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Do the Corporate Wellness PEPM & PMPM Models Support Meaningful Utilization of Corporate Wellness Programs?

Many corporate wellness programs are charged through a per-employee-per-month (PEPM) or per-member-per-month (PMPM) model. These subscription-based business models work by employers paying a set price to get access to a particular workplace wellness service. Critics of PEPM and PMPM models have highlighted that while the arrangement brings predictable and constant revenue to the vendor, it does not necessarily benefit the costumer as employers often pay for services they do not utilize (Cheng, 2015).

Shortcomings of the PEPM Model in Corporate Wellness

When employers pay PEPM fees, they are essentially paying for services that will almost never be fully utilized or found valuable by the entirety of their workforce. This is because PEPM fees are collected regardless of how many employees use the service. James Powell (2014) articulated this situation well when he compared it to inviting 250 people to a party just to get one to attend. In other words, employers assume much of the engagement risk — which is neither in their interest, nor compels the vendor charged with fostering employee well-being to have a vested interest in program engagement.

Furthermore, subscription fees make it harder to generate positive return-on-investment (ROI). Many companies are now looking for a return on their corporate wellness programs to justify their existence (“Doctors on Demand,” 2015). In Powell’s post cited above, the author presents an example of a client with 40,000 employees who had access to a second opinion program. Out of all employees, only 140 used the service in one year, which means the utilization rate was less than 0.4 percent. Services with low utilization are not cost-effective, so it is somewhat startling they are not questioned more rigorously by our industry.

Alternative to the PEPM Model

An alternative to the PEPM model has been suggested by those who argue that a non-subscription model is better suited to the health and wellness needs of businesses. They propose a pay-as-you-go model, which places the financial risk upon the vendor. This suggests the vendor needs to take initiatives and offer services the client will actually use.

Furthermore, a no-PEPM model will likely offer better ROI that can be realized from Day 1 of usage. With this model, a consistent utilization rate of 1.5 to 3 percent has been reported; and in some complex cases it increased to up to 20 percent (Powell, 2014).

Overall, the non-subscription model probably offers a more meaningful utilization of wellness initiatives and ensures that employee wellness services represent the client, which should be considered a major goal for a progressive vendor that is truly interested in providing quality workplace wellness programs.

Examples of a no-PEPM Model in Corporate Wellness

Fortunately there are progressive providers that are starting to successfully implement a pay-as-you-go model of business. A shining example is Doctor on Demand, the country’s leading video telemedicine company. Its unique business model supports the next-generation telemedicine services, which are becoming a very popular benefit as showed by a survey among U.S. employers (Towers Watson, 2014).

Doctor on Demand regards its model of work as a no-risk model that allows for the employer to offer its services to everyone, including non-benefit-eligible and non-benefit-enrolled employees (Cheng, 2015). In this way, access to high-quality, low-cost health care is becoming a reality, which resonates with the values of the wellness industry.

Interview with Drew Schiller about the Future of Digital Health

Drew Schiller is co-founder and Chief Technology Officer at Validic, a health and wellness technology company that operates as digital health’s Rosetta Stone for disparate health data. Before starting Validic, Drew was the principal at a Web development firm as well as the founder and developer of a dietary nutrition website. Companies that benefit from Validic’s API are able to build products that pull data from a variety of mobile health apps, wearables and in-home medical devices. Drew is at the forefront of mHealth innovation. You can follow him at his personal blog:

1) When we first met, the ANT+ Fit SDK was being heralded as the way health apps were going to be able to communicate with one another. Obviously a lot has changed since then – but not enough. Data interoperability is still a major design hurdle for many digital health innovators. Now mobile manufactures like Google, Apple and Samsung are trying to become conduits and interpreters of these disparate data sources. How have the advent of Google Fit and Apple HealthKit affected Validic’s business model?

