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What if they gave a Koop Award and nobody came?

You have to read this all the way through because, in breaking with long-established precedent (which needless to say is recounted in loving detail), in 2017 the Koop Award Committee — wait for it — did the right thing. 


In 2017, 3 companies applied for a Koop Award. This is down from a peak of 21, and represents the belated recognition on the part of wellness vendors that it simply isn’t mathematically possible to satisfy the requirement of saving money. Thankfully, one of the best attributes of math is that it’s true whether you believe it or not.

Many an employer has won an award, only to learn later — via the media — that their vendor had fabricated the savings. This litany might explain the slight reticence of vendors to shine a light on their own programs:

  1. Wellsteps: “Top Wellness Award Goes to Workplace Where Many Health Measures Got Worse,” STATNews
  2. McKesson: “Wellness ROI Comes under Fire,” Employee Benefit News
  3. Health Fitness Corporation:”Nebraska’s Acclaimed Wellness Program Under Fire,” Omaha World-Herald

An example of what transpires when employers find out they’ve been snookered would be McKesson. If the name “McKesson” sounds familiar, it’s probably because you saw 60 Minutes the other night explaining how drug distributors including McKesson facilitated the opioid crisis.

The good news is, illegally trafficking in opioids doesn’t disqualify a company from winning a wellness award. Is this a great country or what?

Once McKesson got wind that Employee Benefit News was going to publish an expose on how they got snookered, they called in a consultant, not to investigate how they got snookered but rather to mount a coverup. The consultant “clarified” to Employee Benefit News  — in lay terms that any fifth-grader could understand — how, among other things, employees’ weight could go down and up at the same time:

“Health indicators in 2013 and 2014 were adjusted in the analysis, while several sensitivity analyses of the ‘inter-individual’ impact that used a matching approach confirmed the results.”

Silly me! Of course weight can go up and down at the same time!

McKesson was not exactly copacetic about this coverage. Here is the reaction of McKesson’s wellness program champion to my analysis, as reported to me:

“I wish you could have been in the room when I questioned the architect of that whole program. I’ve never unintentionally pissed anyone off that much. Red faced and table pounding, it was a moment! He retired 3 days later. Coincidence?”


Next, consider last year’s award, bestowed upon their Wellsteps buddies.  Wellsteps (motto: “It’s fun to get fat; it’s fun to be lazy”) is the kind of company that gives cronyism a bad name…but they were overdue for the award, never having won one despite their years of service on the Awards Committee.

Sure, Wellsteps harmed employees, but harming employees has never been a deal-killer for a wellness award. Ron Goetzel observed that employees en masse becoming sicker — both objectively and according to their own self-assessment — only meant that the program did not “[go] exactly right.”  By that logic, the Vietnam War did not go exactly right either.

 


The 2017 Awards

No one won in 2017. The Committee deserves great credit for getting it right this year, finally albeit belatedly acknowledging that it is indeed impossible to get a positive ROI by screening the stuffing out of your employees.  So kudos to them!

Instead, they gave “honorable mentions” to the three applicants: Delta Airlines, IDEXX Labs, and Pepsico.  I’m sure all three deserved their —

Whoa! In the immortal words of the great philosopher Meat Loaf, stop right there! Come again? Pepsico?  That Pepsico?

If one excludes the total debacles at Penn State, Nebraska and Boise — Pepsico runs the single most-pilloried wellness program in history. It was the subject of a Health Affairs article showing massive losses on its wellness program. These losses, massive as they appeared, were likely understated. I was the peer reviewer, and I passed it rather than make the author do more work, because I thought it was more important to get the word out there promptly than to make him recount every single stupid thing they did.


Pepsi’s Latest Innovation

In all fairness to Pepsico, maybe they do deserve at least a “most improved” award, because now you can buy Pepsi made with real sugar. This is a good thing, according to their announcement, even if the people who run their wellness program disagree. One can only imagine what a beleaguered Pepsico employee’s Outlook calendar looks like:

Perhaps McKesson’s consultant could explain this to us.


