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Employee health programs: A resource is more cost-effective than an outsource
Outsourcing would cost 300% to 1,200% more than in-house
If your hospital administrators think that outsourcing employee health would be cheaper than paying your salary (plus that of a few others), show them the numbers. An in-house program is a much better value than paying the marked-up cost of consultants.
Depending on the size of the program, service offerings, and operational structure, outsourcing may actually run from 300% to more than 1,200% higher than performing the same tasks in-house, says Jeffrey L. Bowman, MD, MS, medical director of associate health for St. Vincent Hospitals in Indianapolis. In addition, some tasks cannot be outsourced, such as program administration in organizational compliance.
In reality, there is much more beyond employee health services to be considered, such as medical center occupational health (MCOH), workers' compensation (WC), disability management (DM), industrial hygiene (IH), manager education, manager accountability, and integration with other programs in safety, infection control, and benefits, he notes.
Cutting the employee health function isn't an option for hospitals. Some employee health tasks are required by federal or state regulation. Others are linked to patient safety and accreditation. Injury prevention and effective workers' compensation case management save the hospital money. "Many of the things that are done in employee health, occupational health, and the related programs have to be done," he says.
But finding a way to trim employee health costs may be tempting - especially since administrators may view employee health as a non-revenue-producing department. To demonstrate the value of employee health, Bowman developed a method that can be used to compare it to fair-market (outsourced) costs. To make that comparison, you need to know how much your services cost the hospital per employee per day. And you need to calculate the costs of common tasks.
For example, pre-placement evaluations may be required by state law or regulation. Even if they're not, you need to follow various rules and guidelines - to offer hepatitis B vaccination, for example, and to check for immunity to measles, rubella, and varicella. You also need to check new employees for fitness for duty and, depending on their exposure risks, they may need to be fit-tested to wear respirators.
You might streamline your pre-placement exam in employee health and only send special cases to an occupational health physician for a full medical evaluation, but you can't get around the basic services. So how much does that cost?
"You have to have a good representation of the services you're providing and what is required," says Bowman. "What does it take for us to run these operations?"
Employee health nurses need to take a business approach and demonstrate the return on investment, or ROI, for the programs implemented by their department, concurs Annette Haag, MA, RN, COHN-S/CM, FAAOHN, occupational health nurse with 3M Drug Delivery Systems in Northridge, CA, and a past president of the American Association of Occupational Health Nurses (AAOHN).
It is difficult for occupational health nurses to develop and analyze metrics amid their many other roles and responsibilities, she says. "However, it is critical that OHNs take the time to articulate their value to management. In today's economic climate, it is essential that cost-benefit and cost-effective analyses be done and presented to management in business terms on a regular basis.
"On-site OHN programs will not survive unless the OHN analyzes the data to prove that the services provided by the OHN program are cost-effective and produce value to the bottom line," she says.
Calculate cost per employee per day
To get a handle on the value of your services, Bowman suggests measuring how many minutes it takes each member of your staff to conduct a pre-placement exam, from the scheduling and other front office time to nursing and practitioner time during the visit, after the visit, and in follow-up visits. Assign a labor rate for each staff category and include the cost of vaccines and supplies.
Compare that cost to the fee charged by an occupational health service in your area. Chances are its fee will be much higher than your actual cost, says Bowman.
For example, the fee for a single lab immunity assessment of a new employee may be as much as $75 when outsourced. The internal costs for the same service could be a fraction of that total, and in some cases, may be only 13% of the outsourced cost. Bowman conducted a cost comparison in the Indiana region and found that contracting out pre-placement exams would cost the hospital system from 300% to 1,200% more than what they were currently paying.
You also may want to understand how your costs compare to those of your competitors. As a simple approach, determine the cost per-employee-per-day by dividing your total annual operating budget by the number of employees in the systems you serve and then dividing by 365, he says. Detail the types of services you may be providing (i.e., EHS, MCOH, WC, DM, Family and Medical Leave Act, industrial hygiene, manager education, etc). Then you need to find colleagues in your region with a similar employee health program. (For example, do they coordinate workers' compensation and disability management? Does the program include wellness and health promotion?)
Bowman found that his hospital and a closely matched competitor with an equally good reputation for expertise in EHS and MCOH had a very similar per-employee-per-day (pEpD) cost, while another less-refined program that relied on outsourcing spent nearly 800% more. "Upon further investigation into the detail, this more expensive program that was smaller in size was not providing the same level of service offerings and not getting the best value for their organization," he says.
Meanwhile, Haag encourages occupational health nurses to do a time study, logging how much time they spend on various tasks throughout the day, as a way to assess their priorities. If you're spending time on a task that doesn't require nursing skills, such as data entry or even fit-testing, delegate those and focus on priorities that can promote health and wellness and reduce injuries or illness, she says.
How do you save your hospital money?
Why provide employee health at all? The answer may seem obvious to you, but perhaps the importance of employee health isn't fully understood by hospital leadership. In a time of rising costs and pinched reimbursements, you need to make the case for employee health both as a necessity and a cost-saver.
"Employee health is linked to risk management, infection control, regulatory compliance, worker safety, patient safety, and accreditation. It's the right thing to do for comprehensive quality and safety initiatives," says Bowman.
What would the cost be of not having employee health? You need to break down the different types of functions you provide, including services beyond conventional EHS such as MCOH, WC, integrated disability management (IDM), infection control support, compliance tracking, wellness, safety, programs for managers, support for medical education, services to indirect employees (such as some contract workers or students) and medical staff.
Benchmarks and evidence-based treatment guidelines can help increase the cost-effectiveness of medical care, Haag says. For example, Medical Disability Advisor (Reed Group, www.medicaldisabilityadvisor.com) or Official Disability Guidelines (Work Loss Data Institute, www.disabilitydurations.com/) can tell you how many days an employee typically loses from work due to a condition such as back strain.
If you are able to accommodate employees and you are able to return them to work earlier than the disability duration guidelines indicate, you can calculate the savings. You don't need to pay for a replacement for the absent worker or indemnity payments (lost wages) for workers' compensation cases. Disability benefits can be discontinued.
The direct costs are much less than the significant indirect costs, which include lost productivity and the cost of administering the claim. "Some companies use a 5-to-1 ratio of indirect costs to direct costs," says Haag.
"Each month, the occupational health nurse should document the costs that are avoided (cost avoidance) by treating injuries and illnesses in a timely manner and then following these cases through case management activities to assist employees in achieving optimal outcomes," she says.
"Many managers are unaware of how much the OHNs are saving them," says Haag, who teaches courses to prepare occupational health nursing to obtain their certification in occupational health nursing. She also has been actively involved in teaching business courses for occupational health nurses to assist them in demonstrating their value to management.
If you increase the percentage of employees who receive the flu vaccine, for example, you are reducing absenteeism. It will cost 1.4 times her salary to replace an absent nurse, including lost productivity on that nurse's unit.
Preventing a single back injury through safe patient handling could save as much as $100,000, if the employee requires surgery and has a serious, long-term condition. The use of safe patient handling equipment also could lead to a reduction in workers' compensation premiums.
Then there's the worst-case scenario: Unsafe needle practices or an undetected case of tuberculosis in a health care worker can compel the hospital to test hundreds of patients for possible exposure to an infectious disease - and cause negative publicity in the community.
Taking a business approach to employee health also can help build a stronger program. An analysis will reveal where you are spending your greatest resources. How does that match with your priorities?
The cost analysis may help you reassess your program. For example, you may be able to reduce the employee health cost of the flu campaign by using nurses on units as peer vaccinators. Bowman's motto: "You've got to be able to measure in order to be able to manage."