In a recent post, we agreed with Goetzel et al. about the advisability of moving away from a preoccupation with the return-on-investment (ROI) of wellness programs and toward the more systemic, iterative view required to make progress toward workplace “cultures of health.”

At the same time, we acknowledged Lewis et al. and others for helping to usher in a new and needed scrutiny of the fairness and effectiveness of employment-based wellness programs. But, we also cited peer-reviewed evidence that counters Lewis et al.’s conclusion that there are no conditions under which employer wellness programs, and by extension employer efforts to manage their core health-related value/sustainability challenge, can achieve a return-on-investment (ROI) ratio of better than 1-to-1 savings to cost.

Lewis et al. have added their voice to the scrutiny increasingly applied to employer use of outcome-triggered incentives or penalties to promote employee behavior change in the context of health-contingent programs under financial provisions in the Affordable Care Act. The momentum fueling these developments could soon extend far beyond wellness programs.

Potentially subject are the full range of tools—from disease management to health promotion to evidence-based benefit design and, more recently, mobile health—in which employers are investing to improve or maintain employee health and productivity while adequately controlling health care costs. The extent to which employers will confidently continue down this path may determine the long-term impact of their efforts to promote employee health and productivity.

One frequent claim is that there is almost no evidence that employer wellness programs reduce health care costs, let alone accomplish this in a manner that produces a positive return on investment. In response to this claim, this post offers as a case study an overview of the approach mounted by Navistar during 1999-2009, the subject of 20 peer and non-peer reviewed papers since 2003.

Headquartered in Lisle IL, Navistar is a leading manufacturer of commercial trucks, buses, defense vehicles, and engines. Using an approach that ironically paid little attention to ROI calculations per se, the company nonetheless ultimately achieved huge costs savings and an excellent return on its investment. Moreover, the strides it took toward a benchmark, sustainable workplace “culture of health” are striking.

Navistar’s Approach and Results

Navistar’s efforts to foster a safer, healthier, and more productive workforce across this time period entailed studying and acting on opportunities for improvement in workplace safety and occupational health; primary, secondary and tertiary prevention; worker’s compensation and disability claim reduction; reductions in absenteeism and presenteeism; and increased control over health care costs. These specific objectives drove Navistar’s approach toward what can now be termed its larger goal: a sustainable workplace culture of health.

Companies that successfully build this culture “bend the health care cost curve” for their covered lives. The financial impact of Navistar’s efforts was impressive.

Exhibit 1 compares two trend lines of per capita annualized total direct health care costs during the 11-year period: one for Navistar’s approximately 65,000 employees/retirees and one for the national average of employees/retirees. The data presented in this figure, it should be said, was compiled in-house by the company’s Health and Productivity Unit and is the result of the highly scrutinized process required of corporations.

The measures—unadjusted for inflation—were independently audited and confirmed by actuaries and presented to the company’s Board of Directors annually. These data were also subsequently published under peer-review.

Exhibit 1. Cost Savings Achieved By A Culture of Health Company

Allen-Exhibit-1

This chart shows what other benchmark companies have also demonstrated: a bending of the cost curve over the decade studied.

Most companies that have taken this journey report that it takes a considerable length of time before the impact is discernable. Navistar is no exception. As shown, during the first four years, the company’s trend stayed an average of some four percentage points above national trend. In 2003, the company’s increment relative to national trend dropped to one percentage point. In 2004, the company’s trend dropped below national trend, and the resulting decrement continued to grow through 2009.

Also, benchmark culture of health companies (i.e., companies that have sustainably flattened their medical cost trend, improved the health status of their workforce, and enhanced organizational performance) experience remarkable savings relative to trend once they in fact start to bend the health care cost curve and improve the health and safety of their workforce. When the approximately $250 million that Navistar spent on health care in 1998 is used as the common starting point, the net savings from these changes for the company relative to this national comparison benchmark from 1999 to 2009 sum to over $300 million, even without taking into account the reductions in corporate contributions to reserves and Financial Accounting Standards Board requirements that resulted from these savings.