Delta and IDEXX

I can’t really comment on the other two because none of the four flight attendants I talked to at Delta had any familiarity with their program beyond the basics (“Yeah, I think if you fill out a form and go to the doctor, you get a discount on insurance or something like that”), while IDEXX doesn’t use vendors connected with the Awards Committee and doesn’t make up savings. To bestow an outright win in that situation would go against all precedent, so IDEXX should be happy with their honorable mention.

Theirs is a fitness-based program that deserves a closer look, as a model for what a wellness program should look like.  I hope to do that someday.

And perhaps IDEXX is a harbinger of things to come, where wellness is done for employees and not to them, wellness vendors don’t lie about savings, and they endorse and agree to adhere to the Employee Health and Wellness Code of Conduct.

Otherwise, for the wellness industry, there might be trouble on the horizon.

 

 

 

 

 

 

 

 

The following is an unpaid apolitical announcement

We live in an era which can’t exactly be characterized as bipartisan, but every review shows — and as you can confirm by playing the game yourself — all members of every party agree on one thing: Quizzify.

Why? Because employee health literacy is a huge issue. You can’t achieve a culture of health without achieving a culture of health literacy.  And quite literally the only company that addresses it — in an engaging Jeopardy-meets-health education-meets-Comedy Central format, no less — is Quizzify. Literally, the only company of any note. Try googling on “employee health literacy” if you want to see for yourself.

Put another way, why wouldn’t you want to improve health literacy? Is there an argument for keeping employees in the dark, when for about $1 PEPM you could enlighten them? Wiser employees make healthier decisions…and it’s your money they’re making those decisions with.

Or, viewed yet another way, a three-part question:

  1. What is the only expense your employees are allowed to spend unlimited amounts of your money on?
  2. What is the only expense employees can spend your money on without training in how to spend it?
  3. How do your answers to those two questions make any sense in combination, or even individually?

The specific occasion for this posting is a terrific article in Workforce about Quizzify, featuring one of Quizzify’s many valued customers (and such a power-user that Quizzify routinely incorporates her edits into the main question database), Debbie Youngblood of the Hilliard City Board of Education.  While we encourage reading the article in its entirety, here are a couple of tidbits, starting with a quote from Debbie:

“I’ve always felt that there was a need to have more [information] available to people as they go through their stages of life,” she said. “It always surprises me that we expect people to know how to achieve overall well-being. We’ve given them very little opportunity to know, understand and practice the things that might be beneficial…”

She also believes it’s valuable to educate adults on health-related topics because it drives conversation. She sees employees discussing topics and questioning the information gained through their health literacy program.

To summarize…

Employees are talking about Quizzify.  About what they learned, what surprised them, and what they would do differently now. By contrast, employee comments about conventional wellness can’t be repeated in a family publication like TSW. Here are some of the more printable ones.  Oh, yeah, and don’t forget these.  (To be fair, occasionally an employee does benefit.)

Another tidbit in the article describes (in as many words) how Quizzify and Hilliard have morphed “cheating” into “learning.” Employees are encouraged to look up the answers in order to improve their scores. That’s how they learn — which of course is exactly what Ms. Youngblood and Quizzify want them to do. So employees brag about what they’ve learned, whereas in other wellness programs they brag about how they cheat.

Consequently, companies that think they’re creating a culture of health are instead creating a culture of deceit. Call us wacky idealists, but for $1 PEPY (in lieu of the likely much higher fee you are paying now), you could replace that culture of deceit with a culture of health literacy. Why wouldn’t you?


Disclosure
TSW principals, while not salaried by Quizzify, have an ownership interest in it. However, this site is not affiliated with Quizzify and opinions expressed in this blog are our own. Except this one, which seems to be shared by everyone.

Wellness program quote of the day

An uberfit Ultimate Frisbee teammate of mine reported that his company’s wellness vendor asked if his doctor had measured his waist size.

“No,” my friend replied. “He’s not a tailor.”

Ron Goetzel proves, definitively, that screening loses money–and lots of it.

There is a saying: “In wellness, you don’t have to challenge the data to invalidate it.  You merely have to read the data.  It will invalidate itself.” Indeed, if there is one thing you can take to the bank in this field, it’s that articles intending to prove that wellness works inevitably prove the opposite. Another saying is that the biggest enemies of Ron Goetzel and his friends are facts, data, arithmetic, and their own words.

