THE BLOG
07/30/2015 11:32 am ET Updated Jul 30, 2016

'Be Healthy and Be Rewarded' -- With Rewards in Health Care... Everyone Wins!

A decade ago, financial rewards for healthy behavior was a "fringe" technique in some circles and morally offensive in others. It was common to hear "we are not paying people to do what they should be doing." Today, health rewards is a foundational technique in the health care community to drive consumer and provider behavior.

In 2012, Todd Park, former Chief Technology Officer of Health and Human Services (HHS), commented, "The two biggest health trends will be data liberation and incentive reform." He was spot on.

In 2014, Forbes outlined the five "Megatrends" with the potential to transform health care, and rewards were two of the five:

• The Formation Of Accountable Care Organizations (ACOs)
• Moving Away From Fee-For-Service Payment Models
• Rewarding Better Health Outcomes and Quality
• Health Information Technology Incentives
• A New Generation Of Physicians

In 2015, Brigham and Women's Hospital Innovation Hub named rewards as one of Top 10 Innovations of 2015.

This culminated in the summer of 2015 with the Center for Medicare and Medicaid Services (CMS) expanding incentives in Medicare, an area in which many felt that rewards would never be accepted. Finally, in 2015, HHS set aggressive goals for the percentage of Medicare payments tied to value (as opposed to fee for service), indicating that 50 percent of Medicare payments will be tied to value by 2018.

Incentives in health care is now squarely on the desk of the CFO. Recently, the Wall Street Journal produced a report (June 22, 2015) from the CFO Network, in which it outlined the top priorities for the nation's chief financial officers. "Incentives in Healthcare" was one of its top five priorities. Rewarding for healthy behavior is here to stay.

As the authors noted in "Think Like A Freak", "there is probably no quadrant of modern life in which financial incentives do not hold serious sway." Perhaps most importantly, consumers want them. Consumers are willing to take healthy actions if they are rewarded:

• 96 percent would change their health behavior if they were rewarded (Welltok, 2014)
• 75 percent would have their blood pressure checked (Harris Interactive Survey, 2013)
• 73 percent would lose weight (Harris Interactive Survey, 2013)
• 68 percent would have blood sugar or cholesterol checks (Harris Interactive Survey, 2013)
• 51 percent would have their lifestyle choices scrutinized (Harris Interactive Survey, 2013)
• 51 percent would use a regimen to lose weight or control diabetes (Harris Interactive Survey, 2013)
• 38 percent would follow a diet to lower blood pressure (Harris Interactive Survey, 2013)

Even 49 percent said they would not only undergo a genetic test but would allow those results to be shared with their health plan for a reward.

This has become front and center with the consumer with the onset of health wearables. Consumer health technology, like AppleWatch and Fitbit, has been inserted into our daily lives and has great potential to improve the health of our nation. However, like other health behaviors, consumers don't stick with it. Endeavour Partners' research reveals that more than half of U.S. consumers who have owned an activity tracker no longer use it. A third of U.S. consumers who have owned one stopped using the device within six months. Others say that 80 percent of health apps are abandoned within two weeks.

If you ask consumers, at least part of the answer is rewards:

• 68 percent of consumers would use wearables streaming data in exchange for a reward, according to a PWC report entitled "The Wearable Future."

• 50 percent of consumers would share personal information as long as they receive rewards . "Wearables Privacy Report" by Zeno and London's Imperial College Business School.

With the millions of individuals acquiring health coverage through exchanges, the expansion of Medicaid, and the rise in Consumer-Driven Health Care (CDHC), the consumer's relationship with healthcare is rapidly changing. This shift to consumerism is transforming the way health care is purchased and consumed, and how consumers engage with the healthcare community. More than at any time in history, consumers are purchasers of the insurance they choose, and have more skin in the game.

What does this mean for healthcare? Health organizations that understand a consumer mindset will have a competitive advantage over those who don't. This requires them to understand consumer marketing like those in other industries do to drive customer acquisition, retention and loyalty.

In every other consumer industry, rewards to drive behavior are a cornerstone of every consumer program. Would you ever fly on an airline or stay in a hotel that didn't have a reward program? Not only are health rewards used by over eighty percent of large companies, but retailers such as Walgreens have enrolled over $85 million in its reward program. They are being rolled out in Medicare and Medicaid. Even hospital systems are getting in the game, launching reward programs to attract consumers both before and after they are patients. In pharma, consumers have indicated that rewards are the #1 thing they want from pharmaceutical companies. It is just a matter of time before every health plan and health system has a rewards program just like our favorite airlines, hotels, banks and retailers.

As Accenture noted, "The value of incentives, in particular, is clear in the way progressive healthcare plan providers are structuring their products." The health care community understands that driving consumer and provider behavior is the cornerstone to reducing cost, improving health and creating lasting connections with these two audiences.

Rewards for healthy behavior is one of the few solutions to the healthcare crisis in which everyone wins. Here's how:

• Consumers win... by earning financial incentives for being healthy in ways that improve health and offset the growing cost of health care.
• Health plans win... by reducing the cost of the individuals they insure.
• Employers win... by reducing the cost and improving the productivity of their workforce.
• Providers win... by managing patients better under the new "pay-for-performance" and risk bearing models.
• Politicians win... Democrats win by enabling individuals to earn a valuable support as the result of a government program. Republicans win by creating personal accountability and rewards for individuals who perform better.
• Governments, Medicare and Medicaid win... by reducing high cost medical care through greater prevention and lifestyle management.

When financial incentives are aligned to the behaviors that improve health or optimize utilization of health resources, everyone in the health care community wins.