It has not actually changed our business model at all. In fact, it has accelerated things quite a bit. The entrance of Apple and Google into this area has created awareness. Anytime you have the world’s largest leading consumer electronics companies entering a new market, the entire ecosystem benefits. This has resulted in an accelerated interest from consumers in personalized generated data. We’re seeing accelerated interest from the investment community. These are signals digital health is here to stay — that all of these massive companies are placing huge bets. So, from that perspective, their entry has been tremendous for Validic.

Furthermore, these solutions are doing little to mitigate that a lot of digital health device manufacturers don’t use open standard protocols because they want to add additional security layers on their devices and/or they want to stream additional information that is not part of standard protocols. Also, you have fitness tracking devices that are streaming all kinds of proprietary information, and they do not want just anybody to have access to that because the analysis of that data is part of their secret sauce.

In order to actually connect with these devices at the device level, you oftentimes have to work direct with the manufacturer to get the proper SDK, the proper coding for it to decrypt the device’s serialization. In that sense, true interoperability has to happen at the data layer. So, once the data is off the device that’s where we can standardize and normalize the data. That’s where we can provide some sort of method to create interoperability. That’s where we play. We will connect directly to Bluetooth devices if that’s where we need to be. We will also connect directly to APIs in the cloud. We also have mechanisms with many companies to send data directly to us. So, we allow for interoperability wherever the data is coming from. Our methods are a different approach than a lot of other players in this space, which gives us an advantage.

2) Piggybacking off this topic, futurist Graeme Codrington made a bold prediction about Apple regarding Health Tech in a recent Fast Company article that by 2025, “There is no doubt that with their iOS 8 released Health app and their integration of myriad health apps with the Apple Watch, Apple are making a play in this space, and by 2025 are likely to be the world’s leading remote and proactive health care company.” Do you believe there is merit to assume a product company like Apple or Samsung will end up evolving into a health-care company?

I certainly think that they will have divisions of their companies that are successful, but can you name any dominant player in the health-care industry today? I mean, there is no one dominant player. So, I think that statement, albeit sensational, is a fallacy. Samsung already has a massive business building MRI machines. They build X-ray machines and X-ray equipment. They already have a pretty massive health-care business. It is not on the consumer side, but it certainly is something that’s core to their global entity.

I do believe companies like Apple will be a big factor in health care in 2025. I think that they are going to continue to make great devices. I think that they’re going to sell boatloads of them because that is the game that they’re in. If you look at what they have done with iPhones, look at what they have done with the iPad, these are transformative platforms and I think the Apple watch has the opportunity to do that too eventually. Do I think companies like Apple and Samsung are going to solve all of the world’s problems related to health care? No, I do not. But, do I think they’re going to provide a really valuable product that adds even more value to the health-care system over time? Yes, I do.

3) The narrative regarding wearables is fairly pervasive in health tech, but how is the Internet of Things (sensors outside of wearable devices) going to change health technology in ways that are currently unexpected?

One way that the Internet of Things in general is improving things is that there is now scale. The fact that sensors are becoming cheaper, and more cost efficient, and yet give higher resolution of data I think is really helpful.

You now have smart asthma inhalers that are able to measure your breathing; in real time when you’re inhaling the device it gives you the correct calculated dosage of medicine, as well as the GPS coordinates of the location that you’re taking that dosage. With this type of data we can start to look at casual factors at a population level. For instance, determine where people are having the most number of attacks and start to look at environmental conditions. At the population health level, you can ask questions like, “In this particular area, at this particular time of day, asthma rates are spiking by 50 percent. Why?” We are starting to be able to do interesting things like that at scale with these type of connections.

There is a company called Aldebaran building a prototype for a next generation robot. It is five and a half feet tall. It would be in your home and it has the ability to not only communicate with you, but also has the ability to help you up if you fall. So, this is great for in-home elder care. It also has the ability to help with medication adherence. It has the ability to help you decide the pill you’re supposed to take and it can record you actually taking it. Then, if there are any problems, it has the ability to call for help. It’s a 24-hour, always-on solution for care for people who need that in their homes.

