CDC Interview: Return on Investment for Corporate Wellness

Ron Z. Goetzel, Ph.D. is the Director of the Emory University Institute of Health and Productivity Studies and Vice President of Consulting and Applied Research at Thomson Reuters. Dr. Goetzel is a nationally recognized expert on evaluations of health promotion programs. He has an extensive background in health and productivity management, data analysis, and applied research. Dr. Goetzel's areas of expertise include health promotion and disease prevention, healthcare data analysis, outcomes research, managed care, and productivity-related topics. He has made numerous presentations at conferences focused on health and productivity issues. Dr. Goetzel earned his doctorate in Organizational and Administrative Studies and his M.A. in Applied Social Psychology from New York University, and his B.S. degree in Psychology from the City College of New York.

Q:  What is Return-on-Investment (ROI)?
Dr. Goetzel:  Return-on-Investment is simply a ratio – dollars saved due to a particular intervention divided by the dollars spent on that intervention.  So, an ROI of 3:1 means that for every dollar spent, three dollars were saved.  It's important to consider the time horizon for an ROI assessment.  For example, a company may save $300,000 over three years from a program that cost only $100,000 – that's a 3:1 ROI over three years.  An ROI evaluation is different than a savings analysis which is sometimes referred to as a calculation of Net Present Value (NPV).  NPV is calculated as program savings minus program cost.  In the example above, if the program cost $100,000 to implement and saved $300,000, the NPV would be $200,000 ($300,000 minus $100,000).

Q:  Why does ROI matter?
Dr. Goetzel:  ROI is a sought after metric in business because owners and senior managers want to understand how much money they need to invest in a given program or intervention, for example one that would reduce the prevalence of overweight and obesity among employees, and whether the program or intervention could produce dollar savings for the company.  It is natural for business owners to evaluate one investment over another to determine their relative value for the enterprise.  There is a growing body of evidence that well-designed, comprehensive, and efficiently-delivered health promotion programs can achieve cost savings and even a positive ROI.  However, most managers of companies recognize that health improvement and risk reduction are positive outcomes and if these can be achieved cost-effectively, even when there are no net savings, that alone is worthwhile.

Q:  How long does it take for an employer to achieve a positive ROI?
Dr. Goetzel:  Cost savings and ROI studies typically last three to five years, with the median time period for realizing dollar savings being three years.  Employers are encouraged to evaluate the cost impact of the their programs at these key milestones (years three and five,) since costs often increase in the first year or two as employees realize they have health problems and seek help to address those problems.

Q:  What data are needed to evaluate the ROI associated with a workplace intervention?
Dr. Goetzel:  ROI studies that analyze company medical claims, absenteeism, disability, workers' compensation and productivity data (e.g., presenteeism) require very large datasets that typically involve several thousands of employees in order to be statistically valid.  These studies are complicated to conduct and are also quite expensive.  Thus, small- and medium-sized employers are not likely to initiate economic analyses that require person-level data and expert researchers to conduct the studies.  For these employers, there are several calculators that have been developed, including the one found on CDC's LEANWorks! website, that project cost savings and ROI from risk reduction programs.  These are generally adequate for demonstrating the economic justification for initiating evidence-based health promotion programs.

Q:  Is the calculation of ROI the end all, be all?  Are there other ways that employers can demonstrate value from their health promotion programs?
Dr. Goetzel:  The two most important measures of program success are participation rates and behavior change.  If health promotion program managers are able to achieve high participation rates in programs (over 50%) and demonstrate that participants are successful in improving their health (e.g., reducing the prevalence of overweight and obesity), then, in my mind, the program has demonstrated value.  Other measures of success include leadership support and engagement in addition to changes in the physical and social environment of the organization so that employees experience a healthy company culture and improve their morale.  If the organization is also able to demonstrate a reduction in the rate of increase in health care costs, fewer absenteeism days, less disability and workers' compensation claims, and improved worker productivity, all that's for the better.

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The opinions expressed in these interviews are those of the interviewee and do not necessarily represent the official views of the Center for Disease Control and Prevention (CDC), the Department of Health and Human Services (DHHS), or the U.S. Government.  The placement of these interviews on the Center for Disease Control and Prevention's website does not imply the endorsement of one particular organization, author, product, or service over another.