And Mr. Goetzel, writing in this month’s Health Affairs,  [behind a paywall] is Exhibit A in support of the paragraph above.  The “overscreening today, overscreening tomorrow, overscreening forever” gravy train of the wellness industry is officially dead. He killed it, not me.  In one article he managed to do what I’ve been trying to do for five years. (It can now be replaced with a health literacy tool such as, to use one random example, Quizzify. No one will ever invalidate health literacy. And we still support screening according to US Preventive Services Task Force guidelines, even though it won’t save money.)

No, not because of his conclusion that companies with lower risk factors spend more than companies with higher risk factors. That by itself would be worthy of a headline, of course, since it’s quite at variance with the massive savings shown in the Koop Awards he gives to his friends.  But there is much, much bigger news, though in this case he “buried the lead,” in a sleight-of-hand that he knew Health Affairs‘ peer reviewers wouldn’t notice.


The Death of the Wellness Industry is Not Exaggerated At All

Here’s what he did — very clever, but not clever enough not to get caught. He and his co-authors pegged average spending on cardiac at a perfectly plausible $329 per employee per year. However, they decided not to split that average of $329 out into “bad” spending (specifically, spending on events, like heart attacks), vs. “good” spending (prevention expense — things being done to avoid heart attacks).

goetzel-health-affairs

How big a rookie mistake is combining these two opposites, prevention expense with event expense and calling it “average payment for all CVD claims”?  It would be like saying the average human is a hermaphrodite.

If they had split that average out into its two opposite components, they would have been forced to reveal that spending on actual avoidable events is less than spending on wellness programs to avoid those events.  That, of course, is exactly right, and was what we showed about 14 months ago.


Let’s do the math

How much do employers spend on heart attacks? Well, here is the number of heart attacks. I’m spelling it out so that people can replicate this using the HCUP database for 2014, for all the heart attack DRGs:

  1. DRG 280 — 12,825
  2. DRG 281 — 15,404
  3. DRG 282 — 18,365
  4. DRG 283 — 1,800
  5. DRG 284 — 275
  6. DRG 285 — 160

This totals to 48,829.  There are about 100,000,000 adults 18-64 insured through their employers, meaning that about 1 in 2000 will have a heart attack in any given year.  I had thought it was 1 in 1000, and my own data — from roughly 30 commercial health plans and large employers for which I measure event rates — backs that up, so let’s totally give Ron the benefit of the doubt (the wellness industry’s business model is based on being given the benefit of the doubt) and double the HCUP figure, to 1 in 1000.

Now assume $50,000 per heart attack all-in. That is high, but once again, benefit of the doubt. So of the $329 PEPY that Ron calculated for prevention and events combined, only $50 is events.  The rest is prevention and management expense, like putting people on statins, diuretics etc., doctor visits, lab tests etc.  Not avoidable, and not even reducible through wellness. Just the opposite– these wellness people are always wanting to close “gaps in care” by doing more of this stuff.


How this invalidates screening

According to Mr. Goetzel’s own data, a wellness program — health risk assessments, screening, portals etc. — costs about $150 per employee per year.  An industry that spends $150 PEPY to get what Ron estimates to be a 1% to 2% reduction in a $50 PEPY expense can’t survive on merit, which explains all the lying about savings, not to mention lying about me.

Anyone care to claim the $2-million reward I’m offering for showing wellness saves money?  I didn’t think so…

 

Breaking News: Is Ron Goetzel about to admit wellness loses money?

This article is now mooted — the Health Affairs piece did come out…and it’s much much worse (meaning, better) than I thought. Skip to it now.

Rumor has it that within the next couple of days Health Affairs is going to release a paper in which Ron Goetzel admits that — even with his finger on the scale as it always is (along with the other nine and all his toes) — wellness loses money.  This is total vindication for the years in which he has preferred to simply fabricate large savings, based on trivial risk impact, and then accuse me of “outrageous inaccuracies” and other such fanciful tales for observing — accurately, as it turns out — that all his savings are made up.

Yes, I know I’ve said he has admitted wellness loses money several times before, like in his HERO Guidebook, or in STATNews, or in the Chicago Tribune.  But those were all gaffes. (A gaffe is defined as “accidentally telling the truth.”)  The difference is, this time it’s deliberate.

