Connie Chen, MD, leads product, clinical operations, and research as the COO at Lyra Health, a leader in global workforce mental health.
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With rising healthcare costs and pressure on bottom lines, every company is feeling the squeeze this year, trying to balance getting the best care for their people with tighter budgets. Healthcare expenses are one of the largest, most significant and least predictable operational costs for many companies.
This line item directly affects corporate finances while heavily influencing employee satisfaction, retention and productivity. And the balancing act of putting together the right suite of benefits is even harder when every vendor seems to over-promise on ROI and, often, under-deliver on quality.
If people leaders believed every ROI claim, they’d be making money on healthcare. If only that were the case!
As a physician and executive, I've seen firsthand how often ROI data is massaged to paint favorable results. Cherry-picked numbers, statistical extrapolations and fanciful marketing can make vanity metrics look like the real deal. So, how can leaders tell what’s real from what’s fluff?
Unlocking Tangible Healthcare ROI: Three Essentials
Understanding whether a vendor can deliver real healthcare cost savings requires three essentials: watertight ROI methodologies backed by quantifiable clinical outcomes and attention to those with the greatest needs (and highest costs).
Meaningful Methodology
The number one thing to question is how a vendor is calculating their ROI. There are some simple ways to figure out if those numbers are real or if they are only showing a tiny window into the bigger picture.
• Is there a full year of data? Healthcare costs are often cyclical. If a vendor presents only one or two quarters' worth of data, that likely means that the full year tells a less compelling story, because they are excluding seasonal ups and downs, including times when costs tend to be higher. For example, organizations with self-funded plans consistently see costs rise in the second half of the year as deductibles are met.
• Does it include the entire population? Cherry-picked population data is another key way vendors can strategically show lower costs and better outcomes. For example, vendors may exclude members with past diagnoses or more complex health issues, who have higher treatment costs in order to show more favorable results.
• Are savings sustained over time? A full year and population-wide data should be considered the minimum. But it is even better if results can be proven consistent and replicable, at scale, over multiple years to understand long-term trends. The more members and time that are included in the study, the better.
While there are many other statistical sleights of hand companies may use to boost their ROI numbers, asking these questions about their methodology will help you get a clearer picture.
Clinically Validated Outcomes
The next point feels really simple because it is. Real ROI has to come from measurable clinical improvement. In healthcare, if people aren’t getting better at higher rates and at a lower cost, there can’t be actual ROI.
Many vendors will tie their ROI to utilization but are unable to prove superior clinical outcomes. This is the grand trap of many analyses: correlation over causation. Utilization stats can show that use increased, but it can’t show that it had any kind of meaningful impact. A vendor needs to be able to prove that a verifiable change has occurred that has directly caused the changes in spend, and that’s where rock-solid outcomes data comes in.
To take our field, behavioral health, as an example, clinical outcomes can be measured using validated assessments, such as the PHQ-9 and GAD-7, to track progress from the initial assessment through the conclusion of the treatment. Some companies estimate clinical improvement based on things like demographics or time in treatment rather than reporting actual data and then claim cost savings based on it. This has the same prognostic power as the fabled groundhog, which “predicts” spring. While the spectacle is attention-grabbing, it can’t actually tell us the weather.
Cheaper, lower-quality benefits might seem cost-effective at first. However, poor-quality care often leads to higher relapse rates and the need for additional sessions of care, driving up the overall cost in the long run. Real returns are achieved when a program provides high-quality care that effectively addresses health issues the first time and reduces the need for further treatment.
Estimated clinical outcomes should always be a red flag for a savvy benefits leader because if the actual data told the best story, they’d see that instead.
Comprehensive Care For Complex Needs
In healthcare, there’s an 80/20 rule that remains true year after year, suggesting that 20% of individuals generate 80% of healthcare costs.
The principle is particularly pronounced in behavioral health, where a significant portion of expenses are tied to managing adolescent mental health or complex mental health issues, such as eating disorders, severe depression, suicidality or substance use disorders.
These high-acuity needs require a coordinated, multifaceted approach to treatment that supports individuals of all ages and their families. Without high-quality care for these high-need populations, employers will end up spending more on hospital readmissions, persistent health problems and an increased reliance on emergency health services.
If any vendor claims a high ROI but does not offer specialized support to address the most costly 20% in their field or have specific data for these populations, you’re unlikely to see significant cost savings.
A Call To Look Beyond Surface-Level ROI
In a time where healthcare spending is escalating and budgets are under strain, understanding tangible ROI is imperative for employers striving to make the most out of their investments and resources. While data and analyses can seem daunting, these simple questions can help you quickly separate real results from just good marketing. This will help you make better-informed decisions that enhance your organization's well-being and optimize financial returns.
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