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2015 Koop Award Winner McKesson Stock Plummets in 2016

They say being on the cover of Sports Illustrated jinxes you. I wouldn’t know.  There is no chance of that for me, unless they run a feature story about 60-year-olds playing Ultimate Frisbee on Christmas night, when they should be playing canasta with their aunts.

That jinx may be an urban legend, but here’s a real jinx: winning a C. Everett Koop Award.  The 2016 vendor got humiliated in STATNews, of course — we’ve already covered that. The 2012 awardee was embarrassed in the media as well. The vendor ended up losing their gig.

Neither of their customers (Boise or Nebraska) are public companies, though, and that’s what this article is about, because it’s the customer’s performance we are most interested in, not the vendor’s. The latter do quite well for themselves, snookering unsuspecting employers.

The most recent public company to win an award was the 2015 winner, McKesson. McKesson got clobbered in the stock market in 2016, the 14th worst performance among the S&P 500, as investors learned that only the dumbest bunch of managers would pay a cabal of vendors (that themselves are among the industry’s most clueless, like Vitality) to harass their employees. Employee Benefit News took notice of the McKesson wellness program, and pilloried them, thus triggering the sell-off.


You might say: “Wait a minute. Yes, that was a failed, hilariously mismeasured, program whose award was due to the cronyism of having 5 of their vendors and consultants connected with the Awards Committee, but how could something as trivial as a wellness program be responsible for their stock price collapse?”

The answer, of course, is that it doesn’t. Based on the amount of money these programs lose, McKesson’s wellness program was probably only responsible for 1% or so of the 27% stock price decline.  And that’s precisely the point. Ron Goetzel claimed that winning a Koop Award caused a dramatic increase in stock prices.  I noted that, like most of Ron’s defenses of wellness, that analysis didn’t hold water, and any observer with a calculator and access to stock price histories could see that wellness causes a dramatic decrease in stock prices.

While I won that face-off (a year later, you would have been way ahead of the game shorting Koop Award stocks and hedging with index and sector funds), neither conclusion is really valid. Both analyses have a ridiculously low signal-to-noise ratio. Many things happen in the market that overwhelm wellness. For instance, I don’t think any of the analyses of Citibank’s 2008 crash would blame their Koop Award-winning wellness program.

Instead, the negative impact on stock valuations can be shown to be pretty trivial.  Let’s start out with some favorable assumptions. Assume the typical program is more successful both than the allegedly successful one most recently measured in Health Affairs and also than the award-winning so-called best-in-the-country Wellsteps program for Boise, in that it neither loses money nor harms employees. Instead, it is only worthless. So even though Ron Goetzel and Michael O’Donnell say most programs fail, let’s assume yours neither causes health spending to increase or employees to get worse.

If you pay vendors to “manage” 10,000 employees @$150, that’s $1.5 million lost. With a typical pretax P/E of 10, you reduce your market value by $15,000,000. A company with 10,000 employees might have (for example) a market value of $1.5-billion. That makes the negative impact of wellness on stock price only 1%, hardly enough to cost a CEO his job.

So the good news is that McKesson’s collapse is the exception. Screening the stuffing out of employees, lying about outcomes, winning a Koop Award, and hiring a cabal of clueless vendors will not cause your stock price to plunge. In a year in which the media gave the wellness industry little reason to cheer, costing your shareholders only 1% of their investment in your company is great news. Worthy of a celebration. Or at least a couple rounds of canasta.

In workplace wellness, fat-shaming is the new black.

This posting is a request to self-anointed wellness industry leaders to pleeease stop picking on people because of their weight.  It’s like you’re still in kindergarten, no offense intended.*


2016 was the year in which weight-shaming, weight discrimination and a generally dismissive and outright misanthropic attitude towards two-thirds of the country’s employees became a wellness industry thing.  This started in January at Davos, where the head of a wellness vendor named Vitality announced what quickly became known as the Fat Tax.

Here’s how the Fat Tax would work.  Companies would tell shareholders how many fat people they employed. Employers, presumably feeling shame over this disclosure, would be motivated to pay a “tax,” in the form of a fee to a wellness vendor — such as, coincidentally, Vitality — for screening and weight loss programs.