And, no, he hasn’t sworn off lying.  Lying is a thing these days.  He was way ahead of the curve on that. Mind you, I have not seen the article, and I wasn’t allowed to peer review it. (Health Affairs allows authors to rule out certain peer reviewers, so he ruled me out — despite admitting not too long ago that I am the best peer reviewer in the field.)  However, I anticipated that, given his level of integrity, he would use the completely invalid participants-vs-non-participants methodology, and so I invalidated it for him ahead of time, not that he didn’t already know.

Despite admitting losses, he still holds to the fiction that somehow risk factors decline, a claim which I intend to examine once I see the article.  I suspect he didn’t plausibility-test the outcomes (even though his HERO guidebook says to do that) and/or he didn’t count dropouts and non-participants.  But we’ll know soon enough.

However, by admitting wellness loses money even if risk factors improve, he just invalidated every single Koop Award he has ever bestowed on any of his buddies.  The reason is that in those award-winning situations, risk factors either only improve a trifle (Staywell, 2014 and Nebraska, 2012), don’t decline at all (McKesson, 2015), or increase (Wellsteps and Boise, 2016).  None of these non-improvements acknowledges dropouts, of course.

Stay tuned…


PS  Remember my $2-million reward for showing wellness saves money?  Let’s make it $3-million.

 

 

 

 

And the envelope please. The best outcomes evaluator in wellness is…

The best outcomes evaluator in the wellness field is Dr. Iver Juster.*

*Among the subset of males not affiliated with They Said What.

Why Dr. Juster’s Case Study Is the Best Case Study Ever Done in This Field

Chapter 2 of the HERO Guide is a great study and deserves high praise. But before we get into the salient points of what makes this absolutely the best case study analysis ever done in this field, be aware the provenance is not a coincidence.  Dr. Juster is very skilled at evaluation. Indeed he was the first person to receive Critical Outcomes Report Analysis (CORA) certification from the Disease Management Purchasing Consortium. (Dr. Juster very graciously shares the credit, and as described in his comments below would like to be listed as “the organizer and visible author of a team effort.”)

Note: the CORA course and certification are now licensed for use by the Validation Institute, which has conferred honorary lifetime certification on Iver gratis, to recognize his decades of contribution to this field. (Aside from the licensure, the Validation Institute is a completely independent organization from DMPC, from They Said What, and from me. It is owned by Care Innovations, an subsidiary of Intel.  If you would like to take the CORA Certification course live, it is being offered next in Philadelphia on March 27.  You can take it online as well.)

Early in the chapter, Iver lists and illustrates multiple ways to measure outcomes. He dutifully lists the drawbacks and benefits of each, but, most importantly, notes that they all need to be plausibility checked with an event-rate analysis, which he provides a detailed example of–using data from his own work. In an event rate analysis, wellness-sensitive medical events are tracked over the period of time in question.

Wellness has never been shown to have a positive impact on anything other than wellness-sensitive events. Consequently, there is no biostatistical basis for crediting, for example, “a few more bites of a banana” with, to use our favorite example, a claimed reduction in cost for hemophilia, von Willibrand’s Disease and cat-scratch fever.

ted-nugent

By contrast, real researchers, such as Iver, link outcomes with inputs using a concept called attribution, meaning there has to be a reason logically attributable to the intervention to explain the outcome. it can’t just a coincidence, like cat scratch fever. As a result, he is willing to attribute only changes in wellness-sensitive medical events to wellness.

Event-Rate Plausibility Analysis

Event rates (referred to below as “PPH” or “potentially preventable hospitalizations”) are laid out by disease on page 22 of the HERO Report.  Note the finding that PPH are a small fraction of “all-cause hospitalizations.”  Though the relative triviality of the magnitude of PPH might come as a surprise to people who have been told by their vendors that wellness will solve all their problems, Iver’s hospitalization data sample is representative of the US as a whole for the <65 population, in which chronic disease events are rare in the <65 population.

hero page 23 total

Gross savings total $0.99 per employee per month.  This figure counts all events suffered by all members, rather than excluding events suffered by non-participants and dropouts. Hence it marks the first time that anyone in the wellness industry had included those people’s results in the total outcomes tally — or even implicitly acknowledged the existence of dropouts and non-participants. He also says, on p. 17:

For example, sometimes savings due to lifestyle risk reduction is calculated on the 20% of the population that supplied appropriate data. It’s assumed that the other 80% didn’t change but if some of the people who didn’t supply risk factor data worsened, and people who got worse were less likely to report their data, that model would overestimate savings.

