As health plan providers increasingly offer rewards and reimbursements for exercising, fitness facilities are partnering with them to beef up membership and revenue.
These days fitness pays — literally — for members and health clubs. Health plan providers increasingly offer discounts, gift cards, cash and reimbursements to plan members for joining a club and working out.
“Providing incentives is the missing link to getting people to change their behavior,” says Stuart Slutzky, vice president of product development at Destiny Health, a company that offers a fitness incentive program for health plan members.
Something is needed to get Americans off the couch. Sixty-five percent of Americans are overweight. Chronic diseases such as heart disease, cancer and diabetes are the leading causes of death and disability in the United States, accounting for seven of every 10 deaths and affecting the quality of life of more than 90 million Americans. These health issues have caused health care costs to skyrocket. Each year an estimated $33 billion in medical costs and $9 billion in lost productivity due to heart disease, cancer, stroke and diabetes are attributed to diet. In 2000, health care costs associated with physical inactivity were more than $76 billion, according to the Centers for Disease Control and Prevention. People who are physically active, eat a healthy diet, and practice other healthy behaviors have half the rate of disability of those who do not.
These numbers are affecting corporations, a growing number of which are waking up to the benefits of exercise in maintaining a healthier workforce. Thirty percent of companies subsidize health club memberships, according to a 2004 survey by the Society for Human Resource Management. A 2005 Kaiser Family Foundation survey found that 34 percent of large firms (200 or more workers) offer fitness programs or on-site health club facilities.
The public is open to the idea, too. In 2002, American Sports Data (ASD) conducted a study for the International Health, Racquet and Sportsclub Association (IHRSA) to find out what benefits the public would like to have subsidized. Exercise classes came in as number two while health club memberships came in at number three. Additional research from ASD found that 82 percent of those surveyed would exercise regularly if their employer subsidized their fitness facility membership.
“For the last five years there's been a continued or renewed emphasis on getting people to live healthier lifestyles,” says Mohit Ghose, director of public affairs for America's Health Insurance Plans, the trade association for health plan providers. The health insurance plan community has emphasized this movement by providing information to employers, physicians, hospitals and others involved with health issues to encourage everyone in the system to discuss healthier nutrition, exercise programs and antismoking efforts so that people will live healthier lives.
Hop on the Reward Train
Rewards are a trend that spells opportunity for fitness facilities, as Life Time Fitness is well aware. The Eden Prairie, MN-based chain partners with several health plan providers to offer certain health plan members discounted or free memberships to their clubs and rewards for club use.
“My vision had always been that the ultimate way to impact health care costs and the conundrum brewing in the early 1990s was to create partnerships between health care providers, health clubs and corporations and to surround the consumer,” says Glen Gunderson, vice president of business-to-business at Life Time Fitness. He also wanted to carve a unique position for Life Time in terms of member experience.
“We could power the member experience and create a longer life within the club for them and help them really make strides in health improvement,” he says.
In 1998, Life Time launched an incentive-based, utilization-tracked plan with Medica Health Plans, a provider in the upper Midwest. In January, the company launched a similar program with Blue Cross Blue Shield of Minnesota. The BluePrint for Health® fitness discount program rewards eligible members with a $20 credit toward their fitness center membership when they work out at a participating club at least eight days in a month.
As of April 1, Life Time began a partnership with Destiny Health Plan. Destiny also offers the plan through Sport & Health Clubs in the Washington, DC area. The Destiny Health Vitality Program allows Vitality members to earn rebates on their monthly membership dues along with access to health and wellness-related services with regular visits to a Life Time Fitness or Sport & Health club. The Vitality Program includes an integrated health riskassessment. Plan members earn Vitality Bucks through activities such as preventive medical care, public fitness events and lifestyle changes like smoking cessation or BMI reduction. As members accumulate more Vitality Bucks, they move up in status level from bronze to silver to gold to platinum, thereby earning additional perks and benefits. While Gunderson won't share numbers on participation levels in the Destiny program, he said that the program has been well received in the Chicago and Mid-Atlantic markets.
Destiny Health's Vitality program is similar to one that Virgin Life Care launched this year at Spectrum Clubs in San Antonio, TX; Gold's Gyms in Tampa, FL; and Louisville Athletic Club in Louisville, KY. Virgin Life Care members earn rewards for working out and tracking their health progress on a HealthZone machine that links results to the user's own HealthZone Web page (see story, “Program Links Companies to Data” in the March 2006 issue).
The Virgin Life Care plan requires health clubs to pay Virgin Life Care to install the HealthZone systems in their clubs. However, some of the other health plans actually pay the fitness facilities for servicing their members. Some plans reimburse clubs each time plan members use a partner fitness facility. Others offer clubs a capitation fee that is determined by how many plan members live within a club's service zip codes.
Axia Health Management's PRIME program is a prime example of fitness facilities earning additional revenue with these programs. Axia Health Management offers health promotion and prevention programs to health plan providers. PRIME, offered through PacifiCare in Arizona and Oklahoma, provides free health club membership to plan users who are 18-64 years old. In addition, if plan members visit the fitness facility 10 times each month, they receive a $25 gift card to a retailer of their choice. For each visit made to a fitness facility by a health plan member, Axia Health Management pays a fee to the club, allowing the club to earn additional revenue.
