Many companies are relying on wellness programs to help rein in healthcare spending. However, as we have covered here before, companies are investing more and more money in these programs without measuring the results or return on those investments. Backing this is up is a recent ADP survey of 507 companies, which found that only 25% of mid-size companies with 50-999 employees and 22% of large companies with 1,000 or more employees measure the ROI of wellness programs.
As the ADP survey found, hard numbers are not always necessary for companies to proclaim their wellness initiatives to be a success. Of the 79% of large companies and 44% of mid-size companies that offer wellness programs, the majority (53% of mid-size companies and 60% of large companies) declare that their programs have exceeded expectations when it comes to reducing overall healthcare costs, even though not all of those companies gauge ROI.
Is measuring ROI even necessary? To be sure, there are plenty of academic studies measuring the impact of wellness programs and wellness-related incentives. However, some executives might argue that relying purely on the financial results of these programs overlooks, and possibly undercuts, the many intangible benefits and results these programs create.
For example, many companies argue that a culture of wellness improves employee morale and leads to the type of work environment in which employees can thrive. If companies reduce these programs to the hard numbers of financial returns on investments, they risk overlooking the importance of these intangibles when making decisions about specific programs and approaches. In this argument, ROI simply does not tell the whole story.
While the argument about intangibles is certainly an interesting one, companies are in business to make money and that creates a definite place for financial metrics in wellness programs. For one thing, when companies keep an eye on their own unique programs, costs and results, it provides insight into how well various wellness programs are performing and addressing areas that have been identified as needing improvement. Financial impact aside, unless companies understand how wellness programs are performing in general or against specific goals, those companies will not have the insight necessary to modify and adjust programs to ensure that they are focused on the company’s priorities, meeting employee needs and maximizing results.
Measuring the return on wellness investments can be a challenge, so where can companies begin? After all, as we have noted, many of the effects of a wellness program are sometimes difficult to quantify. CFOs will need to make some assumptions and educated estimates in some cases.
For example, although it can be difficult to attribute all productivity gains to a wellness program, it is reasonable to attribute a portion to a wellness program that shows tangible changes to employee behavior, healthcare claims and other metrics. At the same time, patience is warranted. Few wellness programs offer a return within the first year or so, so that time period can be focused on identifying metrics, identifying relevant data and beginning the process of collecting that data.
In our next post, we will focus on specific ways CFOs can manage this measurement process.