Workplace wellness

Do wellness programs really save companies money?

January 29, 2014: 1:29 PM ET

Yes and no, says a new Rand study. The only big cost savings, at least in the short term, come from efforts to help employees who are already sick.

Fitness class at Devon Energy

Fitness class at Devon Energy

FORTUNE -- No question, workplace efforts to encourage people to take better care of themselves have caught on in recent years. Since about 60% of U.S. companies now offer some kind of wellness initiative, up from just 36% in 2009, designing and running such programs has grown into a $6-billion-a-year industry, according to a new study from nonprofit think tank Rand Corp.

What's more, because they're supposed to lower -- or at least contain -- the cost of medical care, the Affordable Care Act includes provisions that encourage their growth.

But do wellness programs really save money? A much-ballyhooed 2010 study by a Harvard economist says they do, to the tune of $3 in health care cost savings, and another $3 in reduced expenses from absenteeism, for each dollar companies spend on helping employees stay healthy.

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Now, however, comes a somewhat different take, based on a six-year study of more than 67,000 PepsiCo (PEP) employees. Typical of most big companies' efforts, PepsiCo's program has several parts, including health-risk assessments, fitness-and-diet programs, and helping people manage chronic illnesses like diabetes and heart disease (which together make up about two-thirds of total U.S. medical spending).

That's important, because Rand's research found that returns vary markedly depending on which part of the program you look at. Consider: In line with earlier research, the latest analysis found that helping employees manage chronic illnesses saved $3.78 in medical costs for every dollar invested in the effort. Mostly because it cut the number and length of hospital stays, disease management accounted for about 87% of PepsiCo's total cost savings, even though only about 13% of employees participated.

By contrast, among the far larger number of employees who are healthy now and are trying to stay that way through diet and exercise, "the lifestyle-management component of the program -- while delivering benefits -- did not provide more savings than it cost to offer," said Soeren Mattke, the Rand senior scientist who led the study.

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"While workplace wellness programs have the potential to reduce health risks and cut health care spending in the long run, employers and policymakers shouldn't take for granted that the lifestyle-management components of the programs can reduce costs or lead to savings overall," Mattke added.

Companies "need to be clear about their goals for the wellness program," the study concludes. "... [I]f an employer wants to improve employee health or productivity, an evidence-based lifestyle management program can achieve this goal," while also boosting workplace morale, other studies have shown. "But employers who are seeking a healthy ROI on their programs should target employees who already have chronic diseases."

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