Note that the PPH declined only in cardiac (“IVD”) and asthma.  Besides the event rates themselves being representative of the employed population in the US as a whole as a snapshot, the observed declines in those event rates are almost exactly consistent with declines nationally over that same period. This decline can be attributed to improvements in usual care, improvements that are achieved whether or not a wellness program was in place.  The existence and magnitudes of the declines, coupled with the slight increase in CHF, diabetes and COPD combined (likewise very consistent with national trends), also confirm that Iver’s analysis was done correctly. (Along with attribution, in biostatistics one looks for independent confirmation outside the realm of what can be influenced by the investigator.)

It is ironic that Ron Goetzel says: “Those numbers are wildly off…every number in that chapter has nothing to do with reality” when I have never, ever seen a case study whose tallies — for either total events or event reduction, let alone both — hewed closer to reality (as measured by HCUP) than this one.

Another factor that conveniently gets overlooked in most wellness analyses is that costs other than PPHs rise.  By contrast, Iver is the first person to acknowledge that:

HERO other costs increase

The implication, of course, is that increases in these costs could exceed the usual care-driven reductions in wellness-sensitive medical events. Indeed, Iver’s acknowledgement proved prescient when Connecticut announced that its wellness program made costs go up.

The $0.99 gross savings, and Connecticut’s healthcare spending increase, exclude the cost of the wellness program itself, of course. Factor in Ron Goetzel’s recommendation of spending $150/year for a wellness program and you get some pretty massive losses.


The old Al Lewis would close by making some reference to the dishonesty and cluelessness of the Health Enhancement Research Organization’s board. The new Al Lewis will do just the opposite. In addition to congratulating Iver Juster (and his co-author, Ben Hamlin) on putting this chapter together, I would like to congratulate the Health Enhancement Research Organization, for what Iver describes as the “team effort” in publishing it — HERO’s first flirtation, however fleeting and inadvertent, with integrity and competence.



Iver Juster Comments on the article

Iver reviewed this article and would like to add several points. I am only adding a couple of my own points, noted in indented italics:

