The next and timely differentiator for the healthcare market
Today, more than ever, corporations face the challenge of controlling rising healthcare costs. Comprehensive wellness has emerged as today’s key differentiator in the corporate marketplace.

Today, more than ever, corporations face the challenge of controlling rising healthcare costs. Comprehensive wellness has emerged as today’s key differentiator in the corporate marketplace, proving a consistent 3:1 return on investment (ROI) over three to five years (Grossmeier, 2012). More and more, corporations and brokers will choose health plans and programs based on comprehensive wellness with a proven ROI model. Not only does this pose a great opportunity for healthcare companies, but also a very timely one given the backlog of workplace wellness demand, the impending 2014 insurance exchanges and the trend of member-centric service offerings. To leverage comprehensive wellness as the key differentiator, healthcare corporations must pursue a niche strategy by exploring a combination of key wellness strengths relevant to this marketplace.

What is wellness, and what is a comprehensive wellness program?

Wellness, as defined by Charles B. Corbin of Arizona State University, is a “multidimensional state of being describing the existence of positive health in an individual as exemplified by quality of life and a sense of well-being.” Wellness is not only physical, but also spans the emotional and social realms allowing one to function optimally.

A comprehensive wellness program is one that addresses all areas of health for all segments of a given population. Traditionally, most managed care organizations had focused on treatment of illness once illness occurs; a retrospective phenomenon known as disease management. A comprehensive wellness program should not only entail traditional disease management, but also include prospective efforts that predict and prevent potential risk of illnesses and maintain good health for the already healthy. Due to the potential cost savings via proven ROI, corporations are beginning to see wellness programs as a strategic asset today rather than an auxiliary benefit.

Corporate wellness: A fragmented marketplace.

A fragmented market is one that has many small competitors and has structural factors that inhibit one or a few suppliers from dominating the market. The automotive maintenance market is a good example. There is not one firm that can provide all the desired benefits for consumers of the automobile maintenance market. Structural factors, such as geographic location, prevent one firm or a few large firms from servicing all the automobiles in the United States.  As a result, there are myriad automobile maintenance firms, even within the same city.

The corporate wellness market follows a pattern similar to that of the automobile maintenance market. According to the IBIS World Market Research Report of December 2011, the corporate wellness services market is a $2 billion market with more than 7,400 businesses employing over 14,000 employees (Corporate Wellness Services in the US: Market, 2011). Even in a given city or locale, there are several wellness providers. Furthermore, no two populations have the same exact need or the same propensity to change their lifestyle to incorporate wellness. This cultural disparity serves as a key structural reason for the marketplace remaining fragmented.

Where is the wellness market headed?

The corporate wellness market will likely remain fragmented until health insurance exchanges become operational in 2014—and perhaps even beyond. There are several factors contributing to this market remaining fragmented.

  • Cultural disparity. Wellness programs are applied to given populations within culturally disparate localities. As the efficacy of such programs depends on culture, this disparity allows for multiple players to exist in this marketplace, each tailored to address specific features.
  • Market uncertainty. The healthcare market is still undergoing massive transformation and uncertainty, such as the HIPAA rules of rewards/penalty for wellness participation. Healthcare reform increases this reward/penalty to 30 percent, but is unclear on the timeline. Furthermore, this rule will apply to 10 states and depending on its success may be extended to others. This uncertainty will sustain a large number of players, each trying to claim their stake in an opportunistic marketplace.
  • Lack of awareness. The awareness of what practices facilitate wellness is low among the US population. As a result, corporate purchasers of wellness remain relatively uninformed, leaving much of the purchasing decision based on individual needs and perceptions of HR departments. This allows multiple suppliers to exist, each catering to the varied needs of the market.
  • Unhealthy lifestyle. The lifestyle in the United States is not conducive to healthy living. Poor diet, heightened stress, lack of exercise and several other factors keep many of us unhealthy. This means many firms can continue to innovate and explore wellness solutions for different populations, and therefore the likelihood of one dominant solution or firm emerging is very low.

The opportunity is in niche markets.

Given that the marketplace will remain fragmented, solution providers can tailor their services and solutions to the needs of specialized markets and build niche businesses. Due to current market fragmentation, a given solution provider needs to only identify a few benefits that resonate with its niche market. As a result, comprehensive wellness solutions face a unique opportunity today to find a niche and then develop and grow it.

The time for comprehensive wellness is now.

Not only is the opportunity for comprehensive wellness programs evident, it is also very timely. The key factors below make wellness solutions compelling today more so than the past.

  • Cost containment. Employers can expect an 8.5 percent increase in healthcare costs in 2012, compared to 8 percent in 2011 (Behind the numbers, Medical cost trends for 2012, 2011). Employers are taking some action to address rising costs as evidenced by the growing number of consumer directed health plans (CDHP). Fifty-four percent of companies in 2010 offered CDHPs, a 6 percent increase over the previous year, while in 2011 that figure was estimated at 61 percent. The pressure to reduce healthcare costs has never been stronger than now for employers (Purchasing Value in Healthcare, 2010).
  • Health insurance exchanges. The payback period for comprehensive wellness programs ranges between three and five years and, according to some studies, could be as little as two years if productivity calculations are included in the ROI calculations. Many health plans are concerned about retaining their competitive advantage when the 2014 Insurance exchanges proliferate. If health plans are to differentiate themselves in the face of the 2014 exchanges, now is the time to launch comprehensive programs, establish their ROI in the marketplace, and capture new entrants into the individual market.
  • Backlogged demand. Most firms recognize the value of wellness programs but have put off their implementation due to difficult economic times. The U.S. economy seems to be turning a corner, however. Unemployment stood at 8.5 percent in Dec 2011, the fourth month in a row that showed a drop in unemployment. There is a lot of demand that is still unmet, and now is the time to meet that demand in the marketplace.
  • Numerous mid-size and large enterprises. Very few large organizations create in house wellness programs, and most mid-size organizations cannot afford to do so. However, all enterprises still face the demand to lower healthcare costs. Furthermore, wellness programs are becoming a common way for companies to differentiate themselves during corporate recruiting. To be competitive in the recruitment market and reduce healthcare costs, organizations need comprehensive wellness programs now more than ever.
To learn more about the Wellness implementation Matrix, a strategic framework for developing a wellness niche, or to find out more about West Monroe Partners’ wellness consulting services, please contact Munzoor Shaikh.