According to Ron Goetzel, Ph.D., director of the Cornell University Institute for Health and Productivity Studies and vice president of consulting and applied research for Thomson Medstat, the consensus of a number of studies is that wellness programs can yield a 3-to-1 return on investment (ROI). In other words, for every $1 spent on wellness, companies get $3 back.
“That's kind of the median amount that you hear about,” Goetzel says.
In an article in the November/December 2006 edition of the North Carolina Medical Journal, Goetzel points to a review, conducted by Larry Chapman, of 42 financial-impact studies from the past 2 decades. In the review, Chapman concluded that workplace wellness programs achieve a 25 to 30 percent reduction "in medical and absenteeism costs in an average period of about 3.6 years,” Goetzel wrote.
“In a widely cited example of rigorous ROI analysis,” Goetzel also wrote, “Citibank reported a savings of $8.9 million in medical expenditures from their health promotion program as compared to their $1.9 million investment on the program, thus achieving an ROI of 4.56 to 1.0.”
5,000 Square Feet of ROI
Birmingham, Ala.-based American Cast Iron Pipe Co. (ACIPCO) has determined that for every $1 it spends on wellness, it sees a return of $2.19 in reduced health care costs alone, according to Rebecca Kelly, Ph.D., RD, CDE, who designed and implemented the program.
When ACIPCO factors in reduced absenteeism, Kelly notes, the ROI jumps to $3.50.
A concrete example of the ROI of wellness is ACIPCO's 5,000-square-foot Eagan Center for Wellness. Completed in 2001, the center – which includes strength training and cardiovascular equipment, an aerobics studio, showers and offices as well as facilities for physical therapy – paid for itself in 3 years by offering physical therapy services to its injured workers.
By moving physical therapy on site, Kelly says the company is able to reach more workers, and physical therapy costs have been cut in half.
“We went from employees being off the job an average of 2 ½ hours a day for a physical therapy appointment to 1 hour,” says Kelly, who left ACIPCO in January to become the first-ever director of health promotion and wellness for the University of Alabama. “And that continues to be a significant cost savings for the organization.”
Controlling Health Care Costs – Another Way to View ROI
ROI can be looked at in a number of ways. Fort Atkinson, Wis.-based Highsmith Inc., for example, views its award-winning wellness program as a success because the company has been able to control its health insurance spending while maintaining a “rich” health plan for its employees, says Highsmith Manager of Learning and Development Laura Hanson. Highsmith's health insurance premiums have risen, Hanson says, but the increases have been well-below the national averages.
Another positive impact of workplace wellness at Highsmith – the company prefers to call it “learning and development” – can be seen in the improvements in employees' key health measurements. From 2000 to 2006, the number of Highsmith employees in the high-risk category for cholesterol (those with a total cholesterol level of 240 and higher) dropped 66 percent, according to Hanson, while the number of employees with high blood pressure (those with blood pressure levels of 140/90 or higher) declined 33 percent.
Hanson also believes that Highsmith's workplace wellness program has contributed to employee retention. According to Hanson, Highsmith's turnover rate is “in the single digits,” and the average employee tenure is 12 years.
Research Isn't Perfect
When looking at studies on the ROI of workplace wellness, Goetzel – who has led or co-authored a number of them – cautions that “most of these studies are not rigorously conducted” and that “the methods used in determining ROI could stand improvement.”
“So the methods that are used in establishing ROI certainly would be subject to critique by the research community,” Goetzel says.
Also, Goetzel points out that companies that don't have success with wellness programs “are typically reluctant to publish their findings.”
“As you might expect,” he says.
On the bright side, Goetzel says that the ROI of wellness has become the subject of a growing number of government-funded studies conducted by universities.
“That research will get out into the scientific community, because it's independent and not subject to private funding,” Goetzel says. “So you will see better studies out there.”
The Right Reasons
While companies such as Highsmith and ACIPCO are convinced that wellness is a solid financial investment, they also believe it is a sound moral investment.
“We feel so strongly that what we're doing is best for our company in terms of our profitability, our productivity and the health and well-being of our work force,” Hanson says. “It just makes sense for us.”
Kelly asserts that when employers launch wellness programs solely for financial reasons, employees know it.
“So you have to do it for the right reasons,” Kelly says. “Not just because it's good for the bottom line.”
This is the third article in an OccupationalHazards.com series on workplace wellness. Upcoming articles will discuss: promising practices; strategies for garnering upper management support; and whether or not to enlist the aid of a consultant or vendor. In the series, OccupationalHazards.com also will take an in-depth look at Medical Mutual of Ohio's award-winning Wellness for Life program.