• Promoting a Healthier Workforce

    Health and Productivity Management

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  • Health and Productivity Management Center

    Health, Safety, and Productivity in a Manufacturing Environment

    JOEM/January 2001

    William B. Bunn, III, MD, JD, MPH; Dan B. Pikelny, MA, CEBS; Thomas J. Slavin, MS, MBA; Sadhna Paralkar, MBBS, MPH

    The Health and Productivity Management model at International Truck and Engine Corporation includes the measurement, analysis, and management of the individual component programs affecting employee safety, health, and productivity. The key to the success of the program was the iterative approach used to identify the opportunities, develop interventions, and achieve targets through continuous measurement and management. In addition, the integration of multiple disciplines and the overall emphasis on employee productivity and its cost are key foci of the International Model. The program was instituted after economic and clinical services' analyses of data on International employees showed significant excess costs and a high potential for health care cost reductions based on several modifiable health risk factors. The company also faced significant challenges in the safety, workers' compensation, and disability areas. The program includes safety, workers’ compensation, short-term disability, long-term disability, health care, and absenteeism. Monthly reports/analyses are sent to senior management, and annual goals are set with the board of directors. Economic impact has been documented in the categories after intervention. For example, a comprehensive corporate wellness effort has had a significant impact in terms of reducing both direct health care cost and improving productivity, measured as absenteeism. Workers' compensation and disability program interventions have had an impact on current costs, resulting in a significant reduction of financial liability. In the final phase of the program, all direct and indirect productivity costs will be quantified. The impact of the coordinated program on costs associated with employee health will be analyzed initially and compared with a “silo” approach.  (J Occup Environ Med. 2001;43:47 – 55 )

    For any industry initiating a health, safety, and productivity (HSP) program, a systematic and incremental approach is the most effective. The program must include measurable outcomes that can be managed and monitored. The overall program goals at International Truck and Engine Corporation, a leading manufacturer of medium- and heavy-duty trucks, buses, and diesel engines, are to improve the health and productivity of employees and their families, reducing the overall cost to the company as a result.

    The establishment of a Health, Safety, and Productivity department/group brought together a series of specific measures and programs in safety, workers’ compensation, long-term disability (LTD), short-term disability (STD), and health care. The total health and productivity management (HPM) cost to a corporation of approximately 20,000 employees was estimated at $400 to $500 million in direct and indirect dollars, and specific programs were estimated to save up to $50 million each year. This calculation led the senior management of the corporation, the board of directors, and the major unions to support the recognition and formation of a HSP group.1

    The HSP group was tasked to expand the management of safety, workers’ compensation, and disability to focus on time off (sick leave, STD, LTD, workers' compensation); medical services (workers' compensation, disability, group health); preventive care and disease management; absenteeism; and indirect costs of the loss of health and productivity. Effective HPM requires awareness of the full impact on corporate profits; recognition that total cost is predominantly productivity lost (opportunity cost), rather than health care expense (direct cost); integration of functions/elimination of the silo (departmental/functional) approach; commitment to view HSP as a business asset; and a set of performance indicators/outcome measures that are accurate and are reviewed and accepted by senior management.2-4

    Methods

    One of the keys to evaluating the success of various programs at International is the stability of employee demographics and lack of change in the employee health and welfare plans. The employee base consists of approximately 14,000 employees in the United States, 4000 employees in Canada and Mexico, and 50,000 retirees and surviving spouses. Approximately 70% of the employees are unionized, with the largest union being the United Auto Workers. The average employee age is 48, and the gender distribution is heavily skewed, with an approximately 2 to 1 ratio of male to female employees. The company has several main operating sites including Springfield (Ohio), Indianapolis (Indiana), Melrose Park (Chicago, Illinois), Ft. Wayne (Indiana), Conway (Arkansas), Chatham (Ontario), and Monterey (Mexico). Additional sites include parts distribution centers and finance/sales offices. The program was implemented across the entire company, with the biggest focus on the manufacturing sites where the higher costs are incurred. At the operating sites, many of the jobs are blue-collar efforts, primarily in three areas–truck assembly, engine assembly, and foundry/metalworking operations. However, company-wide support staff includes engineering, information technology, and various other corporate functions.

