Progress Report: Measuring the Value of Occupational Health and Safety Interventions

By Karen O’Hara

The ability to quantify the effectiveness of workplace health and safety interventions––once an elusive goal––is now within the grasp of employers and their medical provider partners.

A number of studies, tools, and formulas are available to demonstrate ways in which health and safety programs help lower costs and improve performance. The Integrated Health and Safety Index (IH&S Index) is the latest guidance to emerge. Based on the Dow Jones Sustainability Index, the IH&S Index is designed to translate the impact of occupational health and safety initiatives into business value for investors by applying familiar Dow Jones performance categories of economic, social, and environmental sustainability.

The IH&S Index is based on the premise that most employers manage health and safety programs as separate functions when they should be treated more holistically. In the absence of health and safety integration, experts say opportunities to achieve economies of scale, standardization, positive impacts on worker behaviors, and the bottom line are missed.

Anticipated benefits of IH&S programs include:

• Strategic, systematic combinations of distinct programs and policies
• Prevention of exposures, injuries, and illnesses
• Collaborative organizational, personal, occupational, community, and environmental activities
• Development of standards that are replicable and measurable
• Improvements in the overall health and well-being of workers and their families

The concepts behind the index are explained in a new paper, Integrating Health and Safety in the Workplace,(1) which appears in the May 2015 edition of the Journal of Occupational and Environmental Medicine, a publication of the American College of Occupational and Environmental Medicine (ACOEM). The paper was presented in early May at the college’s annual national conference in Baltimore.

The authors represent a who’s who of ACOEM senior members and executive leaders. Todd Hohn, global director of workplace health and safety at Underwriters Laboratories (UL), the international safety company is known for consumer protection and product certification, is also a key contributor. (UL’s Work- place Health & Safety Division, an NAOHP vendor member supports OHM and SYSTOC software for occupational clinics and employee health departments.)

“While employers have been steadily expanding their efforts to create healthier and safer workforces, what has been largely missing are strategies to integrate the work of the health and safety teams and a way to accurately assess the business impact of that work,” said Mr. Hohn. “This new guidance offers a pathway to both.” 

Contributing author Ron Loeppke, M.D., M.P.H., president and vice chair of U.S. Preventive Medicine and former ACOEM president cites increasing evidence that the health and personal well-being of employees affects business value: “A new way of evaluating and measuring health and safety will make it possible to significantly accelerate the accumulation of important data – which in turn will increase our understanding and encourage innovation,” he said.

INDEX DEVELOPMENT

The IH&S Index is the byproduct of a summer 2014 summit sponsored by UL and ACOEM that was attended by more than 30 occupational health and safety experts. The summit was preceded by a spring leadership roundtable with the theme, Through the Eyes of the Executive: Creating a Healthier and Safer Workforce, (2) held by UL in collaboration with the Owen Graduate School of Management at Vanderbilt University (owen.vanderbilt.edu) and UC Berkeley’s Center for Catastrophic Risk Management (ccrm.berkeley.edu). 

The Dow Jones Sustainability Index is globally recognized by investors as the leading standard for corporate sustainability. With this model in mind, IH&S Index developers evaluated existing and emerging health and safety assessment methods, integrated programs, and at least 40 different guideline components. It was agreed that standards underlying ACOEM’s Corporate Health Achievement Award self-assessment tool would offer a solid foundation for the IH&S Index because the prestigious award recognizes organizations for exemplary environmental, health, and safety performance across the board. At the leadership summit, participants examined the three dimensions of the Dow Jones Sustainability Index, economic, environmental, and social, through an IH&S lens. Dr. Loeppke said they adopted a 1,000-point possible scoring system to allow employers to evaluate “how well they are doing and how they can be rewarded for what they are doing” in each standard category.

“We ultimately hope this score will show the value of investing in workplace health and safety and that investment, health and insurance industry executives will start to pay attention. It may lead to reduced premiums and increased investment because of the inextricable link between the two. These are exciting times, one might even say transformative times,” Dr. Loeppke told physicians attending the ACEOM conference.