  • It’s important to credit the work to a larger group than just myself. I was the ‘lead author’ on the financial outcomes chapter of the HERO/PHA measurement guide, but the work entailed substantial planning and review in collaboration with the chapter’s coauthor (Ben Hamlin from NCQA) and members of the group dedicated to the chapter (as well as the HERO/PHA authoring group as a whole).
    • Yes, I am more than happy to credit the entire group with this study, especially Ron Goetzel, Seth Serxner and Paul Terry.
  • Nonetheless the work does reflect my perspective and approach on the topic – the important points being (a) select metrics that are impactible by the intervention or program; (b) be transparent about the metric definitions and methodology used to measure and compare the; (c) assiduously seek out potential sources of both bias and noise (in other words, exert the discipline of being curious, which is greatly aided by listening to others’ points of view); (d) understand and speak to the perspective of the study—payer, employee/dependents, clinician/healthcare system, society.
  • Be particularly sensitive to the biologically-plausible timeframes in which your outcomes ought to occur, given the nature of the program. Even if optimally implemented with optimal uptake and adherence, we might expect ‘leading indicators’ like initial behavior changes to improve quickly; program-sensitive biometrics (lipids, A1C, blood pressure, BMI) and medication adherence to change in a matter of months; and a few program-sensitive ER/inpatient visits (like worsening heart failure or asthma/COPD exacerbations) to improve within several months (again, assuming the program is designed to address the causes of these events). Longer-term events like kidney failure, heart attack and stroke and retinopathy take much longer to prevent partly because they require sustained healthy behavior, and partly due to the underlying biology.
    • This is one excellent reason that the measured event rate decline mirrored the secular decline in the US as a whole over the period, meaning the program itself produced no decline over that period.  Possibly they might decline in future years if Iver is correct. Ron Goetzel would take issue with Iver’s assertion — Ron says risk factors decline only 1-2% in 2-3 years.
  • Event rate measurement in any but the largest Commercially-insured populations is subject to considerable noise. Though a challenge, estimating ‘ confidence intervals should at least shed light on the statistical noisiness of your findings. 
    • No need this time because your results hewed so closely to secular trend, reflecting the quality of the analysis.
  • It is very likely that the program used in the illustration did affect more than the events shown because it was a fairly comprehensive population health improvement initiative. For example, ER visits were not counted; and collateral effects of ‘activation’ – a very key component of wellness – were not included in this analysis. Assuming the 99 cents is an accurate reflection of the program’s effect on the events in the chart, I’d be willing to increase the actual claims impact by 50 to 75%.
    • If your speculation is accurate, that would increase gross savings to $1.49 to $1.73/month–before counting preventive care increases indicated on Page 22.
  • Nonetheless, to get effect from an effective program you have to increase both the breadth (number of at-risk people) and depth (sustained behavior change including activation) – but at a cost that is less than a 1:1 tradeoff to the benefit. In other words, you must increase value = outcomes per dollar. This cannot be done through incentives alone – as many researchers have shown, if it can be done at all, it must be the result of very sustained, authentic (no lip service!) company culture.
  • We are beginning to pay attention to other potential benefits of well-designed, authentic employee / workplace wellness programs (of which EHM is a part) on absenteeism, presenteeism, employee turnover and retention – and, importantly, company performance (which is after all what the company is in business to do). It’s early days but it’s possible research will show that companies that are great places to work and great places to have in our society will find financial returns that far outstrip claims savings. The jury’s still out on this important topic but let’s help them deliberate transparently and with genuine curiosity.
  • Did Ron really say you have to spend $150 per year PER MEMBER on a wellness program? I’d be thinking a few dollars (unless he’s including participation incentives)

 

And the Envelope Please. The Best Outcomes Evaluator in Wellness Is…*

*Among the subset of males not affiliated with They Said What.


Alert readers may recall that my New Year’s resolution was to balance my negative postings about the wellness industry with positive ones.  Like Diogenes searching for an honest man, I thought the finding the latter would be hard, but just as Romy Antoine also did earlier this month, The subject of this posting — to be named in Part Two — makes that easy.  Part One sets the stage for the review of his study.

By way of background, in preparation for bringing a possible lawsuit, I re-read the famous Chapter 2 of the equally famous HERO report. That was the chapter which inspired Ron Goetzel, Seth Serxner and Paul Terry (who was recently anointed as the American Journal of Health Promotion’s new Fabricator-in-Chief) to circulate their defamatory letter about me to the media, in a singularly self-immolating attempt to discourage them from publishing my material.  They insisted that Chapter 2 was pure fabricated nonsense, rather than a carefully analyzed report of real data.  Here is an excerpt from their actual letter, copies of which are available from me but which is summarized here:

A fabricated…absurd, mischievous and potentially harmful misrepresentation of our data.

Ron said it best in our Great Debate, minute 1:17 in the MP3 downloadable here:

Those numbers are wildly off…every number in that chapter has nothing to do with reality. 

However, the sun rises in the east, taxes are due April 15th, and Ron Goetzel is lying.  Quite the contrary, Chapter 2 turns out to be a carefully analyzed report of real data — almost certainly the best case study ever published.

How did I learn that Ron was fabricating a story that his guidebook had fabricated a story?

  1. This chapter says it’s a real report, on p. 22.
  2. Since this chapter’s analysis was so far above the pay grade of those three aforementioned HERO characters, I checked the acknowledgements in the HERO book. Sure enough, none of the HERO cabal wrote it. Someone else (to be named in the next posting) was the lead author, and I called to congratulate him on it. I also asked him some background questions, one of which proved very revealing. It turns out that…
  3. This real analysis of real data was — get ready — reviewed prior to publication by the exact same people who are disowning it now. Yes, among the people who peer-reviewed it prior to publication were the very same Ron Goetzel, Seth Serxner, and Paul Terry. (In addition to them doing the actual review, the lead author, very graciously sharing the credit, wanted to make sure that I indicate that he was only the “organizer and visible author of a team effort.”)