    Safety

    HPM encompasses several aspects of business performance, ranging from safety, regulatory compliance, and workers' compensation to disability, health care cost, and absenteeism. The key to managing the different areas is a metric-oriented system with established baselines to measure performance.

    The most commonly available safety data are Occupational Safety and Health Administration (OSHA)-recordable injuries and illnesses, and Lost Time Cases, as defined by the Bureau of Labor Statistics and required by OSHA. OSHA-recordable incident frequency rate and lost time case rate are normally expressed as cases per 200,000 hours worked (ie, per 100 employees working for 1 year). The Bureau of Labor Statistics publishes benchmark data for these measures, and other less formal surveys that use a consistent definition are also available.5

    As part of safety review metrics, International added the audit score in 1998. The audit selected is a quantitative assessment that has evolved from a protocol developed by Goodyear Tire and Rubber Company and is used as an important driver of safety performance. The audit emphasizes management systems and was chosen over commercially available instruments that focus mainly on compliance. The audit remainder (ie, 100-Audit Score) is the measure used to track improvement. Comprehensive health and safety audits are performed annually at each manufacturing facility. A cross-plant audit team with management and union volunteers from other company sites reviews management systems, monitors regulatory compliance, and identifies opportunities for safety improvement.6

    Workers’ Compensation and Disability

    Both workers’ compensation costs and disability costs are measured as paid costs per employee. Workers’ compensation costs include all payments made on all open cases, both current and from past years, to measure the effectiveness of case management. The management of non-occupational disability (LTD, STD) and occupational disability (workers’ compensation) was merged into a single, quality-focused program. The program consolidated staffing and physical resources and used common data systems.

    Health Care

    Health care costs are tracked at International at two levels. High-level data are used for financial reporting, and individual claim data are used for analysis. After a period of improvement due to the implementation of a paid provider organization, health care costs increased rapidly. An analysis revealed that high health care costs created a significant cost disadvantage compared with benchmarks (19% to 34%) and with competitors
    (Table 1).

    Occ Table 1

    For the population, cardiovascular and musculoskeletal disease were the two most costly/frequent diseases. Further analyses revealed that after controlling for age, gender, and occupation, major excess incidence and cost (up to 50%) remained. A union/management health risk appraisal identified lack of exercise, smoking, and cholesterol level as the three leading excess risk factors.

    Health Promotion

    Analysis of International's health care, disability, and workers’ compensation data showed that after cardiovascular disease, the next high-volume, high-cost category was musculoskeletal disease. Responding to the need for disease management in the musculoskeletal area, International began to proactively manage work-related and non-work-related injuries at major manufacturing locations through occupational clinics, physical therapy, high safety standards, appropriate ergonomic interventions, aggressive case management, and return-to-work programs.

    To target appropriate areas and prioritize efforts, both the incidence and overall cost of each disease was analyzed. In addition, health risk appraisals were performed on the employee population and employees were surveyed as to program interest. Health promotion programs were analyzed and developed, a corporate function was reestablished under the banner of Vital Lives, champions were identified, and teams were formed at every operating site. Program metrics included the activity level of site committees, awareness rates, and participation rates.

    Absenteeism

    As one of the first steps in measuring the total direct and indirect cost of health and productivity, the tracking of absenteeism was initiated. A time and attendance system had already been in place for hourly workers, but management did not consider absenteeism to be a significant cost or problem, nor did it make use of the data. Absenteeism was also viewed differently across plants. Absenteeism statistics are one of the key output measurements of the HPM model.

