It’s no secret that ROI in wellness is hard to track, but we know through research that there is a strong ROI of workplace wellness initiatives.
So, how can you measure your organization’s current wellness initiatives to provide a positive ROI to your CFO?
We get asked that question quite frequently. So, to that end, here are some step-by-step instructions to help your organization measure and report the ROI of your Corporate Wellness Program:
- Segment your entire population into cohorts, or groups based on participation in or intervention from your wellness initiative(s). This should give you a control group and a group that is currently engaged in your wellness initiatives.
- From there, you will want to
track the following metrics over a 12-month period:
- Total health claims (including medical and pharmacy) cost for each population.
- Amount of change (positive or negative) in health claims cost for each population.
- Take the amount of change from your control group and subtract the
amount of change from your cohort.
For example, let’s say that:
- Year 1 – Cost of Control Group = $50M, Cost of Cohort is $60M
- Year 2 – Cost of Control Group = $60M, Cost of Cohort is $60M
- The change of the Control Group is $10M, while the change of the Cohort is $0. This means you saved $10M with your wellness program.
For another example, let’s say that:
- Year 1 – Cost of Control Group = $50M, Cost of Participating Group is $60M
- Year 2 – Cost of Control Group = $60M, Cost of Participating Group is $50M
- The change of the Control Group is $10M, while the change of the Participating Group is – $10M. You subtract NEGATIVE 10M from 10M to find that you saved $20M with your wellness program.
Great! Now you know the dollar-and-cents cost-savings of your wellness program!
Unfortunately, there are some real problems with stoppingat measuring ROI.
For one, we’re operating on a very short time horizon. For example, not all of the benefits of a diabetes management program will happen in the first 12 months. And, you’re likely to see a cost increase in the short term from engaging these members.
Additionally, there are several positive externals that your wellness program can create which provide real value, but don’t get measured in ROI. That’s why, in addition to Return on Investment, we recommend that employers track the Value on Investment of their wellness initiatives.
Return on Investment vs. Value on Investment: Why Your Measurements May Be Shortsighted
While the ROI of your wellness initiative is an important metric to track, it’s not the only metric to track. Value on Investment, or VOI, is equally important.
Unlike ROI, VOI isn’t really one metric. It’s much more difficult to wrap the value of your wellness programs into one number, so VOI typically takes the form of a few complimentary metrics to include alongside your ROI calculations. VOI is important primarily because ROI-based metrics don’t account for the following crucial factors of your wellness program.
Productivity and Absenteeism
Increasing employee productivity and reducing overall absenteeism is extremely important to your organization’s bottom-line. Companies that have initiated wellness programs are seeing positive returns. Harvard researchers report that for every dollar spent on employee wellness, medical costs fall $3.27 and absenteeism drops $2.73, a 6-to-1 return on investment. It’s easy to understand why taking fewer sick days leads to higher performance for a business. Unfortunately, wellness programs that reduce absenteeism and increase productivity rarely get credit for these efforts. This study found that corporate wellness programs, in aggregate, led to a 25% reduction in absenteeism and sick leave, and based on our findings, it’s not an anomaly. Wellness initiatives across the board reduce absenteeism, sick leave, and increase overall productivity of your workforce.
To measure absenteeism, you will use the same tactics that you’d use to measure ROI. Track the number of sick days taken by both participants and nonparticipants in your wellness program. Compare these numbers as a whole, per employee, and the rate of change in each population. This will help you determine your wellness program’s impact on productivity.
Turnover Rate and Employee Engagement
Additionally, we have identified several instances where wellness initiatives have effectively decreased turnover rate and improved employee engagement. Again, the impact that this has on your company’s bottom line can be tremendous.
Unlike absenteeism, however, this metric is extremely fungible or convertible. With something like sick days, it’s pretty easy to draw a straight line from a wellness initiative to your desired outcome. With turnover rate and engagement, however, a wellness program is usually one of many factors that go into your final output.
Here are a few ways you can measure employee engagement and turnover rate as a function of your wellness initiatives:
- Measure turnover rate by population and compare turnover percentages, as well as changes in turnover rate year-over-year.
- Send out regular surveys to participants in your wellness programs to ask about their satisfaction with your wellness offerings.
- Send out regular surveys to your entire organization measuring overall satisfaction in the workplace. Compare satisfaction by population.
- During exit interviews, ask questions like “What will you miss the most about our organization,” and see how many people mention the wellness program.
Future Risk Factors
The value of wellness doesn’t end with your historic costs. In fact, most of the true “return” on today’s wellness initiatives comes in the form of health savings years down the road. The single most important thing that you can do with your wellness program is move at-risk members out of the high-risk categories.
According to the Harvard Business Review, in one case, 57% of people with high health risk reached low-risk status by completing a worksite cardiac rehabilitation and exercise program.
Unfortunately, this is the most convertible statistic of all, which is why we highly recommend leveraging a health analytics software in order to more effectively measure the return on your investment.
Looking Back Versus Looking Forward: How Forecasting Tools Can Present More Accurate Data on Return
At Total Wellness, we talk a lot about the difference between leading and lagging indicators. Lagging indicators like ROI or VOI can show you how effective your programs were last year, but they struggle to predict what impact you could be having on future healthcare costs. That’s where leveraging software can be extremely beneficial.
If you’re not able to answer the following questions, you should probably consider a software partner to help you track your wellness program:
- In the next 12 months, how are healthcare costs for each of these populations projected to change?
- What gaps in care exist within those populations, and how can you more effectively close them? What impact will this have on overall ROI?
- What does your “at-risk” population look like? How many individuals have you moved from “high-risk” to “low-risk” in the past year, and how many are you forecasted to move this year?
- How are the “unknown” members of your population (i.e., the unengaged or those onboarded after your wellness program was launched) impact future costs?