Yes, as is so often the case with these three, they lied about the lies that they lied about.  It’s quite ironic that their argument against my original praise of this analysis was to insist that because my source was their own lies, my own analysis was unreliable.  These lies above don’t include the actual lies I might sue them about, which were lies about me, which are totally separate from their lies about their previous lies. (Their lie about me was that I had a history of outrageously inaccurate statements, none of which they have ever been able to identify.)

These characters aren’t ordinary run-of-the mill alternative fact-type liars.  They’re way beyond that.

Their lies go to 11.

goetzel-on-fire


Coming soon, the reveal…

2015 Koop Award Winner McKesson Stock Plummets in 2016

They say being on the cover of Sports Illustrated jinxes you. I wouldn’t know.  There is no chance of that for me, unless they run a feature story about 60-year-olds playing Ultimate Frisbee on Christmas night, when they should be playing canasta with their aunts.

That jinx may be an urban legend, but here’s a real jinx: winning a C. Everett Koop Award.  The 2016 vendor got humiliated in STATNews, of course — we’ve already covered that. The 2012 awardee was embarrassed in the media as well. The vendor ended up losing their gig.

Neither of their customers (Boise or Nebraska) are public companies, though, and that’s what this article is about, because it’s the customer’s performance we are most interested in, not the vendor’s. The latter do quite well for themselves, snookering unsuspecting employers.

The most recent public company to win an award was the 2015 winner, McKesson. McKesson got clobbered in the stock market in 2016, the 14th worst performance among the S&P 500, as investors learned that only the dumbest bunch of managers would pay a cabal of vendors (that themselves are among the industry’s most clueless, like Vitality) to harass their employees. Employee Benefit News took notice of the McKesson wellness program, and pilloried them, thus triggering the sell-off.


You might say: “Wait a minute. Yes, that was a failed, hilariously mismeasured, program whose award was due to the cronyism of having 5 of their vendors and consultants connected with the Awards Committee, but how could something as trivial as a wellness program be responsible for their stock price collapse?”

The answer, of course, is that it doesn’t. Based on the amount of money these programs lose, McKesson’s wellness program was probably only responsible for 1% or so of the 27% stock price decline.  And that’s precisely the point. Ron Goetzel claimed that winning a Koop Award caused a dramatic increase in stock prices.  I noted that, like most of Ron’s defenses of wellness, that analysis didn’t hold water, and any observer with a calculator and access to stock price histories could see that wellness causes a dramatic decrease in stock prices.

While I won that face-off (a year later, you would have been way ahead of the game shorting Koop Award stocks and hedging with index and sector funds), neither conclusion is really valid. Both analyses have a ridiculously low signal-to-noise ratio. Many things happen in the market that overwhelm wellness. For instance, I don’t think any of the analyses of Citibank’s 2008 crash would blame their Koop Award-winning wellness program.

Instead, the negative impact on stock valuations can be shown to be pretty trivial.  Let’s start out with some favorable assumptions. Assume the typical program is more successful both than the allegedly successful one most recently measured in Health Affairs and also than the award-winning so-called best-in-the-country Wellsteps program for Boise, in that it neither loses money nor harms employees. Instead, it is only worthless. So even though Ron Goetzel and Michael O’Donnell say most programs fail, let’s assume yours neither causes health spending to increase or employees to get worse.

If you pay vendors to “manage” 10,000 employees @$150, that’s $1.5 million lost. With a typical pretax P/E of 10, you reduce your market value by $15,000,000. A company with 10,000 employees might have (for example) a market value of $1.5-billion. That makes the negative impact of wellness on stock price only 1%, hardly enough to cost a CEO his job.

So the good news is that McKesson’s collapse is the exception. Screening the stuffing out of employees, lying about outcomes, winning a Koop Award, and hiring a cabal of clueless vendors will not cause your stock price to plunge. In a year in which the media gave the wellness industry little reason to cheer, costing your shareholders only 1% of their investment in your company is great news. Worthy of a celebration. Or at least a couple rounds of canasta.

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