A company called Proteus is doing amazing things with ingestibles. You wear a patch on your stomach and you ingest a pill, and when the pill is in your body it is activated and powered by the enzymes in your stomach and communicates with the patch (that’s on your skin). It tracks your dosage, the medication, and the time that it was taken. So, it knows what was in your body and at what time. This type of technology could save the health-care industry billions of dollars due to wasted and unused medication consumption.

4) Putting yourself in the role of a futurist, what are your hopes and predictions for health tech over the next decade?

We’re starting to see some really interesting things. One thing I will say about health care, is that unfortunately health care is slow to adopt new technologies. This is an industry that, for some good reasons actually, still largely relies on pagers and fax machines for everyday communication. The primary reason why adoption is slow is because new technologies that are brought into health care need to be bulletproof. They need to be perfect — or as perfect as you can get them — because when you are dealing with data and/or a message that could make or break a patient’s well-being you really need to make sure delivery is perfect.

Health care has the opportunity to have massive disruption from ideas that have taken place outside health care. I think that we are starting to see that already taking shape with the current wearables movement. Devices like Fitbits and Jawbone are now commonplace. What is exciting is we are starting to see new sensors that were developed in areas outside of health, but are starting to make their way to health care.

For example, there is a company called SunSprite that we connect with, which is a wearable tracker you wear on your person to measure the amount of sunlight exposure you get in a day. This is great for patients with Seasonal Affective Disorder. Sunlight trackers, light exposure meters, these things have been available for a long time, but never in a wearable context for health care (in this case specifically for patients with Seasonal Affective Disorder). So, that is one example of the future.

Another good example is we are seeing John Hancock Life Insurance, very recently, are starting to use wearable trackers as a metric for adjusting your life insurance premiums in real time. Just like you can go to your Progressive auto insurer and they put a device in your car, and they adjust your auto insurance rates based on how well you drive, this is something where your life insurance company is giving you a wearable tracker and adjusting your life insurance premiums based on how you live.

There is an abundance of opportunities for us to learn from other industries, and apply it to health, and apply new technologies to health in really innovative ways. I think that some of the most innovative things that we’re going to see moving forward are also better ways of making health care more frictionless and seamless.

5) Validic has had to keep up with a market that has been in a constant state of flux, iteration, and evolution. What are three key product development and/or product user experience concepts (specific to health) that you could highlight from your experience that can benefit digital health creators?

1) I would say getting the user experience right — and this is for app developers and device makers alike — in my experience patients who have a specific disease state… they’re happy to have monitoring around that disease, but they don’t want to be constantly reminded that they have a disease. So, for example, there is a company that’s developing a continuous blood pressure wearable. In their initial user testing, they had the blood pressure reading on the watch face every time you look at your wrist. Well, patients with hypertension, they are just trying to look at the time. They don’t want to be in a meeting at work wondering if the meeting is starting late and they look down for the time and they’re reminded that, oh, by the way, I have hypertension, right? So, from a user interface perspective, it’s important to provide users the quantification and provide the measurements, but don’t necessarily remind the patients of the problem. In fact, some of the user feedback that I’ve heard are things like, “Can you just not even show me the data and just send it directly to my physician because I want them to have it? It’s important that they have it, but it’s not important for me to see it all the time, right?” So, I think that getting UX right is always going to be important.

2) Patients only care about their health when they have to. So, what I mean by that is, for example, if I’m a 45-year-old, obese man and I know I need to cut down on my meat, and salt intake, and maybe drink less, certainly I already know all of that, right? But, I’m not going to be overly worried about it until I have a pre-heart disease episode where the situation highlights I need to make a change, right? This reality is a really hard problem to solve in health care. It is something that I think health-care companies often forget. They’re solving for future problems, as if people always care about what is going on today. Patients generally only care when something “happens.” That doesn’t mean that we can’t affect positive behavior change before that negative event occurs. We just need to incentivize the behavior change to something that the patient will care about. I think that’s something that is often missed, we design like the person or patient is going to care at the onset without a trigger or incentive.