    To focus efforts on the appropriate categories of absenteeism, it was divided into two groups: controllable and uncontrollable. In general, uncontrollable absenteeism was defined to be time off given to employees for vacation or other non-health-related obligations such as jury duty. Controllable absenteeism became a key component of the HPM model and included time off for issues such as illness, injury, or disability. The controllable absenteeism rate, calculated as controllable absenteeism hours divided by scheduled hours, is the statistic used as one of the output measurements for the HPM model.

    Results and Discussion

    Initial Integration: Occupational Safety and Workers’ Compensation

    All companies should track their work-related injury and illness experience and be able to incorporate it as part of the overall HSP measures. Initially at International, incident frequency rate and lost time case rate (cases per 100 employees) were regularly used to monitor performance, but improvement targets were not established by senior management. Improvement targets based on incident frequency rate were first set in 1996, the year before the integration of HSP functions, but were not met. Before the establishment of integrated goals, safety activities were primarily reactive and many programs were defined by union negotiations from the 1970s. In the late 1980s, a more strategic approach was developed in partnership with the union but with little senior management involvement in goals and strategies.

    The three initial study measures selected for integration were incidence frequency rate, lost time case rate, and workers' compensation costs. These measures were selected to assess the frequency of occupational injury and illness (incident frequency rate) (Table 2), the severity of the cases (lost time case rate) (Table 2), the costs to the company, and the effectiveness of the medical and insurance management of the injuries and illnesses (workers’ compensation costs) (Table 3). Workers’ compensation costs were measured as actual payments made on all claims, including prior-year cases, to reflect case management performance. Performance measures were compared with prior 3-year averages to minimize year-to-year fluctuations.

    occ Table 2


    Occ Table 3

    International's workers’ compensation program is self-insured and self-administered, so effective management of prior year cases is an important target for cost control. Workers’ compensation costs may be measured in several ways, and there is no standard or universal benchmark data to dictate a metric format. Insurance industry commonly reports “incurred” costs, whereas self-insurers tend to look at "paid" costs. Incurred costs comprise both paid-to-date costs and estimated future payments (reserves) on the same cases. Incurred costs can be a good indicator of current-year safety activities compared with other years, but the costs depend on accurate reserve estimates. Year-to-year comparisons must value cases on the same relative date.

    Paid costs reflect payments actually made to claimants and providers and may count costs for only current-year claims or for all prior-years as well. Paid costs for prior years may be of little interest to insured employers if the costs do not affect premium adjustments (premiums are often retro-actively adjusted for up to 3 years). On the other hand, paid costs may be an important case management metric for self-insured employers because a dollar paid out on an old case costs the same as a dollar paid out on a current-year case. Old open cases affect both cost and absenteeism and must be managed as aggressively as new cases. Focusing on paid costs encourages efforts to return employees to work.

    Workers’ compensation cost may also be expressed as total costs or as cost per person or per hours worked. The latter approach better reflects the at-risk period; the former gives management a better sense of targets and dollar savings and better accounts for workers’ compensation costs during shutdowns and for closed operations.

    Although the three measures could be expected to coincide from a trend analysis perspective, they were intended to provide a balanced view of safety performance from the standpoints of frequency, severity, and case management.

    Goals based on these three measures were initially set with senior management, and then with the board of directors. The goals were set as a summation of improvement in the three measures rather than three separate goals that would each have to be attained. Management was accountable to the board of directors for attaining the selected goals. The summation approach was selected so that operations could improve all three measures or focus on efforts to achieve significant improvement in one targeted area with lesser improvement in another. Joint union/management support for the integrated programs have led to the achievement of the targeted reductions in each of the 4 years of the program.

