IV Creating a Culture of Wellness, the Long Term Return On Investment?
A 2002 study of effective health care cost management through the implementation of a wellness program was conducted by Hocakulah and Joseforsky for a company which they refer to as Crandon Corporation's Elcho division*. Elcho division employs 2,500, mostly hourly, persons. Elcho identifies the following health risk factors: Many of Elcho's employees are at an age when illness and disease develops, the average age is 51 years, 80 percent of the employees are male (Kocakulah & Joseforsky, 2002).
Many of Elcho's employees suffer from high blood pressure, high glucose, cardiovascular disease, cancer and obesity. Age is not controllable but all the other factors such as poor nutrition, lack of regular exercise, high blood pressure, and obesity are. Reducing a risk factor will help the employee as well as the company's bottom line. The self funded insurance plan provided by Crandon, brings the average health care cost per employee to $5,200. At the time of the 2002 report, the average employer paid $4,164 per employee in annual health care (Kocakulah & Joseforsky, 2002). Another 1999 study suggests that a direct correlation exists between the number of risk factors an employee possesses and their short-long term healthcare costs. The conclusion of the study cites the possibility of a modifiable healthcare risk lowering healthcare costs in as little as 18 months (Kocakulah & Joseforsky, 2002). Based on this study, on average, Elcho will have the following population of persons with risk factors:
Risk Factor, Percent of Employees, Number of Employees
Inadequate Exercise 50% 1,000
High Cholesterol 50% 1,000
HighBlood Pressure 24% 480
Cardiovascular Disease 27% 540
Excessive Levels of Stress 44% 880
Smoking 26% 530
Heavy Drinking 10% 200
Irregular Seat Belt Use 60% 1,200
What is the cost of Elcho's employees risk factors? Elevated health risks almost always translate into expensive medical costs. An employee with a cardiovascular disease factor costs companies 150 percent more than an employee without the disease (Kocakulah & Joseforsky, 2002). Applied to the Elcho model, it is known that the cardiovascular risk factor applies to 540 employees. If this number is accurate, then annual medical costs could possibly increase to $7,800 ($5,200×150 percent) for these employees. The per employee increase would mean an annual healthcare cost for Elcho of $1,404,000 for all 540 employees likely to have the disease. The possible savings are astronomical catching this risk factor early and preventing cardiovascular disease. Another study focused on obesity. An obese employee costs companies 21 percent more in annual medical costs, an employee with high blood pressure costs 12 percent more, and an employee who smokes costs 15 percent more (Kocakulah & Joseforsky, 2002). The individual numbers might not appear large, but applied to 750 or 1000 employees one can see a tremendous opportunity for savings. What are the potential savings for Elcho if these numbers were applied to the risk factors of obesity, high blood pressure, and smoking alone? A staggering potential for a savings of $1,272,960.
Another area of potential savings for Elcho is the area of unnecessary medical visits. What if unnecessary medical visits were reduced through demand management for illness/injury? Demand management for illness/injury is defined as the right care at the right time at the right place with the right provider (Institute of Management & Administration, 2006). The researchers concluded that Elcho employees visit a doctors office on average 2.8 times per year. The average cost per visit is $50 and about 25 percent of these visits are unnecessary (Kocakulah & Joseforsky, 2002). If Elcho could eliminate unnecessary doctor visits for the work force of 2,000 it could experience annual savings of $70,000. The same analysis applied to unnecessary ER visits could yield a potential of $130,900 in savings per year. Combined savings could be $200,900 annually by eliminating unnecessary medical visits. This could be achieved by printing brochures at a cost of $3 each with a total cost of $6,000, with guidelines on when and when not to seek the services of a physician.
Only 35 to 40 percent of corporations offer a comprehensive wellness program. These companies are finding that health promotion can provide returns on investment in healthcare for employees. With the right wellness program, health claims and absenteeism begin to decline from within four to six months of implementation. (Moskowitz 1999). The company cost for healthcare is reduced by 7 to 9 percent, for companies offering a wellness program than those who do not offer a wellness program (Kocakulah & Joseforsky, 2002). On this basis, Elcho could save $728,000 to $936,000 if all 2000 employees participated. One hundred percent participation is very unlikely though, and even if half the employees participate, a savings of $468,000 could be realized.
For Fairview's Wellness programs the numbers are encouraging in a similar fashion. Fairview reports a savings per employee due to their Alive Program of $116 per employee when it started in 2001. By 2003 that savings rose to $464 in medical health care savings per employee per year. Overall Medical expenses per employee went from $4,640 in 1999, almost $1,000 above national health care industry averages, to $6,511 or about $200 per employee below average in 2004. The cost of Fairview's Alive Program is $160 per employee, per year. If disease management is added, which is paid through the health plan, the additional cost is $30 per employee (Institute of Management & Administration, 2006).
Research clearly supports that effective wellness programs reduce the number of medical claims, but their benefits are difficult to measure because the costs are difficult to be attributed. For example, if high blood pressure is detected in an employee through a health risk assessment, and the employee starts treatment, a possible cardiac arrest could be prevented from happening. The medical savings, however, are hard to measure because it can not be said with certainty what would have happened had the employee not received early treatment. What research shows is that with minimal investment a company could contribute greatly to employee health and to the company's bottom line. But wellness programs aren't just for big corporations any more. Among employers from 10 to 499 employees, 41 percent offered at least one disease management program (Hirschman, 2006). To quote David Raccagni, head of Cigna Healthcare: "Care management programs are critical for employers of any size, and the only sustainable way to lower healthcare costs by improving health".
Part 1: Introduction
Part 2: Teaching People to be Well
Part 3: A Successful Model of a Wellness Program
Part 4: Creating a Culture of Wellness, the Long Term Return On Investment?
part 5: What Could a Wellness Program for your Company Look Like?
Part 6: References
Beste Gesundheit,
Werner