During 1999 to 2009, there was less than $10 million in additional investments that Navistar made on wellness components (above and beyond items like exercise facilities and occupational health clinics which were already in place). Although specific calculations were not made by the company along the way to justify the institution of individual programs, calculations recently offered by the first author (Allen) focusing on Navistar’s overall approach attest to the magnitude of the return on its investments that the company realized during this period.

Likewise, the company achieved significant concurrent reductions on the drivers of all indirect costs measured (Exhibit 2), which encompassed drops on sickness absenteeism, workers compensation, disability and presenteeism that mirrored and further validated the trends on the direct cost side. These reductions, and the reductions on the corresponding indirect cost measures, were similar in slope and percentage to the reductions on the direct cost measures despite none of the changes on the supply side (e.g., vendor selection, cost sharing, and plan design) that often characterize the self-insured employer environment.

Exhibit 2. Productivity Gains Achieved In A Workplace Culture Of Health

Allen-Exhibit-2

This chart demonstrates what other benchmark companies have also accomplished: productivity gains.

These decreases occurred not just among those with selected disease diagnoses but also among healthy employees (Exhibit 3). Moreover, they occurred with minimal cost-shifting: from 2001-2 to 2008-9, the company’s total direct cost reductions in dollars tripled the relatively modest (and expected) increases in employee share (Exhibit 4). (Note: the entries in Exhibits 2-4 express differences between the 2001-2 and 2008-9 time frames, with statistical controls for workforce changes over time in age, gender, percent salaried, and annualized earnings). All told, these results meant sharp gains not just in cost control but also in employee health and productivity during this period.

Exhibit 3. Savings In A Workplace Culture Of Health Across The Health Spectrum

Allen-Exhibit-3

This chart shows what other benchmark companies have also achieved: improvements in population health.

Exhibit 4. The Minimal Cost Shifting Needed In A Workplace Culture Of Health

Allen-Exhibit-4

This chart shows that, like other benchmark companies, Navistar achieved its cost savings with minimal cost shifting.

Navistar’s approach to achieve these results spanned demand and supply side management, prevention, and purchasing — all developed, implemented, and periodically assessed on a worksite by worksite basis AND all developed, it should be emphasized, without an explicit emphasis on ROI. Initially, senior management was willing to assume that a stay-the-course mentality would more than pay for itself over the long term. By the time the actual numbers started to confirm this assumption, ROI calculations and the time and effort to calculate and report them came to be seen as unnecessary. We recommend that other corporate leaders adopt this enlightened view that the pursuit of a safer and healthier workforce can produce a competitive advantage in the marketplace.

Instead, the company’s framework focused on adapting the Deming “plan-do-study-act” cycle for quality improvement to “real world” corporate decision-making. This approach gave first priority to evolving iteratively to maximize the fit between population health characteristics that were observed and available resources that could be brought to bear to manage these characteristics. Operationally, it involved monthly measurements and reacting to these results, combined with annual assessments of the previous year’s experience and the setting of goals in collaboration with management and the unions. Many programs were site or manufacturing division-specific while others were corporate-wide. Even the corporate-wide programs, though, often had site-specific emphases in a given year.

Periodically, these routine reports were supplemented by studies with a strategic orientation, based on advanced statistical analyses and conducted by external research experts. These latter studies provided up-to-date information on the annual data and guidance for long-term planning. Over the years they examined a wide variety of areas, ranging from the measurement and management of the disease burden of various respiratory, musculoskeletal, and autoimmune disorders to the impact of overtime and age on employee health and productivity to the validity of self-report measures.