3) What we’re starting to see is that patients who do use a wearable tracker are also more likely to keep track of other information. When you have a person that has genuinely adopted a wearable, you now have identified a person who has made self-tracking part of their routine. This trend is also being driven organically somewhat by the growing market share of wearables. This is important because the desirable experience for this segment is different than the casual user. If the digital health experience is tailored to this user type — knowing that the efficacy of a particular intervention can potentially have broader user experience implications — we likely can increase overall usage by lowering the adoption barrier.

Interview with Al Lewis about Workplace Wellness Programs

Al Lewis is an outspoken voice in health care and workplace wellness. He is the author of several books on these topics including Why Nobody Believes the Numbers: Distinguishing Fact from Fiction in Population Health. He has founded and held senior positions at a variety of health-related organizations including the Population Health Alliance. Al’s latest endeavor Quizzify is one of only a few population health companies to measure its outcomes validly and guarantee savings for the organizations it serves.

1) Your graduate focus at Harvard was law. Before you discovered that most health-care measurement methodology is flawed, what was the initial impetus that led you to the pursuit of exploring, examining and developing a career that revolves around health care and corporate wellness?

I went from Harvard Law School and I was going to become a lawyer. I stumbled into this recruiting session for a consulting firm and there was this guy giving a recruiting presentation and I was just mesmerized by it. The guy was a manager at Bain and Company by the name of Mitt Romney. I applied for a job at Bain and I didn’t become a lawyer.

I worked at Bain for eight years and toward the end Bain was imploding at the time. I jumped ship and went to work at a health-care company and that’s how I got into health care. Then, I stumbled into a job as a Chief Executive and Chairman of a NASDAQ health-care company called Peer Review Analysis in 1993. In 1995, we merged with another company and I had to find another job. Once again, I kind of stumbled in a new role, this time in disease management, but I figured out that there was an opportunity there, especially in the Medicare population. There was so much chronic disease and yet doctors were getting reimbursed very little. Primary care doctors were getting reimbursed very little and there was nobody watching patients between visits.

At the time, I thought there was an opportunity for disease management and I started the company Disease Management Purchasing Consortium. During that time health plans — and to some extent employers — just jumped onboard. I started basically putting these programs in place, and was doing that merrily until somebody came along and essentially said that my measurement was wrong and that, in fact, disease management saved much more money using something called “prospective identification,” some wacky methodology that their actuaries told them to use. The belief is that they were actually saving a lot more money. I thought, this doesn’t look right. So, I sat down with a spreadsheet and compared my methodology to theirs and, guess what? My methodology overstated the savings and so did theirs. In my book Why Nobody Believes the Numbers I compare prospective identifications, annual requalification, and it turns out both overstate savings and you have to do something different altogether.

When I went back and looked at all the numbers I’d put together for people, they were all wrong. The savings didn’t exist. So, apparently, it is perfectly fine with other people to do this, but it was not fine with me. What happened next is detailed in the 2007 blog post: A Founding Father of DM Astonishingly Declares: “My Kid is Ugly”.

Since then, after writing Why Nobody Believes the Numbers, I basically went rogue and started naming names, built They Said What?, I call out the liars, etc. But, it wasn’t my first choice. I was essentially forced into it. I mean Rachel Carson wrote to Monsanto and pointed out the hazards of DDT very nicely and they didn’t do anything. So, that’s when she went rogue. I basically did the same thing, except that in my case, it’s more [Silent Spring author] Rachel Carson meets Dave Barry.

2) In a recent article about the folly of content curation and the way information now gets disseminated, the author Katie Herzog argues that in the age of the Internet we often herald things that distort the bigger picture. Beyond the frustration you have publicly shared that Baicker’s seminal research is continually used to support the efficacy of employee wellness programs, how does an organization effectively find the signal within the noise? How do you believe organizations should define success?

First, let’s define wellness as two types of wellness, wellness done for employees and wellness done to employees. Now, wellness done for employees is basically not quantifiable. It is things that employees want to do, and you are making it easy for them to do it. Maybe they want fitness facilities. Maybe they want better food. Maybe they want flex-time. Whatever it is, it is not things that they have to be bribed to do or punished if they don’t do. And that’s the big difference between wellness for and wellness to employees. I don’t think there’s anyone who objects to wellness for employees. I’m a big fan. But, what the Affordable Care Act is about and what the controversy is about is wellness done to employees.

