 Although the health club industry has continually evolved from its inception roughly 25 years ago, there are now medical, sociological, and technological trends that will converge and alter the way clubs are compensated. It will be so dramatic as to cause a sea change in the industry in the remaining half of this decade.
Boomers Are Shifting the Health Club Demographics
No surprise here. The U.S. population is shifting and the smarter clubs will shift along with it. It's no longer the "fit" segment of twenty or thirty-something's looking for more and more complicated exercise machines to gain an edge in body building or sports performance. Catering to this crowd has been the 16% of the population that the club industry has been stuck at and unable to grow.
This fit market is being rapidly eclipsed by the deconditioned market, the remaining 84%, that needs to exercise for improved health and not narcissistic reasons. The overweight and out-of-shape are being urged to exercise by their employers to put a lid on exploding health care costs which has been rising at 19% per year.
New data gathering technologies are about to allow third party payers, such as large employers and health insurers, to offer cash rebates for verified regular exercise.
The principal target consists of boomers, that ultra large age band of the 43-61 year-olds which represent 78 million Americans and another 10 million Canadians. However, getting this group to exercise regularly and at an appropriate level of exertion to derive benefit has been a challenge to both employers and health insurers alike.
The First Wave in Exercise Motivation Was Health Club Membership Reimbursement
Today in the United States, over 65% of adults are overweight or obese. Heart disease remains the leading cause of death. Major depression is the leading cause of disability and chronic back pain is a widespread condition. These conditions reflect the fact that 57% of Americans do not meet recommended guidelines for moderate physical activity.
Exercise and physical activity have been proven to be an effective preventatives against many diseases and conditions ranging from heart disease, type 2 diabetes, colon cancer, breast cancer, prostate cancer, hypertension, metabolic syndrome, and stroke. It also mitigates mental afflictions such as Alzheimer's, dementia, depression, and even anxiety.
But with overwhelming evidence of it's benefits, adherence to a regular exercise program is just not practiced by the vast majority that need it most, the out-of-shape that will have a higher propensity to contract a deadly disease.
The health insurance carriers and large employers are well aware of the benefits of regular exercise and they stand to financially gain the most by its widespread adoption, but the major obstacle seems to be in motivating employees to exercise regularly and stick with the program.
The first wave of incentives by employers was to reimburse employees for their health club memberships. The logic being that the nominal cost of a health club membership across a population can slice the after-the-fact disease treatment costs. But a paid membership doesn't necessarily translate into "sweat".
The Second Wave: Rewards and Prizes
The second wave of incentives to get people to exercise was to offer rewards. The reimbursed health club membership either partially or wholly, didn't do the trick. Having a fitness center key tag does not alter health one iota, unless you're in there regularly sweating.
After all, if employees won't exercise for a longer healthier life, perhaps they'll exercise for free retail items or trips
However even these incentives to date have not moved the needle much.
Silver Sneakers shined during the second wave. It is arguably the most successful reimbursement program to come out of the health club industry in the past 10 years. It succeeded in getting a large percentage of the senior population to exercise on a regular basis, and to fill the midday voids in health clubs.
In case you have been living in a cave, Silver Sneakers is a senior friendly exercise protocol offered to more than 2.4 million Medicare-eligible members in 43 states at more than 2,100 fitness centers and class sites. It's free to the seniors and the health clubs are paid by the insurers - thus the new payment model.
A Shift in Economics to 3rd Party Payers
Next year is an election year for president of the U.S., and already the rhetoric is animated as to what to do about the broken health care system. But one thing everyone agrees on is that sickness prevention is better than treating a person with a preventable disease.
New data gathering technologies are about to allow third party payers, such as large employers and health insurers, to offer cash rebates for verified regular exercise. And as with Silver Sneakers, a large portion of the tab will be picked up by these third-party payers.
The Original Economic Model
The original economic model for health clubs was a one-to-one relationship between a club member and the club. In this model, each member bore the expense of the monthly club dues and made an individualized ROI decision if they got results.
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In the First Wave payment model, the transaction was solely between individual members and fitness clubs.
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The DNA and the cells they reproduce are no longer perfect copies but damaged copies. This begins the degradation of functioning cells that is commonly referred to as aging. Many age-related diseases are also attributed to this occurrence.
According to Dr. Vincent Giampapa, M.D., age management specialist and founder of Suracell, "The more damage to your DNA, the more rapidly you age. That's been shown with animals, and now has actually been shown to be directly related to human tumors and cancer." |
A variant of this, is that the better fitness centers would solicit blocks of memberships form the large employers in their area and offer a discount for that volume. So that starts to bring in a shadow circle of 3rd party participation.
Enter The New Economic Model
The new economic model is fueled by (a.) the exploding costs of health care and corresponding health insurance and (b.) overwhelming evidence that exercise is a preventive to chronic diseases. This fact pulls in two other players into the economic model: health insurers and employers.
In 2004 alone , total U.S. health expenditures rose 7.9% -- over three times the rate of inflation. Total spending was $1.9 trillion in that same year.
According to the National Coalition on Health Care, health insurance expenses are the fastest growing cost component for employers. Unless something changes dramatically, health insurance costs will overtake profits by 2008.
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