    Major workers’ compensation cost reductions were achieved at International by revision of billing systems to automatically re-price invoices in accordance with fee schedules, reasonable and customary charges, and negotiated discounts. Cost savings were also obtained through better case management, increasing the number of states with self-administration of self-insurance, aggressive return to work programs, and on-site rehabilitation.7,8

    Incorporating Audit Score to Direct Improvement Efforts

    The health and safety audit is a comprehensive review of compliance and management safety systems. In contrast to other safety performance measures, the audit remainder is a proactive measure that focuses site-management attention on program improvements and injury prevention. It identifies specific areas for safety improvement before accidents occur and establishes a way to prioritize actions based on audit point values.9 Audits serve several important functions:

    • ensure compliance with government regulations
    • improve management systems to reduce injuries
    • serve as a predictive tool for proactive hazard control efforts
    • prioritize improvement efforts for efficient use of resources
    • provide a performance measure for senior management
    • create benchmarking and training opportunities for team members

    Audits typically produce three products. The first, a listing of findings related to non-compliance or uncontrolled hazards, requires a response and action plan for correction. A flow sheet similar to those used in QS9000 audit processes is used for follow-up. The second product is a chart displaying scores on major audit sections Fig. 1. This identifies at a glance those areas needing the most improvement effort. The third product is the audit protocol itself, in the form of a spreadsheet with scores for each section and a summary by major categories (Table 4). The score is used as a measure of performance, but it also provides a road map for safety improvement efforts. Most safety measures are indicators of failure, but the audit protocol helps develop strategies for success. The opportunity was not appreciated at first and was not acted on. However, by the second year definitive efforts were undertaken to address audit areas and show improvement (Table 5).

    occ Table 4

    Occ table 4c


    Occ Table 5



    Expanding the Focus to Disability

    Disability costs became a major focus for the corporation when the Financial Accounting Standards Board 112 accrual of disability (1994) became effective, and $40 to $50 million was booked to cover future LTD costs. The original liability projections used the total entitlement period of each individual to calculate the length of each case and assign a cost. An internal reassessment of the LTD reserve was undertaken in 1995 using biostatistical methods rather than actuarial calculations. By analyzing past closed cases both statistically and according to medical diagnoses, a methodology for assigning a projected lifespan to individual cases was established. The reserve was then calculated based on the projected length of each case rather than the entitlement length of the case.1, 10

    Approximately 20% of the original reserve was added to corporate profits in 1995 by reducing the reserve liability (Table 6). Regular calculation of that accrual, to ensure the accuracy of the estimate and to determine if further reversal of the accrual is appropriate, is performed as the corporation focuses on the disability programs. Disability programs were established or enhanced at all operating sites. Aggressive case management and on-site physical therapy programs further reduced the number of disabled employees from 350 to 241, in turn reducing the Financial Accounting Standards Board accrual, both for wage replacement (shown below) and health care liability.

    Occ Table 6

    As a result of reducing the number of employees on LTD, the LTD cost per employee decreased from 1996 through 1999 (Table 7). Because of the historically cyclical nature of International's business, the cost per employee is considered to be more meaningful than percent of payroll, which is significantly affected by overtime.

    Occ Table 7

    STD was also identified as a significant current/ongoing cost. STD benefits are paid to eligible employees according to a negotiated schedule, and they extend to 12 months for most represented employees. STD is also used to supplement workers' compensation payments to injured employees in certain circumstances (eg, payment for an uncovered waiting period, wage replacement in excess of state maximum benefit).

    The integrated approach (1) made use of clinical health management staff (occupational physicians and nurses), (2) integrated multiple disciplines, (3) facilitated the building of a common database/data warehouse, (4) combined supply and demand management, and (5) integrated case management expertise with effective vendor selection.

    A further benefit is better management of litigation (eg, workers’ compensation) through early recognition of complex cases and timely resolution of cases through the use of high-quality health care providers with disability experience. For example, if the personal physician and the occupational physician for the facility disagree, then an agreed-upon union/management panel of specialists will make timely and accurate disability determinations.

    More aggressive case management, combined with accident and illness prevention and quality medical care, had decreased costs until 1999, when costs stabilized despite significant health care cost increases throughout the marketplace (Table 8).

    Occ Table 8-2

    The combination of occupational medicine with health and safety staff responsibilities in the corporation facilitated an integrated approach. Teams of safety and health professionals, both union and management, were formed to determine the “root cause” of accidents and the appropriate treatment and methods of prevention. On-site physical therapy programs used rehabilitation specialists, occupational physicians, safety professionals, and line managers to ensure a timely and safe return to work.

