalidate itself.”

Where does this leave us?

To summarize, pages 10, 15 and 23 combined tell us:

  1. Even before adding page 10’s cost categories back to page 15, costs are $1.50 PMPM;
  2. Savings are only $0.99 PMPM, meaning wellness loses $0.51 PMPM;
  3. The first two points are not our estimates — they’re their estimates and are far more optimistic than ours;
  4. Adding back the cost elements on page 10 to page 15, and then on Page 23 removing the respiratory savings, adjusting for secular decline in WSMEs, and adding in all the extra doctor visits would create a much larger loss from wellness;
  5. And they have already admitted that “pry, poke, prod and punish” programs are bad for morale.

Now you see why RAND’s PepsiCo study showed a negative ROI from wellness:  It’s because there is a negative ROI from wellness, which no one disputes any more.

And you see the reason we asked the question in the last installment:  Why would any company “do wellness” if the biggest proponents of wellness – people who make their living off it – admit that it’s a waste of money that adversely impacts morale?

Likewise, now you see why wellness vendors and consultants get “outed” all the time on this site, advocate savings methodologies designed to obfuscate rather than enlighten, and try to prevent you from learning that we exist.  We are not saying they are sociopaths.  Sociopaths lie for no reason.  Conversely, wellness vendors and consultants are just trying to keep their jobs.  Bleeding customers or clients dry is only a good job security plan if indeed the customers or clients never find out about it.

But now customers know how their own vendors and consultants really feel.  And we can all work together to dismantle these programs and start doing wellness for employees instead of to them.


Poll: Cue the Wellness Industry Response…  

We have a little dispute with RAND’s Soeren Mattke.  He says the wellness industry modus operandi is, whenever one claim is disproven, to switch to another claim.

We say the reason they are known as the Wellness Ignorati is, their strategy is to ignore facts, including ones they admit, and they will simply just ignore this posting so as not to create a news cycle, rather than switch claims.

There is also the chance that they admit that their own financial model is accurate. This would demonstrate integrity, a quality historically in short supply in this field.

So vote early (but not often)…

 

 

While we aren’t deconstructing this as a sales tool for Quizzify.  But as it happens, Quizzify is literally the only wellness program that does pay for itself.  Don’t take our word for it.  Quizzify is 100% guaranteed to save money and improve morale/engagement–exactly the opposite of what the HERO report says usually happens.  No other wellness program is either, let alone both.

Quizzify 3

Quizzify: the antidote to poke-prod-pry-punish wellness


9 Comments

  1. Mitch says:

    In a long line a great posts drivien by solid thinking and analysis this might be your best yet. Thank you and keep up the great work.

    And you are making an impact: I read an article today about a new-ish small business focused broker, Zenefits. They don’t do wellness among their offerings, as it is a financial loser for their clients! They do recommend smoking cessation. Thye are a stereotypical disruptor, will be fun and interesting to see them move up the food (bigger company) chain.

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  2. Sam says:

    Whenever I read your posts, I think “this is the end of wellness.” But this one really should be the end of wellness — their own words (and picture) are the best argument for that. Just as a clarifcation, Caesars’ program was not about weight. it was about everything but weight. And seeing this picture makes me think that’s not a coincidence.

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  3. […] the report claims no financial benefit, major or otherwise. It optimistically lists wellness’s gross annual savings as about $12 per employee (“optimistically” because US government data shows that the 23 percent reduction in […]

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  4. […] the report claims no financial benefit, major or otherwise. It optimistically lists wellness’s gross annual savings as about $12 per employee (“optimistically” becauseUS government data shows that the 23 percent reduction in […]

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  5. […] the report claims no financial benefit, major or otherwise. It optimistically lists wellness’s gross annual savings as about $12 per employee (“optimistically” becauseUS government data shows that the 23 percent reduction in […]

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  6. […] their healthcare expenses will rise. Even wellness vendors themselves admit — in their official consensus industry guidelines — that wellness loses money. […]

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  7. […] wellness vendors themselves admit—in their official consensus industry guidelines—that wellness loses money. That’s […]

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  8. […] universal agreement. The New York Times‘ economists, the nonprofit RAND Corporation and even the wellness industry trade association itself agree on this […]

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  9. […] universal agreement. The New York Times‘ economists, the nonprofit RAND Corporation and even the wellness industry trade association itself agree on this […]

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