An Analysis of Corporate Health Achievement Award winners published in 2013 validate the positive effects of IH&S on the value of investment (VOI). (3) Researchers tracked an initial theoretical investment of $10,000 in publicly traded award recipients – including American Express, Johnson & Johnson, IBM and the Baptist Health System – from the mid-1990s to 2012. They found award-winning companies outperformed the S&P 500 in four theoretical investment scenarios. In the highest-performing scenario, award winners had an annualized return of 5.23 percent vs. −0.06 percent for the S&P 500. In the lowest-performing scenario, award-winning companies had an annualized return of 6.03 percent vs. 2.92 percent for the S&P 500.

The authors of the 2013 study, some of whom contributed to the new IH&S paper, said: “Evidence seems to support the building of cultures of health and safety provides a competitive advantage in the marketplace. This research may have also identified an association between companies that focus on health and safety and companies that manage other aspects of their business equally well.”

Achievement award self-assessment categories are leadership and management, healthy workers, healthy environments, and healthy organizations. These correspond with the proposed IH&S Index framework of economics, environmental and social standards and related metrics to which numerical values are assigned. Examples of metrics include:

• Workers’ compensation claims filed and total costs incurred
• Absenteeism and presenteeism rates(4)
• Employee turnover
• Accident/incident rates (e.g., frequency measured as OSHA recordable injury rates based on the number of hours worked, severity based on restricted duty and lost work days)
• Hazard recognition and prevention activities (e.g., number of inspections, near-misses, observations, education and training provided)
• Health risk assessment and wellness program participation
• Prevalence of chronic health conditions and health risks

At the conclusion, the IH&S integration paper expands on these guiding principles:

1. Plan performance measurement with small- and medium-sized organizations in mind to help them leverage limited resources and adopt core concepts.
2. Apply the IH&S management model to service, manufacturing, and other industry sectors; it is not self-limiting.
3. Develop incentives to drive improved collaboration; these may range from favorable tax policies to workers’ compensation insurance discounts.
4. Build partnerships and coalitions to gain support from health and safety professionals, industry associations, governmental entities, academic institutions, and others who may be willing to support pilot projects; align efforts with the insurance sector and encourage continued research.
5. Develop new educational models to convey IH&S concepts in ways that make them relevant and accessible to employees and encourage continued research.
6. Establish confidentiality and trust; data must be carefully managed and personal privacy protected.

BOILING IT DOWN

As long as operational silos create barriers to IH&S integration and performance measurement, there will be a need for occupational health professionals to demonstrate the value they bring to the workplace. Common metrics and performance measurement standards can be used by providers and employers to determine exactly where they stand in comparison to best practices, processes and procedures. There is a lot at stake. For example:

• According to the National Council on Compensation Insurance (based on 2013 data), the average medical cost per lost-time workers’ compensation claim is $28.8 million and the average indemnity cost per lost-time claim is $22.7 million. Medical expenditures are growing at a faster rate than nonmedical (indemnity) costs; the opposite used to be the case.
• There were more than three million recordable injury cases in 2013 (the most recent reporting year), with 917,100 lost work days and a median of eight days missed, according to the Bureau of Labor Statistics. Lost work time could be prevented in many of these cases with appropriate health and safety interventions.
• The Centers for Disease Control and Prevention estimates that $3 of every $4 employers spend on health costs is used to treat chronic conditions such as obesity, hypertension, diabetes, asthma, and depression.
• A 2015 Society for Human Resource Management survey found employers are not well prepared to manage the aging workforce; less than a third of respondents said workforce aging has prompted changes in general management policy/practices, retention, and recruiting practices (refer to www.shrm.org/research/surveyfindings/pages/aging-workforce-research-initiative.aspx).

To put things in perspective, occupational health providers can assist their employer clients with relatively easy calculations. While the answers may depend on individual employer perceptions and the nature of their business, the following approaches may be used.