    Return-to-work and transitional work program performance improved significantly when the occupational physicians worked with the benefit managers. At one site, 10 individuals on LTD who had been off from work for as long as 9 years were returned to work. This was achieved with the leadership of the Health, Safety and Productivity department, but it required the cooperation and focus of line managers who were given incentives to achieve the targeted health improvements and cost reductions. Furthermore, these programs led to significant improvements in the health and quality of life of employees.1, 11

    Changing the Health Care Paradigm from Administration to Management

    To address the health care issue, a monthly tracking system was initiated and goals were established. A team of professionals focused on eliminating the competitive disadvantage. Both cost and quality measures were established, measured, and monitored. Population-based analyses were performed to identify areas of risk and potential intervention strategies.10  Several intervention strategies were used:

    • both program and benefit changes at contract negotiation
    • vendor review and contract renegotiation
    • combination of the Employee Assistance Program (EAP) with managed mental health care
    • appropriate disease and case management programs.

    Figure 2 shows a linear forecast of health care costs based on annual health care cost inflation figures projected for the company by external actuaries who considered company experience and existing managed care arrangements. This forecast was compared with the actual cost experience and the prior-year cost.

    As a long-term intervention, a cardiovascular disease management program was developed and implemented to manage cardiovascular disease risk factors, symptomatic disease, and inpatient care and congestive heart failure (the only piece of the disease management program readily available on the market). Risk factor modification is offered that emphasizes risk reduction through lifestyle changes and management of lipid disorders, hypertension, and post-myocardial infarction therapy, consistent with nationally derived and accepted guidelines. Written educational materials are generated from an analysis of individual member risk-factor profiles. Each identified treating physician receives clinical practice guidelines for the secondary prevention of coronary artery disease and current formulary information about drugs available for treating hypertension, diabetes, and hyperlipoproteinemia. In addition, through a partnership with a pharmaceutical company and a research institution, sales representatives discuss with physicians the health-risk factors facing International employees (as a group), explain the entire program, and conduct a follow-up to the print materials. 12, 13

    Musculoskeletal-specifically, upper limb-injuries caused by repetitive motion and overextension were treated by plant physicians who worked closely with physical therapists and nurses to develop individualized rehabilitation plans. At locations with on-site fitness centers and medical departments, International’s medical staff, ergonomists, and physical therapists were directly involved in managing complicated cases for work hardening (conditioning employees for the physical demands of their job) and early return-to-work. The medical staff managed workers' compensation and disability cases short- and long-term-on a case-by-case basis to ensure that the patient's treatment and rehabilitation needs were being met by the appropriate provider. Longstanding disability cases were followed up to encourage early return to work. Every LTD case was reviewed and followed up by the plant medical staff and the corporate medical department.14, 15

    All programs are funded by site management or through documented/negotiated health care cost reductions. The success of health promotion and disease management programs is possible only with union and employee involvement and cooperation. The working premise is that health improvement through high-quality care results in cost reduction. With fixed health-benefit programs, disease management is the solution to providing better-quality care, thereby improving employee health and reducing the total program cost. Overall, improving quality and focusing on targeted health care led to a decrease in health care cost over the past 2 years, eliminating most of the earlier competitive disadvantage and providing support for the premise.9

    The International-United Auto Workers joint EAP administered by Managed Health Networks (MHN) has been in place since 1995 for all active employees. The purpose of the program is to assist employees and their eligible dependents in resolving health, behavioral, or personal problems that may be adversely affecting job performance, conduct, or personal well-being. Since its inception, the EAP/MHN program has been very well received among International's employees. International's wellness and health promotion program, called Vital Lives, working with on-site occupational clinics and the United Auto Workers EAP representatives, directs employees to appropriate EAP services. Although the utilization almost doubled since the program was put in place in 1995, the mental-health costs were reduced by $750,000 in that first year alone. The cost decrease cannot be attributed to plan changes, because the plan benefits were improved to full coverage for the first 25 visits. Measurement systems of both total cost (inpatient, outpatient, and EAP visits) and utilization remained constant. The EAP/MHN utilization at International has consistently been above the book-of-business numbers for the provider (International 9.8% vs MHN book-of-business 4.4% in 1999). Problem resolution evident by pre- and post-treatment scores indicated a 96% improvement for the same time period.16