In addition to the out-of-pocket fee, employers would pull employees off the job for an hour too, to obtain this screening. In addition, there would be all the administrative time — making the rules and exceptions, catching cheaters (see below), getting the auditors involved, and so on.

All this for what, again?

J&J would have people believe that shareholders are demanding thinner employees. In reality, of course, shareholders could care less about the weight of employees, for the simple reason while weight makes no difference to most businesses (as we’ve proven), the cost impact described above of mass weigh-ins and disclosures would be quite high.

More important is the morale impact. Suppose an employee owns shares and the stock price is down. Next, suppose that shareholders have just been informed how many employees are overweight…and the guy in the next cubicle is obese. Suddenly, that employee can start blaming his co-worker for the loss in value of his 401K.

Your stock price is down, you need to rally the troops. Instead, the troops are turning on one another.

Incredibly, this idea did originally have momentum: along with a few drug companies that make obesity drugs that saw a potential market opportunity in the Fat Tax, IBM and even Pepsico were willing to put their names on it.  The Fat Tax cabal also knows the value of the Harvard name: they paid a little-known instructor at the Harvard School of Public Health (HSPH), so that they could co-opt that moniker, just like the sugar industry used to do.  Only the latter had a big enough budget to bribe two full professors rather than one lowly instructor.

However, the momentum quickly died once word leaked out that the very same Vitality that wants to collect money from others to administer weight loss programs couldn’t even get their own employees to lose weight.

Oh, and if you guessed that Ron Goetzel’s fingerprints were all over this one — just like almost every other debacle since Penn State — you obviously know the way the wellness industry works.

Ah well, as management guru Peter Drucker said, the only thing worse than a poorly conceived idea is a poorly conceived idea that is poorly executed.

Actually he never said that, likely because he was never enrolled in Vitality’s program.


Possibly because of the initial exposure the Fat Tax idea got, hazardous crash-dieting competitions came back into vogue this year.  Crash-dieting competitions are the type of thing that gives idiocy a bad name. Let’s leave aside the fact that employees cheat, as this article shows. They don heavy clothes, fill their pockets and down bottles of water before the initial weigh in, and do the opposite before the final one.

And leave aside the fact that vendors can’t read scales. How hard is it to figure out that it is not possible for the majority of your crash-dieting teams to lose exactly 16.59% of their body weight? The odds of winning the lottery are about 1000 times better.

But the biggest problem is that corporate crash-dieting contests are much more likely to harm employees than benefit them.  Money is on the line for successfully bingeing before the first weigh-in and starving oneself before the last.  Companies are paying their employees to yo-yo diet. Jon Robison has recommended, and I agree, that crash-dieting contests (and other corporate weight-loss programs) should carry a label warning of potential harms.

These harms are fairly self-evident, but just to be on the safe side, Rebecca Johnson laid out the health hazards quite thoroughly in Corporate Wellness, in case anyone needs a refresher course, which apparently Omada does.

Yes, despite the perverse incentives and physical hazards of paying people to lose weight, Omada Health is proposing that health plans do just that. According to Omada, a health plan can save “billions of dollars” — that’s “billions” with a “b”, not “millions” with an “m” or “stupid” with an “s” — by trying to prevent diabetes, including paying members to lose weight. A health plan that offered members this pay-to-diet option would soon find itself deluged with enough takers to require a rate increase for everyone else.

In case anyone is wondering about Omada’s math, the median-sized health plan can’t save billions of dollars by getting people to lose weight because the median-sized health plan doesn’t even spend “billions of dollars.” And I don’t mean on diabetics, I mean in total.


Next, it appears that this year’s presidential campaign has made fat-shaming great again.  One of the first vendors to jump on that bandwagon was Wellsteps, with the immortal words: “It’s fun to get fat. It’s fun to be lazy.” Eventually they took those words down, if only because a number of comments embarrassed them into it.

However, as Maya Angelou said, if someone shows you who they really are, believe them.