The overall process embodied in both tracks of analysis and reporting was driven by evidence, oriented toward the total population, and focused on primary, secondary, and tertiary prevention — all components that would seem indispensable to any endeavor to make effective progress toward a workplace culture of health. This process was also characterized by a fourth indispensable component — relentless monitoring of both direct and indirect costs and their drivers.

This dual focus was driven by the recognition that indirect costs not only predict future direct and indirect costs; their management is key to effective purchaser control of direct costs. It was predicated primarily on the use of research designs that accessed the available administrative data sources to examine the entire eligible workforce. While employee self-report surveys designed to meet specific project objectives (e.g., examine the burden of allergies on performance at work) were also used in certain instances, all data collection, evaluation, and reporting had to accommodate on-going business operations, not vice versa.

Depending on the study, the controls used for these designs consisted of comparison groups vetted by external experts and/or peer-reviewed statistical techniques that adjusted for changes in workforce composition over time. These designs were sufficiently credible in the eyes of management to enable the “stay the course” mentality needed to generate the striking reductions achieved during this 11-year period.

Additional Impacts

Of the several other lines of evidence that provide further confirmation of the trend results reported in Exhibit 1, two stand out. First is the concurrent four-fold decrease in OSHA reportable incident frequency rate that was achieved under the aegis of the company’s safety program (Exhibit 5). [Bunn W. “The Impact of International Health, Safety and Productivity Programs.” Paper presented at the 2012 International Commission on Occupational Health. 2012 March 22. Cancun, Mexico.]

Similar decreases occurred in the OSHA lost time case rate. While not necessarily reflective of wellness per se, this reduction in accidents impacted not only workers compensation but also home, traffic and pedestrian safety—all brought into focus by expanded outreach efforts mounted by the company to promote a culture of health—and spoke to effects registered by the prevention aspects of Navistar’s approach.

Exhibit 5. Safety Gains Achieved By A Culture Of Health Company

Allen-Exhibit-5

This chart provides insight into the connection between workforce health and workforce safety. Benchmark culture of health companies have shown reductions in workplace injuries.

Second is the inflation-adjusted 8.5 percent decrease in total direct costs per Navistar employee versus the 22 percent increase per U.S. national employee during the 2001 to 2009 period found by the first author and colleagues and also reported under peer review. In a process directed and implemented by external personnel completely separate from the in-house Navistar team that started with the same raw data yet used completely independent methods for database development, measure construction, and analysis, this second research team nonetheless found trends in the same direction and of very comparable magnitude.

The return that Navistar experienced from its efforts to manage its core value/sustainability challenge during this period, as far as we know, is the top-end of what has been reported in the peer-reviewed literature. It underscores that an integrated program focused on safety, wellness, health and productivity, and the management of supply and demand can have an ROI that exceeds most any other corporate investment or program goal. Surely, not every wellness program implemented or every attempt to build a corporate culture of health will achieve this kind of return. But, just as surely, the debate over wellness programs is best positioned to serve the field when it incorporates what has been shown to be possible and a replicable road map for achieving it.

By helping to compel further clarification of some fundamental choice points for purchasers—whether or not to invest in workforce wellness, health and productivity, and, if yes, how to do so in a manner that will be sustainable—Lewis et al. and others expressing doubt are making important contributions to the field. In concert with the confusion that has arisen as a result of the November court ruling in the EEOC vs. Honeywell International case, these skeptics are prodding those in the purchaser community that are contemplating whether to initiate or take further action to incorporate lessons learned from what has already been done and proceed accordingly. This holds not just for self-funded employers in the private sector but also for purchasers like the Centers for Medicare and Medicaid Services in the public sector.

Lessons Learned

In this connection, three additional lessons learned merit consideration. First, the gap between Navistar’s trend before its approach started to take hold and the concurrent national trend estimates depicts the magnitude of the excess direct costs the company was incurring and would have been left on the table had it elected to not go down this path. This discrepancy offers a window into the costs of inaction that many employers may continue to face in terms of direct costs alone by not choosing to promote a culture of health in their workplaces. Losses on the indirect cost side could well be greater.

