Calculating ROI for Corporate Healthcare

by Frank Hone

EMPLOYEE BENEFIT NEWS - April 1, 2007

Sometimes the biggest obstacle to corporate change is the "What if?" question. "What if we try it, and it doesn't work?" "What if it doesn't improve our way of doing business?"

As a result, the burden of changing is quite often avoided or delayed by the "prove it" challenge. "Show me precisely what we will gain, and we'll consider doing it - if you can guarantee the outcome."

There are few guarantees in employee health, but for corporations truly committed to transforming their approach by leveraging healthcare consumerism, there is mounting evidence of successful outcomes. However, companies adopting consumer-driven health plans, health savings accounts, wellness programs and the array of related support programs also need to establish their own standards and metrics for success. What results will be significant enough to continue to support health care consumerism in a substantial and meaningful way? The answer will vary from company to company, but having the tools to measure the results will be a key step forward. This article will outline ideas and principles to consider in the ROI planning process.

Measurement begins with objectives

The place to begin is to clearly define the objectives. What specifically are you trying to achieve - by employee segment, by disease area, by investment type? Examples include reducing the overall cost of certain chronic diseases by a specific metric or eliminating all tobacco from the workplace. Done with the required amount of detail, this exercise may be new for many companies. Specific objectives can incorporate a broad variety of features. It is important that each be measurable, because as Peter Drucker taught us, if you can't measure it, you can't manage it.

After defining your objectives, you need to identify just where you are right now. What is the current status of your employees' health? What are we spending? What do we know about the employee population?

Tons of usable data about your employee population are collected each year by your benefit plan providers. Dig into the quantitative information and supplement it with primary research. Qualitative research done via focus groups or in-depth interviews can yield insights about potential new directions. Survey a representative sample of the population about their attitudes, behaviors and desires. Let this help establish a benchmark and begin to chart a path forward.

Setting a clear measurement plan

An ROI research methodology needs to be established and budgeted in advance. Too often, health care marketers invest in a promotional program and then ask about whether it worked. By establishing a methodology for measurement and pursuing results with rigor toward statistical analysis and qualitative outcomes, a clearer picture of effectiveness can emerge.

In thinking through the research plan, decide what parameters need to be measured, how to measure them and when to measure them. Use market research professionals to oversee the process, but also consider creating a taskforce of committed employees to help. HR and benefits managers need to play a role, but are probably not best suited to lead the research initiatives. A third party such as an outside vendor with an unbiased perspective would be more appropriate.

Next, consider test-marketing ideas and approaches. Some ideas and programs are better evaluated with select employee populations as an early indicator of acceptance and outcomes. These can be compared to "control cells" elsewhere in the population. For credible comparison, be sure the two groups can be seen as equally representative.

For full-population programs, look at longitudinal tracking studies to understand what may change behavior, based on communications and interventions that occur along that time horizon. Use employee feedback not just for measurement, but also for improvement.

Many companies have adopted principles of total quality management in many facets of their infrastructure. Manufacturing, research and development, and other departments often run their operations based on such processes. Employee health care should have similar approaches built in.

What, how and when to measure

We know that all investment against employee health should yield an economic impact. Some of that is based on benefits difficult to measure from a health outcome standpoint, such as employee recruitment and retention.

Beyond that, the standard econometric approaches to ROI, as applied to the selection among various health plans, still apply, but are only one dimension of outcome to be considered.

The how to measure' question can be addressed by first understanding currently available data points.

That will need to be supplemented by the qualitative and quantitative points mentioned above.

Use of health risk assessments, blood draws, weigh-ins and other diagnostic tools can effectively supplement existing data.

Add to that self-reported attitudinal and behavioral measures, and a fairly robust picture should emerge. The real key is to measure aspects of the programs that relate back to the objectives.

The last point is the when to measure' question. Taking a benchmark at the beginning and then another measure a year later provides some knowledge, but I recommend measures that can be looked at monthly or at least quarterly. More is better as long as it is relevant and representative.

Few companies will really go "all the way" with such a research plan, but even taking the first step is laudable.

When they see all they can learn, and how they can adjust their benefits to suit their population, it will be hard to go back.

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