Health and Productivity Management Center

Past President Bernacki's Installation Remarks (2002) - Sees Occupational Medicine as a Significant Force in Insuring Productivity for U.S. Businesses

On April 18, 2002, Edward J. Bernacki, MD, FACOEM, was installed as President of the American College of Occupational and Environmental Medicine (ACOEM). The ceremony was part of the College's annual Membership Meeting held during the American Occupational Health Conference in Chicago, Ill. The following is an excerpt of the remarks made by Dr. Bernacki at his installation:

"ACOEM Fellows, Members, and Guests - I appreciate the honor that you have bestowed on me. I feel both humbled and inspired by this privilege. I would like to make a few brief remarks regarding occupational medicine's emerging opportunity to enhance the productivity of the U.S. workforce.

Over the past 50 years, labor productivity has steadily increased - accelerating to 2 percent per year over the past 10 years. Factors, quantified by the Bureau of Labor Statistics (BLS), such as the change in the knowledge base of the workforce, energy and capital costs, investment in information, and other technologies have enabled the average worker to produce more than ever before! However, BLS does not specifically quantify the effect of reducing morbidity and mortality on productivity. This is unfortunate, because it fails to measure medicine's contribution in increasing the output of goods and services per worker.

The economic effect of ill health from a societal perspective has been estimated. In this context, morbidity costs are quantified by computing the earnings lost by people who are unable to work because of disease, and mortality costs are the aggregate of the present value of future earnings foregone because of premature deaths. The economic consequences of ill health varies by age. Murphy and Topal ₁estimate the economic value of an individual's life at age 20 to be approximately $5.5 million and, at age 65, $2 million. These authors estimate that the economic gains for the entire U.S. population, realized by improvements in health (primarily a reduction in deaths) between 1975 and 1995 was $57 trillion or the total gain in consumption over that 20-year period.
For occupational physicians, the more important question is the effect of ill health on individual employers. From the employers perspective, the valuation of morbidity and mortality include:

• direct costs of diagnosis and treatment of occupational and non-occupational conditions;
• disability costs;
• higher wage costs;
• lost production;
• idle assets;
• employee turnover;
• planned overstaffing; and
• indirect business taxes and non-tax liability.

Currently, the direct cost to U.S. business of worker ill health adds up to approximately 7 percent of labor costs. Depending on the industry, about half of this is related to non- occupational medical costs and the other half to the medical and indemnity cost of occupationally related conditions. Indirect costs (i.e., absenteeism, short- and long-term disability, the Family Medical Leave Act, and presenteeism, etc.) are not well quantified, but are estimated to be double the direct costs for non-work related conditions and triple the direct cost for work-related problems.

For some industries, such as the hotel and automotive industries, where salaries may make up approximately 70 percent to 90 percent of the final product or service costs, the direct expense of illness can approximate 4 to 6 percent of the product or service sold. This is significant enough to gain the attention of most labor-intensive employers. However, if indirect costs are added in, the financial burdens of ill health could approach 10 to 15 percent of the cost of the final product. Thus, the ability of labor-intensive industries to reduce the direct and indirect costs of ill health and, therefore, increase productivity, can give them a significant pricing advantage over their competitors. It may be enough of an advantage to compete with foreign companies whose labor costs are much lower than U.S. labor costs, thereby slowing the loss of U.S. production jobs to overseas competitors.

Traditionally, employers have turned to occupational medicine professionals to increase productivity by optimally managing occupational injuries and illnesses. This is simply too limiting a role for our profession to accept - if for no other reason than survival as the number of occupational injuries and illnesses are rapidly diminishing. Between 1992 and 2000, the frequency of lost-time injuries decreased 30 percent in the U.S. Part of this improvement, happily, is due to the ongoing elimination of unsafe work conditions, and part is due to the relocation to emerging economies of production facilities of those industries with high frequency and high severity injury rates. If employers feel occupational medicine's role is limited to the assessment and treatment of occupationally related problems, the demand for our services will continue to contract.

If, however, U.S. businesses appreciate occupational medicine's abilities to address all disease-related costs, as well as productivity decrements, our profession will grow. An appreciation by industry of the full scope of occupational medical practice is timely because of the changing demographics of the workforce. In the year 2010, the proportion of the workforce greater than 54 years of age will equal the proportion under 25 years of age, i.e., 19 percent. Of necessity then, corporations must address the increasing effects of chronic diseases associated with aging on the ability to perform work. While important in all industries, the prevention and treatment of chronic diseases is especially important in knowledge-based industries (investment banking, pharmaceuticals, software design, etc.). Perhaps this is the reason our colleagues who serve these industries, are leaders in this area of diseased-based productivity improvements. Our training - which gives us an appreciation of business needs, ergonomics, industrial hygiene, clinical and preventive medicine, epidemiology and biostatistics - uniquely positions us to address these issues for employers. If we are able to get this message across, occupational medicine can become a significant force in insuring that U.S. business is as productive as possible.

Toward this end, ACOEM is partnering with a number of pharmaceutical companies to measure workforce productivity increases related to the proper management of diseases in working aged individuals. Other pharmaceutical firms have expressed interest in utilizing our members to conduct research that will assess the effect of presenteeism on organizational costs. ACOEM has set up a non-profit foundation to fund research that quantifies the effect of medical interventions in controlling costs, while improving the health of the American workforce.

During my year as President, I pledge to you that I will see to it that these efforts become a reality and that our College generates data that will support what we all know - that we add value to the business we serve above and beyond the treatment of occupational injuries and illness - that we are an integral part of the quest to increase productivity and the competitiveness of U.S. industry and its workers.

Again, thank you for the honor of serving as your President."

Edward J. Bernacki, MD, FACOEM

¹Murphy, Kevin M., and Robert Topel. 2002. "The Economic Value of Medical Research." Forthcoming in Exceptional Returns, eds. Kevin M. Murphy and Robert H. Topel. Chicago: University of Chicago Press.