OSHA Reporting: The Occupational Safety and Health Administration has established calculations that allow employers to report their recordable incident, lost time and severity rates. The standard base rate for these calculations is based on a rate of 200,000 labor hours. This number (200,000) equates to 100 employees working 40 hours per week, 50 weeks per year. Using this standardized base rate, companies can calculate their rate(s) and get a percentage per 100 employees.

OSHA’s $afety Pays calculator uses company profit margin, the average cost of injury or illness and an indirect cost multiplier to project the amount of sales a company would need to generate to cover lost work day costs. The $afety Pays calculator is available at www.osha.gov/dcsp/smallbusiness/safetypays/estimator_text.html.

Lost Wages Method: This calculation is used to determine the total cost of annual work loss attributable to absence: Total annual lost workdays x average daily compensation for full-time employees and average wage “multiplier” (cost to an employer of an absence as a proportion of the absent worker’s daily wage).(4) 

EMPAQ® Metrics: Employer Measures of Productivity, Absence and Quality are ratios (numerators over denominators) that can be used to calculate the effectiveness of health and productivity management programs. They establish a consistent method for measuring cost, utilization, and other performance issues. Refer to www.empaq.org.

PRESENTATION IS IMPORTANT

At the UL Leadership Roundtable last year, participants asked themselves how senior executives would most like to see the value of investment data presented. Thomas Parry, Ph.D., president and co-founder of the Integrated Benefits Institute, San Francisco, Calif., suggested confining answers to the following questions to a single page:

• What is the total health and safety experience of the population?
• What does health and safety really mean to the business?
• Where do organizational results come from?

He also recommended narrowing results to a per-employee calculation. “If you can’t tell a story, you are going to lose the opportunity to have influence,” he said. “You have to be able to describe where your population is in terms of health risks: biometrics, chronic condition prevalence, treatment indicators, preventive care, and so forth. We have to think about metrics as hierarchies of information.” To gain the confidence of senior executives and investors, roundtable participants agreed IH&S metrics will have more credibility as a value indicator if they:

• Can be summarized in an annual corporate report and presented on a balanced scorecard
• Are tied to overall company performance, such as an increase in earnings per share
• Focus on safety benefits rather than risk
• Apply both quantitative and qualitative measurement methods, especially if the goal is to  engage employees and change behavior
• Take into consideration community and population health data and integrate health and safety measures using leading rather than lagging Indicators 

Ultimately, the objective is to shape performance parameters around a company’s profit, growth, people, and social responsibility goals.

REFERENCES:

1. Integrating Health and Safety in the Workplace: How Closely Aligning Health and Safety Strategies Can Yield Measurable Benefits; Loeppke R, Hohn T, et al.; JOEM 57(5) May 2015; http://journals.lww.com/joem/Fulltext/2015/05000/Integrating_Health_and_ Safety_in_the_Workplace_.15.aspx

2. Through the Eyes of the Executive: Creating a Healthier and Safer Workforce; find-

ings from a two-day workshop attended by subject matter experts and executives to pro- vide a road map for organizations attempting to bring health and safety into closer alignment; UL white paper published online: https://www.ul.com/news/seven-actions-integrate-employees-health-and-safety

3. The link between workforce health and safety and the health of the bottom line: tracking market performance of companies that nurture a “culture of health”; Fabius R, Thayer RD, Loeppke R, Konicki DL, et al.; JOEM, 55(9), Sept. 2013; http://www.cancergoldstandard.org/sites/default/files/attachments/Link_Between_Workplace_ Health_and_the_Bottom_Line_0.pdf

4. Measuring Health-Related Productivity Loss; the objective of this study was to determine the relationship between health status and productivity loss and to provide estimates of the business implications of lost work performance; Mitchell R. and Bates P; Popul Health Manag, 14(2): 93–98, April 2011; www.ncbi.nlm.nih.gov/pmc/articles/ PMC3128441/