Retrofit: Tackling Obesity-Related Healthcare Costs
Retrofit is a leading private wellness company that drives weight loss for busy professionals. Retrofit has thus far effectively aligned its operational model to fuel its success in helping people slim down, but must overcome future challenges as the industry continues to shift.
America is the fattest country in the OECD. Due to 70% of US adults being overweight, obesity has fuelled $147-210B of healthcare costs associated with preventable chronic diseases. Founded in 2011, Retrofit is a leading private wellness company that drives weight loss for busy professionals. Having raised $16M of equity financing and being 80 employees strong, Retrofit has effectively aligned its operational model to fuel its success in helping people slim down. However, Retrofit must overcome future challenges as the industry continues to shift rapidly.
Retrofit works with self-insured companies to lower obesity-related healthcare costs. As self-insured companies pay for all healthcare costs for their employees, they are highly incentivised to provide for preventative programs that avoid future costs that may be more costly. Compared to healthy employees, obese employees have been found to cost companies an additional $1400 of healthcare costs and $506 of productivity cost. As a result, firms pay Retrofit a set fee per employee on their wellness program, with the promise that companies will break even with healthcare cost savings within 2 years on average.
Retrofit has effectively aligned their operating model with 3 key measures:
- Cross-disciplinary teaming for a holistic solution
- For each individual they work with, Retrofit assigns a team consisting of a program manager, registered dietitian, exercise physiologist and behaviour coach. In alignment with recommendations by the US Preventive Services Task Force, this enables Retrofit to deliver a high-intensity program that tackles weight-loss through diet, exercise and behavioural change simultaneously.
- Technology enabling convenient care at home or at work
- Retrofit delivers all care remotely. 1:1 coaching is done via Skype, notes are shared by email and reminders are done through texts. All content is accessed through computers and mobile apps. Furthermore, the client’s physical activity and weight is automatically tracked through FitBit fitness trackers and a Wi-Fi-connected weighing scale. This not only allows clients to receive care at home or at work, this also enables Retrofit’s coaches to work remotely and on a flex-time basis.
- High-performance culture emphasizing work-life balance
- Retrofit scores highly on employee satisfaction. Due to a focus on recruiting for coaching talent with substantial experience and good cultural fit, Retrofit is also able to grant coaches the flexibility to work remotely from home. Higher employee satisfaction leads to higher loyalty, which has lowered employee turnover and improved the experience of clients who expect a consistent, long-term partnership with familiar coaches.
As a result, Retrofit has been able to deliver good results for its B2B2C partnerships. For example, Yum! Brands, Inc. (running KFC, Pizza Hut & Taco Bell) successfully piloted Retrofit in early 2015 with 195 employees – 95% of the employees losing 12 pounds on average. Retrofit continues to scale its partnership with Yum! Brands and other key companies.
Moving forward, Retrofit faces two key challenges. The US millennial population has shifted rapidly towards using mobile apps, and Retrofit has only just begun investing in mobile-centric design to cater to the younger segment of their clients. Secondly, Retrofit faces increasing competition with players such as Omada Health in serving companies deal with obesity-related healthcare costs. Only time will tell whether Retrofit can keep up with the pace of change.
Sources
o Interviews of current employees
o http://www.oecd.org/unitedstates/Obesity-Update-2014-USA.pdf
o http://stateofobesity.org/healthcare-costs-obesity/
o https://www.retrofitme.com/howitworks
o http://www.bizjournals.com/chicago/news/2012/11/13/weight-loss-startup-retrofit-nets-8.html
o https://omadahealth.com/assets/pdf/Omada_Clinical_Dossier.pdf
o https://www.cbinsights.com/c-94d1409222a3475c7b218f88ecda3666?term=retrofit#__
o https://www.glassdoor.com/Reviews/Retrofit-Reviews-E959202.htm
o http://www.marketwired.com/press-release/yum-employee-uses-retrofit-to-lose-weight-before-walking-down-the-aisle-2080780.htm
Great post! I like how Retrofit is targeting self-insured companies since they have the greatest incentive to invest in preventative care. You mentioned that Retrofit uses FitBit fitness trackers – I wonder if the company could benefit from introducing proprietary technology into their product offering. I think that this would enable the company to customize the product to complement their business model and therefore increase their competitive advantage. I think the mobile application could help a lot with this but would also be concerned about how they would be able to differentiate their product from current weight loss apps.
Thanks! There is definitely an advantage in increasing switching costs out of the platform. Omada Health, their key competitor, does use proprietary technology for their weighing scale and pedometer which are not currently interoperable with other platforms, e.g. Apple Healthkit.
However, I’m concerned that with the fitness hardware market rapidly improving in capabilities and cost-effectiveness, Omada is carrying unnecessarily excessive inventory capital in the form of hardware on hand, coupled with the risk that their proprietary hardware is becoming obsolete (especially since their target market is increasingly already having their own FitBits/ iPhone tracking apps.
Interesting post, Jeremy! I’m curious if Retrofit’s efficacy is at all dampened by the fact that they operate remotely. Can they keep people in the workplace accountable purely through Skype counseling and mobile apps – rather than installing healthy food in the company cafeteria, sponsoring on-site fitness class, and other costlier initiatives? Also have they mentioned anything about possibly partnering with the healthcare payors themselves? I can see Aetna and UnitedHealthcare having a vested interest in seeing this program succeed as well!
Thanks Alice! The current behavior by self-insured companies is that they do evaluate broad-spectrum healthy living modifications, and execute a subset of them. However, research indicates that these employee perks seem to be primarily accessed or benefit those who are already healthy.
For companies such as Yum! Brands, they have a substantial segment of employees who are not of a healthy weight and require higher-intensity interventions. However, these companies also struggle to find a scalable intervention for these employees who tend to be spread out across multiple sites and also juggling work commitments. Tele-coaching thus serves as a complementary solution for these companies.
Omada Health currently seems to be more actively engaged in discussions with healthcare payors. Omada Health has also been more successful, as their pitch is more disease-centric – that they are able to stop prediabetes from progressing into diabetes through a similar weight and lifestyle digital intervention. Omada’s investment in clinical trials and endorsements by entities such as American Medical Association has thus led to partnerships with Humana and Blue Cross & Blue Shield of Louisiana. Exciting times are ahead for digital health!
Very interesting read Jeremy! I also had the same concern as Alice above – how engaged can you keep employees if they are being held accountable remotely? I wonder if there are any mechanisms to keep employees honest or perhaps a monetary incentive to make sure people are meeting their goals. Another thought I had is on the sustainability of Retrofit’s business. You’re right, I feel like missing the boat on millennials will be a huge risk. There are tons of weight loss/health mobile apps already live, so Retrofit will have to bring some sort of significant competitive edge for when they ultimately do launch an app. Thanks for your post!
Each client receives more “attention” than they normally would from a physical in-person program. They receive a weekly Skype from their careteam, with a time length comparable to a regular in-person coach. They also receive about 3-5 interactions via text from their care team in response to the meals and exercise triggered by the client
Human accountability seems to be the primary psychological driver for their clients. As a result of the program, the workplace manager, the employee’s peer group and human coaches serve to manage accountability.
Review of their performance and comparable firms show a clinically significant weight loss with their protocols. This holds true in the field, and under peer review.
However, the cost of acquisition is high relative to lifetime value – thus causing the shift to B2B2C away from
B2C. As a result, the target segments have been older employees and senior citizens covered by employers and payouts. Time will tell for what millennials will adopt!