    Health Promotion

    Health management and HSP strategies had an immediate impact, as shown by the initial measures used. The long-term promotion of better health and cost reduction requires a continued commitment to primary, secondary, and tertiary prevention of disease. The company commitment is to improve the health of employees while improving the quality of care and reducing cost.

    Wellness efforts are ongoing. For example, in the corporate physical fitness program, called Trucking Across North America (TANA) the number of challenge teams increased from 42 at 6 sites in 1998 to 203 at 23 sites in 2000.17 Overall, 60% of employees used at least one of the programs listed in Table 9, and 48% had at least one positive outcome. An additional health education tool used is the Healthwise Handbook a self-care guide for medical issues. The handbook has been distributed to all employees and is continuously emphasized through employee quizzes with incentives and new-hire orientation modules. A survey of 1500 employees with 508 respondents showed a handbook use rate of 44% and estimated savings of $140,000 based on avoided medical visits. Although the impact of the wellness and health promotion programs is measured through surveys and standard metrics, no specific enrollment data are used to differentiate the cost impact on participants versus non-participants because of confidentiality concerns.

    Occ table 9-10

    Completing the Picture with Absenteeism

    The high rate of absence was influenced by the organization’s culture. For example, one plant did not include absent workers in the definition as long as a replacement worker was available to do the job. As another example, the overtime system encouraged employees to work extensive overtime at premium pay rates and then to incur absence during regularly scheduled shifts, which paid straight time rates. Return-to-work programs were underutilized, and absences were not a focus of line managers as long as they had a bank of replacement workers at hand.

    Although precise absenteeism benchmarking is difficult because of differences in the methods that various companies use to count and report absences, several benchmarks showed that International had approximately twice the average absenteeism rate of other manufacturers in 1998. Furthermore, from a trend perspective, controllable absenteeism was increasing (defined as all time off except vacation, holidays, jury duty, military leave, and union duties) (Table 10).18

    An analysis revealed that although the absenteeism increase required a thorough plant-by-plant analysis to develop specific action steps, significant progress was made in 2000. The integrated approach focused on all aspects of absenteeism:

    • culture-Vital Lives and emphasis on a zero-tolerance absence expectation for employees
    • policy-update and enforcement of current absenteeism policies through supervisor training
    • system-absence management system upgrade/update to allow more accurate, consistent, and up-to-date monitoring of absence data using computer queries rather than paper-based reports.
    • analysis- data analysis of absence history to look for areas of opportunity for intervention/improvement
    • medical programs, eg return-to-work, evidence-based medicine, on-site physical therapy.

    By focusing on all metrics that influence productivity, the company has been able to reverse the trend and reduce absenteeism in the workplace.

    Conclusion

    The integration of HSP and application of HPM principles can improve quality, improve health, and reduce a company's total costs. An incremental approach can be highly effective and has a higher probability of receiving management approval and funding. Looking at individual components, setting goals, and managing on the basis of effective analyses of trends helps gain management confidence and involves the entire corporation in the effort. Every area that has been addressed so far has shown significant improvements with regard to cost and quality.19

    Overall, an integrated HSP strategy has been reported to show at least a twofold return on investment. The next stage of the International Model, as an additional area of research, is to quantify the full cost of HPM by measuring the total indirect cost of health and productivity, including such issues as the impact on defects, warranty claims, on-time delivery of products, and market share. Other areas for refinement of the HSP model include the capture and analysis of absenteeism among non-represented salary and management employees and measurement of ‘presenteeism’ (defined as being at work but functioning at diminished levels).

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