Corporate marketplace evaluates health and productivity management

March 1, 2008

Health and productivity management (HPM), disease management (DM), and wellness programs continue to gain traction in the corporate marketplace. As employers and vendors address gaps, these programs will become fundamental in employer efforts to contain health benefit costs, better manage benefit use, and achieve transparency across employee data.

Health and productivity management (HPM), disease management (DM), and wellness programs continue to gain traction in the corporate marketplace. As employers and vendors address gaps, these programs will become fundamental elements in employer efforts to contain health benefit costs, better manage benefit use, and achieve transparency across a broad spectrum of employee data.

These findings are the result of a 2007 research study by Stonegate Strategic Advisors on corporate marketplace perspectives on HPM, DM, and wellness programs. Current DM users; prospective HPM, DM, and wellness users; and large group benefit consultancies were interviewed. Study participants noted current strengths and gaps:

Employers view HPM as an intriguing concept and a desirable "future state." One critical factor for HPM is acceptance among C-level executives. Interest has been mitigated by the lack of hard data on HPM's true business impact.

Organizational structure, benefit management responsibilities, data availability, and communication channels represent daunting obstacles to HPM implementation. In many cases, adding to these obstacles is the task of integrating multiple vendors – each with individual or proprietary workflow.

DM and wellness perspectives

Employers often view DM and wellness programs as discrete initiatives, as well as with some skepticism, even though DM and wellness represent foundational elements of the HPM continuum.

The impact of wellness programs remains poorly defined, and DM is associated with soft ROI. The variability of measurement approaches, impact "interpretation," and "cost avoidance" calculation add to marketplace confusion about how to benchmark these efforts.

Organizations implementing DM and wellness programs do so under the guise of cost containment, without any consensus on how to define expected performance. While accepting the benefits of DM and wellness programs on the surface, organizations are looking for ways to link DM and wellness initiatives directly to tangible financial performance.

Core DM programs are fairly standard from organization to organization, with little differentiation in program "basics." DM programs and wellness initiatives can differentiate within the key area of "reach and engagement" activities. Employers perceive well-developed, targeted, and executed incentive programs as effective levers in steering or curbing behavior.

Program effectiveness is another significant opportunity for differentiation, and most employers define their DM or wellness needs by ROI. Employers are increasingly demanding that any new programs provide a lever for tangible cost containment/avoidance. In most cases, employers perceive existing methodologies as having weak ROI linkages and have a critical view of cost avoidance calculations. Because confidence in linking DM and wellness programs to ROI is low, management often views them as moral or value initiatives rather than as investments that produce measurable return.

Lastly, firms see differentiation in the critical aspect of program reporting mechanisms. Employers often perceive DM programs as lacking in proactive data, report generation, and opportunity analysis. In the same vein, employers consider program data analysis to be somewhat shallow and not fully in line with their focus on hard cost-avoidance or containment data. DM and wellness program providers can differentiate themselves by approaching reporting with a stronger focus on employer business needs.

Selecting DM and wellness partners

For organizations having instituted DM or wellness initiatives, selecting the right partner involves analyzing many variables. Chief among them is price – a default position due to perceived weaknesses in how program engagement and impact is measured. To justify premium pricing of DM or wellness services, a program provider must measurably demonstrate greater employee impact and best-in-class ROI, measurements that are extremely difficult to "prove out."

Beyond cost, the marketplace is defined by perceptions of fit and ability to partner with other service providers, as well as to integrate services. Organizations seek partners that will effectively impact employees' lives while engaging well with the benefits staff.

Increased competition in the DM and wellness marketplace will push providers to address real and perceived issues and redefine their value propositions. The rationale for considering broader and more sweeping strategies such as HPM will gain traction as these more fundamental programs gain acceptance and demonstrate impact.

Scott C. Dillingham is a principal of Stonegate Strategic Advisors, LLC.