The thing about wellness done to employees is that the results have to be quantitative to justify the expense. Wellness done to employees, you have to either bribe employees or fine them into doing it. If somebody likes something, they’ll do it for free. Coercion damages morale. This is, by the way, is according to a Health Education Research Organization (HERO) report.

HERO are the ones who admitted the morale impact, but you don’t have to be a rocket scientist. Just look at the comments on essentially any article in the lay media about wellness and it is all negative. So, advocates of wellness done to employees have to justify it with math. Math is shockingly easy to do.

Regarding math, some people do it, but many people don’t. Consultants don’t like it because they can’t really charge that much for it. In this case, done right it also shows the opposite of what they expect. You can start with page 22 or 23 of the HERO report that lists a bunch of diagnoses which have corresponding ICD-9 codes. HERO didn’t list them, but anyone who wants them can get them from me. I’m happy to send them. The June posting on the Quizzify blog has a Wellness ROI template all ready to go that has the ICD-9s in it.

The HERO report did their own ROI analysis and they found $.99 in in savings per employee per month from reduced hospital admissions. That, by the way, was without adjusting for the fact that many of the costs at the population level are coming down anyway. So companies are actually turning out an entire wellness program to save $1.00.

Now, you have to subtract the cost of the program. Let’s say the program is $1.50 an employee a month. Good luck finding a wellness program that cheap. Most start at $100 a year per employee. So, then you compare the cost of the program to the reduced claims cost, and that gives you your best-case scenario for savings. I say best case because you have other costs of wellness besides the vendors, consultants, and lost work time, and that kind of thing.

So to somewhat answer your question, you cannot define success by monetary savings. That’s why I’m offering a $1 million reward to anyone who can show that it does, because it doesn’t. My million dollars is very safe.

3) In a recent interview with James Pshock from Bravo Wellness, Pshock resurfaced something for me that I think is at its core, true. Organizations — when they begin as entrepreneurial endeavors — are not generally created to shoulder the burden of employee health care. This is a burden progressively being assigned to enterprise through policy — although few would disagree that a business should be concerned with the well-being of their employees. Based on your experience and opinion of workplace wellness, what do you believe is the obligation of an employer when it comes to employee well-being? 

As an entrepreneur, my job is basically to not put up roadblocks, to stay out of their way, and to be responsive if they have health or personal issues. The staff I have at Quizzify is dedicated, highly productive, motivated.

I don’t have an “obligation” to provide for their well-being per se. But, if I don’t provide for their well-being, either their productivity might suffer or they’ll go somewhere else. So, I don’t need to be told by the ACA, by Congress or the President what I can and can’t do with my employees. I’m going to do the best thing for my employees regardless.

The absolute, positive, last thing that I would ever do to my employees is institute a pry, poke, prod, and punish wellness program. It would cost me money. It wouldn’t save me any money. It would damage their morale. And it would drive a wedge between me and them.

Since you brought up Bravo Wellness, if you go to my expose of their previous website (which they bowdlerized following my exposé) they were essentially bragging about how they can save an organization money immediately by “fining” employees. They also spend a lot of time talking about their appeals process. I would not — in a thousand years — put in a wellness program where I fine my employees for things that have nothing to do with work, where a wellness program was so unpopular that I needed an appeals process to get out of it.  Not to mention the very questionable screens they want to run on your employees.

4) In some of the assertions you make regarding the folly of using motivational tools to promote wellness you’ve used Penn State as an example of how things can go wrong when an organization utilizes extrinsic incentives in an attempt to persuade employees towards better health.  In a recent WellSteps seminar, Dr. Steven Aldana said that after checking in with Cassandra Kitko, an adjustment was made at Penn State that merely repositioned the penalty as a reward? In other words, little has changed there although the remarketing of economic incentive has muffled the criticism. In your experience have extrinsic motivators ever been effective? Or, in your opinion, are economic incentives always going to be “forced wellness”? If yes, how? If no, why do you think that is?