“Fitness centers like this because they can upsell their product and services to this population, which has more disposable income than the Medicare group, and they pay zero for marketing costs,” says Scott McFarland, vice president of innovation, product development and product management for Axia Health Management.
While the fitness facilities pay nothing to participate in the PRIME program, they must adhere to a contract with Axia Health Management that stipulates certain criteria, such as keeping the facility clean and providing a variety of services that the PRIME member would want.
The PRIME program is new in the United States, having just been introduced in January of this year. But of the 70,000 people eligible to participate in the program, 9.8 percent have checked out a partnering fitness facility and 7.5 percent are making recurring visits to the facilities.
An Axia Health program that isn't so new is Silver Sneakers. This program, which offers free membership at gyms to adults over 65 years old, is offered through 20 health plan partners. The program earns fitness centers money, too. Axia Health pays a facility a certain amount each month, depending on the number of Silver Sneaker members who use the facility.
“So we bring [fitness centers] new revenue and bring in new members of a new demographic who have never exercised,” says Jody Steele, spokesperson for Axia Health's Silver Sneakers program. Because this demographic is the fastest growing segment of the health club membership, the extra cash earned by clubs for servicing these members is icing on the cake — especially since these members often work out at times when many fitness facilities are less busy.
Just signing up as a member isn't enough for most of these incentive-based programs. Health plan providers and employers often want to see that members are also using the facility and that they are getting results from their visits.
PRIME reports to health plan clients the number of visits, number of people taking health risk assessments, the aggregated health risk of the population (based on the health risk assessments taken), the number of people using health trackers and the number of people achieving rewards.
Destiny Health offers members a fitness assessment and a comprehensive health assessment of 35 risk factors, including diabetes and cancer risks.
To report these numbers, a tracking system is necessary for most of the programs. The majority use a swipe card system to count visits, which are then reported to the health plan provider. If a club doesn't have a swipe system in place, some of the plans provide their own swipe cards and technology for their plan members.
To participate and provide the required results can take some effort on the part of the fitness facility. The most time-and cost-intensive part of the partnership is developing a system to feed member usage and progress data to the health plan provider while maintaining HIPPA compliance related to member privacy, Life Time's Gunderson says. Life Time Fitness built its own member management system that integrates all the health plan data. Moderate modifications were needed for each of the health plans.
“It's not for the faint of heart,” he says. “It takes a lot of effort to integrate a health club system with a health plan system.”
While some expenses may be incurred by participating in programs such as these, fitness facilities often fork out little to no money on marketing. Instead, the health plan provider promotes the program — and partnering clubs — to their membership. That is, unless you are Life Time Fitness. The chain does its own marketing to members about the health plans that it partners with.
Life Time Fitness has plans to develop its partnerships even further, performing research and development on the evolution of its system although Gunderson would not say what that evolution would be.
“We will continue to focus on innovation and leading the industry from this perspective,” he says. “This will be an important category for us now and will be for the industry.”
While Gunderson says it remains to be seen whether participants in these plans are longer lasting members who spend more at the fitness facility, Slutzky has numbers that should lighten the heart of health plan providers and employers. Members who participate in Destiny Health's Vitality program have 30 percent fewer health care costs than non-program participants, says Slutzky.
So beyond whether the programs provide added revenue or members for clubs, they could be one of the links that helps move the inactive majority of the American population into fitness facilities.
“We're in a very unique position as an industry,” says Gunderson. “We have a powerful opportunity to migrate people from a certain health status to an improved one. This is one way we can do this.”
IHRSA Recommendations on Reimbursements
- Clubs should stay out of the subsidy arrangement. Instead, health plan subsidies should be offered to policyholders directly so that clubs don't incur administrative costs.
- Health plans should offer a choice of clubs from low end to high end.
- Health plans should reward club usage and not just membership.
The key for fitness facilities, says Mohit Ghose, director of public affairs at America's Health Insurance Plans, is to build partnerships with all the health plan providers in a facility's area so that the club can be considered a partner with the plans. Some of the health plan providers will require fitness facilities to meet certain criteria or adhere to certain requirements.
Axia Health's PRIME program requires a fitness center to sign a contract stating that it will provide a clean facility, offer the types of programs that the PRIME member will want to use and have the ability to perform health risk assessments.
Axia Health's Silver Sneakers program requires a facility to have the right accommodations for seniors, including being accessible to those with mobility issues. The facility also must have good lighting, be safe and be located within five miles of the member's home. In addition, the facility must be open to the Silver Sneakers staff training the club's instructors on how to teach the Silver Sneakers classes.
For Destiny Health, a partner club must have a strong focus on wellness to help drive changes in lifestyle, be able to perform fitness assessments, be located in areas that the Destiny plan serves and be aspirational — a place that the typical Destiny plan member might not afford on their own.
“On the financial side, we wanted to make sure that our members would be receiving increased value through the program,” says Stuart Slutzky, vice president of product development at Destiny Health.