Finally, with his editorial in the American Journal of Health Promotion, Michael O’Donnell has out-stupided Vitality, Omada and Wellsteps: He is calling for employers to make employees pay for their health insurance per pound, sort of like buying lobster or sending packages. People say we make fun of the ideas the Wellness Ignorati come up with, but really all we do is repeat them — and occasionally illustrate them so that even the dumbest wellness industry leader can follow along:

lobsterpackagesurviving cover with no promotionajhp

 


So what is the “answer”?  Clearly calories in-calories out influences weight gain and loss. But it’s nowhere near as simple as that. Neuroscientists are discovering and researching all manner of poorly understood biochemical pathways, possibly influenced by environmental factors, that govern or at least influence what and how much different people eat, and what and how much weight different people gain or lose by doing so.
While these researchers don’t know what works, they certainly know what doesn’t work, which is to say any wellness industry scheme involving money. As Vitality, Wellsteps, and McKesson have shown, there is even some likelihood that these schemes will actually fatten employees, though in terms of fattening things, the greatest likelihood of all is that these schemes will fatten the vendors’ bottom lines.

*No offense intended to kindergarteners, that is, most of whom have better manners than this.

Ironically, the wellness industry doesn’t understand irony.

The wellness industry is about nothing if not irony. Ironically, wellness vendors and consultants don’t understand irony, so they keep doing and saying things they think are being taken seriously. Ironically, they are being taken seriously, but only by students of irony.

For example, these wellness people don’t understand that it is ironic that employees can be forced to submit to “voluntary” wellness programs, or face fines of thousands of dollars. They say this unabashedly. Whereas when we make an ironic comment, such as: “Wellness vendors make employees happy whether they like it or not,” we do it deliberately.


The May issue of Managed Care displays a cornucopia of unintended irony, in a debate between myself and Harris Allen, of Navistar fame, on the effectiveness of wellness programs in preventing diabetes.

Speaking of Navistar, Mr. Allen was already famous for irony before this debate. He showed Navistar how to claim a wellness ROI of 400-to-1, later reduced to 40-to-1, before jumping again to 400-to-1. That by itself — adding/removing extra zeros in your ROI but claiming it’s real the whole time — is ironic, but that’s not even the ironic part. The irony is that he was concocting these figures even as Navistar itself was making up $4-billion of phony shareholder equity, perhaps including these wellness savings.  A lot of the perps (excluding Harris) are ending up in jail over this caper. Ironically, despite his pride in his work on wellness for Navistar, he didn’t cite their results in his counterpoint.

Not being Navistar shareholders ourselves, we found this whole escapade highly amusing, so it is recounted in This Is Your Brain on Wellness, our humor column.


Back to the debate irony. The irony is that, in his attempt to justify wellness, he cited two examples that lead to the opposite conclusion.  First, he cited US Preventive Medicine (USPM). USPM did indeed achieve an excellent result, and it is validated by and displayed by the Validation Institute. On that everyone can agree. I myself just wrote a column praising their performance.  The thesis of the column: “See, not every wellness vendor fails.”

He cites that exact same company and exact same validation to conclude: “See, wellness vendors can succeed.”  Yeah, one wellness company has succeeded while the staggering number of failures — companies that couldn’t get validation or didn’t even bother to apply — is in the thousands, a statistic I noted just yesterday.

Using the same logic as Mr. Allen, one might profile Powerball winners and say: “See? Powerball works.”

The other irony is that he cited the Koop Award-winning companies as examples of successes in preventing diabetes, when — according to their own applications — they basically failed. Ironically, I also cited that very same award in my argument. Specifically, McKesson won an award for preventing diabetes even though its employees’ glucose and BMIs increased. Mr. Goetzel’s and his Koop Award committee cronies never been much for fact-checking, even when the facts are right on the application itself:

mckesson bmi and glucose

The final irony is that Mr. Harris ends his argument with a call for “evidence-based” wellness programs. Ironically, the “evidence” is overwhelming…in the other direction: wellness programs have not avoided a single wellness-sensitive medical admission, according to US government figures. The green line below represents the wellness-exposed population while the red line represents the rest of the country.  There is no separation, meaning that the wellness-exposed population has achieved zilch.

Actually, there is slight separation –but ironically it goes the other way. You’d statistically be better off not being exposed to wellness.

This graph is part of my proof of the ineffectiveness of wellness vendors, and allows me to offer a million-dollar reward to anyone who can show wellness doesn’t lose money.

wsmecombined

Where did the government get the data for this graph? It was compiled by Truven Health, the division of IBM that — you guessed it, ironically — employs Mr. Goetzel.

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