Dr. Steven Aldana is not one for fact-checking. He has called me a liar before, but has never provided an example of where I have allegedly lied. I don’t mind. As you can tell, I love the fact that he’s calling me a liar. The truth is Penn State’s original program is gone. It’s done. There’s no spinning of that statement. His statement is incorrect and I’m pretty sure he knows that he is incorrect. If you look at Dr. Aldana’s website, he’s got a wellness ROI calculator. If you put in zero for “annual cost increase”, it doesn’t matter what other variables you put in, by the year 2020, you always save $1,359 an employee. So, he essentially made it up.

In terms of extrinsic motivation, I actually do find that there is a place for extrinsic motivation. The thing about extrinsic motivation is that it only works once. It works to get somebody to try something. And, after that, they have to like what they are doing … they have to want to do it on their own. Otherwise, you simply have to basically keep paying them, and paying them, and paying them to perform the desired behavior. I, myself, was extrinsically motivated to do something healthy once. In fact, ironically — and here’s the fun part. This is that NASDAQ company I was telling you about, Peer Review Analysis, and we were going to switch to self-insurance. I looked around, and we had a lot of nurses there. Nurses, ironically, have horrible health habits. So, I thought: well, if we are going to go to self-insurance anyway, I should have a fitness contest and give people $50 as a reward for participating in fitness activities. What happened is that, of the 100 people in the company, the same 20 who played on the office Frisbee team and the volleyball team were the same people who signed up for this program. The other 80 could have cared less. I, myself, signed up for the program. What I started doing was, out in the western suburbs here of Boston, is I started riding my bicycle to work in mid-town to collect the $50. Well, guess what? That was 1994 and, essentially, every trip I take from mid-town Boston that doesn’t involve snow, rain, or dead of night, I do on my bicycle today because I basically paid myself $50 to do it once and I loved it!

So, I think motivation has a role, but it’s a role of trial and it’s a role of doing something once. It’s not a role of continuing to raise incentives until you get someone to do what you want them to do. We don’t need to force people to do things that they just don’t want to. It is not good for companies, and it is certainly not good for employees.

5) One thing I have found challenging about the recent affinity the workplace wellness industry has had with BJ Fogg is that his popular behavioral model softens the importance of environment. It takes the work of Kurt Lewin and then glosses over the significance of external factors. As a layman of your work, I get the sense that you also advocate that wellness “wins” can be made through environmental design. Is my assumption correct? And in addition to this assumption, right or wrong, where else do you see organizations getting it right?

Yes, without question. I am far from an expert in this field. In my opinion, what you want to do as a company, and if you listen to the wellness industry they advocate this, too, it’s all about creating a supportive culture. As the leader of a company myself, what I’m trying to do is I’m trying to make my organization be as valuable as possible. Part of that is creating an environment where people want to come to work. But, ironically, wellness vendors have essentially nothing to do with creating a culture that makes people excited to go work. To the contrary, the evidence shows many of these types of programs create cultures that do the opposite.

Simply being mindful of environmental factors can have a huge impact. I have an excellent example of that in my book with Tom Emerick, Cracking Health Costs. Back to Peer Review Analysis — it’s going to sound silly — after employees complained about the conditions of our bathrooms I contacted the management of our office building we were in and asked, “How much extra would I have to pay you to clean the bathrooms twice a day?”

We came to an agreement and I paid them probably less than what would have financed a wellness program for probably 20 people. So, for the cost of the wellness program for 20 people, I had the restrooms cleaned twice a day and I don’t think there was an employee in the company who didn’t take notice and was grateful.

What did this accomplish? The organization was telling the employees they mattered. And you weren’t telling them by making some pronouncement that they mattered or by giving them lunch once a month. What you were telling them on a daily basis, doing something very unglamorous — I mean you can’t get more unglamorous than that — is that they matter.