REPOST ARTICLE SOURCE:
Today’s WSJ (VC Dispatch) features an informative post about corporate wellness initiatives (a related Venture Wire story ran last December), programs offered by employers to improve employee health and well-being.
The WSJ article notes wellness programs can help employers reduce not only absenteeism but also “presenteeism” (you’re at work but not maximally productive), habits that collectively cost U.S. employers an estimated $36B a year in lost productivity.
Here’s where it gets interesting: given the huge numbers wellness companies tend to throw around to describe the “epidemic” of absenteeism and presenteeism, you’d figure that if the problem was really so large, and the interventions offered were really so effective, then linking payment to performance would be the best way to optimize alignment, and clearly would be in everyone’s best interest.
While some wellness companies assert they save employers money, and most insist they deliver improved wellness, the fact remains that most wellness programs are offered as a benefit to employees, something HR provides to help recruit and retain workers.
Nothing wrong with that, of course. But the point is that payment for wellness activities seems rarely linked to any measure of productivity or cost-savings – in other words, the wellness company gets paid for helping workers feel better (and sometimes for activity participation or weight loss), rather than delivering any measurable benefit to the corporation’s bottom line.
If wellness companies really do save healthcare costs, and make workers more productive – great and great: let employers pay these companies on the basis of actual healthcare savings delivered, and for demonstrated evidence of improved performance.
Understanding what wellness companies are or are not delivering to employers has several key implications for understanding the economics of digital health more broadly.
First, the corporate wellness example highlights just how unbelievably difficult it is to deliver true cost savings; I’ve previously described what I’ve termed the “Milstein Metric” – the goal of developing innovations that improve health while reducing costs within a five year period. Sounds simple, but in practice, this bar turns out to be exceedingly high.
Second, this example highlights the difference between:
(a) Soft, consumer outcomes – a product needs to make consumers feel good (perhaps there should be a term “wellfulness,” akin to Stephen Colbert’s “truthiness”);
(b) The higher expectations that have traditionally defined the medical products space – a product must demonstrate efficacy in a rigorous, controlled clinical study;
(c) The explicitly higher expectations that are increasingly expected of medical products, enforced by regulators in the EU, and by payors in the US – a product must show not only that it works, but that it is cost-effective, increasingly in “real-world” situations.
Wellness companies generally aspire to, imagine, or genuinely believe they are in the third category, but most are firmly planted in the first (although some, such as Weight Watchers, likely merit inclusion in the second).
To be sure, developing offerings that help employees feel good about their health is a savvy strategic decision on the part of wellness companies, enabling them to be paid by established, well-resourced employers for delivering what is essentially a consumer offering.
But let’s reserve our highest praise for behavioral health companies that not only promise more productive employees and reduced healthcare costs, but are confident enough in their ability to achieve these goals that they are willing to be paid on the basis of the ROI they actually deliver.