Second and related—indeed, speaking directly to the thesis of this post—had Navistar management been guided solely by ROI calculations in the early years of this period, it might well have called off the evolving approach that produced the gains occurring in the later years. It took well into the fifth year of this process before the company’s approach first recouped a below-national trend estimate. Sole reliance on ROI as a metric could well have aborted the progress the company ultimately made toward the realization of its investment objectives.

Finally, even with the gains that Navistar realized during this period, further analysis has shown there is still room for improvement. A 2014 study reporting tests that retrospectively assessed the care for employee/patients with low back pain during 2001-2009 in relation to current guidelines developed for imaging, surgery, medication use, and outpatient visits found not only: high rates of inconsistency between care actually delivered and care specified by the guidelines, but also associated total (direct + indirect) cost impacts that were considerable. Much potential for improved guideline adherence—and, by extension, for advancing still further the company’s capacity to manage its core value/sustainability challenge—still seems possible at Navistar.

Making Good on the “Culture of Health” Promise

We would suggest taking a page from the classic textbook by Jim Collins, Good to Great. In it, he examined the few companies that have been able to initiate and sustain great organizational change and developed a pathway for other companies to replicate this kind of shift. The same can be done here. By taking stock of companies that have developed benchmark cultures of health and sustainably, flattened their medical cost trend, improved the health status of their workforce, and enhanced organizational performance, other employers seeking to achieve the same result can use the roadmap developed by Navistar experience and other benchmark employer efforts.

Our industry is better defining what it takes to build benchmark culture of health companies. There is increasing consensus that it takes a critical mass of effects and programs to achieve it. Recent research. has uncovered more than 200 elements that can foster a culture of health. Several organizations have attempted to measure this and some have distributed awards for best practice including the Institute for Health & Productivity Management’s Corporate Health and Productivity Management Award, the National Business Group on Health’s Healthy Lifestyles Award, the C. Everett Koop Award in affiliation with the Health Enhancement Resource Organization, and the Corporate Health Achievement Award sponsored by the American College of Occupational and Environmental Medicine. The reader can refer to these award winning employers and the assessment methodologies for additional insights.

To achieve benchmark results requires a deep corporate commitment and some patience. Establishing a culture of health takes time. Although it took at least into the fifth year before Navistar’s investment first recouped a below-national trend estimate, we also note that the company’s approach evolved, from a primarily health benefits-only focus in the early years to one that iteratively incorporated both aggressive disease management and health promotion (including lifestyle management and other) components.

Based on an evolving synthesis of lessons learned from the experiences at Navistar and at other leading employers, most award winners now suggest that at least three to five years are needed before significant returns are generated. But all report that the returns are well worth the journey. They cite key drivers to success such as leadership and management support, data management with the generation of sophisticated scorecards, dashboards and cockpits to monitor progress and adjust activities, leveraging the workplace environment, sculpting benefit design based on evidence, implementing behavioral economics, and consumerism.

We would advocate for more research and recognition documenting the impact health can have on indirect costs such as performance like the Lamplighter Study conducted by Unilever. We long for the day when several co-located large and mid-sized employers create “tipping points” that elevate the health status and prosperity of their community. We are excited that organizations such as the Institute of Medicine and the Robert Wood Johnson Foundation are now committed to this pursuit.

The debate over wellness as such needs to shift from its preoccupation with whether wellness alone works or produces a positive ROI. We recommend that the pursuit of best practices for fostering cultures of health will be more fruitful. And, this pursuit should be informed by the full range of what has been shown to work within benchmark companies. This approach will best enable employers and other private/ public sector purchasers of health care to meet the daunting health challenges that lie ahead.

Author’s note: The authors would like to thank William B. Bunn, MD, JD, MPH, and Paul Brandt-Rauf, MD, DrPH, ScD, for their contributions to this work.