Metrics matter: Wellco Corp.

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Scott-FosterA rising star in the crowded health care consulting galaxy, Wellco is making a name for itself by leveraging data to fix companies’ wellness programs and reduce overall health care costs.

Health care costs have been increasing at an annual rate of 10 percent or more, points out Scott Foster, founder of Wellco, which is based in Royal Oak, Mich. “What’s more, the average employer spends more than $10,000 per employee on medical costs each year, and about 95 percent of those dollars go toward sick care, which is controllable.”

Lack of awareness is a large part of the problem. “Executives are way off on how much they spend on avoidable health care costs because they devote little time to it,” Foster explains. “They view health care as a benefit rather than an operational cost and relegate it to a line-item budget issue in their HR department.”

In response Wellco has developed proprietary technology to collect and crunch health care data — and align it with operational metrics that enable CEOs to make better decisions. For example, the company’s HealthHammer system analyzes medical claims, avoidable costs, biometrics and health risks of employees. Then it produces dashboards that identify potential dollar savings in terms of lower medical care and absenteeism and higher productivity. Named for its ability to flatten increasing health care costs to a “zero trend,” HealthHammer has achieved a return on investment of nearly $3 for every $1 spent on wellness programs.

“There’s been a lot of buzz around employee wellness, but most programs have no data to show if they’re working — and they’re not an operational priority,” Foster says. “Companies may offer lunch-and-learn sessions with a visiting nurse or ‘biggest loser’ contests, but these events aren’t integrated into operations. They try it, then get busy or staff turns over, and two years later, the wellness program is gone.”

By providing meaningful metrics and making wellness an ongoing priority, Wellco has been able to reduce overall health care costs for clients by more than 20 percent.

Launched in 1996, Wellco now has 15 employees and is approaching $3 million in annual revenue — and has become a market leader in Michigan. In 2010 it began to pursue external markets and today more than 60 percent of Wellco’s customer base lies outside Michigan, including clients in Wisconsin, Illinois, Indiana, Ohio, Pennsylvania, Virginia and Florida.

Expanding its geographical footprint and moving into second stage have been important milestones, Foster says. “As a second-stager, we have more confidence to decline activities and customers that don’t fit our vision, which is a freeing experience that further jumpstarts growth.”

And for Foster, growth isn’t just about increasing Wellco’s bottom line. “By transforming sick care into preventive care, we’re helping companies become more competitive,” he says. “Reducing health care costs not only translates into capital that can be funneled into new opportunities — it also means healthier, more productive employees.”

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Second-Stage Rockstars

Because second-stage entrepreneurs are so focused on their businesses, their contributions often go unnoticed by the media, policymakers, economic developers and community stakeholders. With that in mind, celebrating growth entrepreneurs and communicating their value is part of the foundation’s entrepreneurship mission, which it carries out in a variety of ways.

Among these is Second-Stage Rockstars, a series of online articles that examines the ongoing impact of second-stage companies. These stories chronicle not only second-stagers’ economic growth, but also how they may be transforming their industry, creating empowering workplaces or excelling as corporate citizens. Below are some recent Rockstars; others can be found in our archives.