Business-oriented approach can offset rising occ-med costs
Inflationary pressures not insurmountable
Recent headlines scream the discouraging news: Rapidly rising health care costs are back with a vengeance. Occupational health professionals certainly are not immune to these pressures, but industry leaders are doing a lot more than just complaining; they’re combating these pressures with a no-nonsense, business-based approach to cost efficiency.
Nevertheless, they concede, the ongoing pressures can be daunting. "Some of the greatest costs are associated with a necessary first step — setting up your unit," says Annette B. Haag, MA, RN, COHN-S/CM, FAAOHN, president of the Simi Valley, CA-based firm Annette B. Haag & Associates. "There’s the equipment, of course, but the largest component is staff costs," she says. "And they will go up with salary inflation."
Christine M. Kalina, MBA, MS, RN, FAAOHN, COHN-S/CM, of Chicago-based Christina M. Kalina and Associates, Global Consultants in Occupational Health and Safety, also cites the rising cost of resources — staff, materials, and time. "People forget time," she notes. "We are so stressed, with fewer resources, yet we are expected to do more. In other words, are you paying for time-and-a-half? How are you attracting staff? What does your overall package look like?"
In addition, she says, regulatory pressures affect the way you use your resources. "There are an increasing number of processes associated with regulations — steps added in drug testing, or in the Occupational Health and Safety Administration’s (OSHA’s) record-keeping requirements, for example," Kalina observes.
Highly qualified and experienced professionals are the most important resources identified in building and maintaining quality, cost-effective, and cost-efficient occupational health services to deal with high-pressure workloads, says Kalina. "High-level managers need to understand this. Furthermore, occupational health professionals need to understand this and market themselves as the best resource. Remember to let management know you get what you pay for’ when negotiating a raise or added dollars for continuing education."
When it comes to hard dollars, however, "There is no way to limit our outlay," says William B. Patterson, MD, FACOEM, MPH, medical director at Occupational Health and Rehabilitation in Wilmington, MA. "The insurance companies are pushing up their charges to employers, but I’m not aware that provider payments have increased meaningfully, especially in the workers’ comp area." It may be that the costs are going up for insurers in the states in which fees are not regulated. "I’m skeptical about where the need to increase the fees comes from in the other states," says Patterson. "In many cases we continue to be under-reimbursed; providers are caught in the middle."
He agrees that the number one source of rising costs is staffing. "The other piece is that we find that some of the hospitals, despite their financial crunch, are successfully recruiting some of our staff because they can offer meaningfully better salary and benefits," Patterson notes.
Business solutions for business problems
Perhaps the greatest key to getting rising costs under control — or at least operating at the highest levels of efficiency and productivity — is to approach the management of your occupational health facility as you would any business.
It’s critical, Kalina says, to understand that the company or hospital has a business strategy, and that you have to run your unit as a business supporting the overall corporate business strategy. Your goals and objectives must support the goals and objectives of the corporation; you must positively impact the bottom line. "Good occupational health is good business," says Kalina. "Understanding the language of business allows articulation of the business benefits of good occupational health in business terms.
"Occupational health nurses, physicians, and professionals have to understand the tools upper management is using to measure and critique them; they must have a basic understanding of business," Kalina continues. "For example, one of the tools managers commonly use is the break-even analysis. Why do managers use this tool so frequently? Everybody talks about ROI [return on investment], but what about the internal rate of return? You have to understand the basic language of business in order to speak to management."
Don’t compromise your credibility with the customer/client by using terms without understanding their strategic business meaning and use, Kalina warns. "Don’t use a buzz word such as net present value’ if you don’t understand what it means and how it is used. If you are speaking to an accountant about the budget and you don’t understand how a figure was obtained, ask. Remember, the accountant, while skilled in his or her field, will surely be calling you with medical questions."
Unfortunately, says Haag, many occupational health professionals are unaware when it comes to that language. "In my Q&A sessions I ask the participants to tell me the top three costs for their company — from an occupational health and nonoccupational health standpoint. The nurses cannot tell me that," she observes. At a lot of companies, she notes, high-risk pregnancies are in the top three in nonoccupational sector costs, but often there is no program to address the problem. "You need to identify the most serious health conditions and prioritize them," she continues. "What does your company pay out in workers’ comp? What kind of health plans does it offer?"
For Kalina, the first step is a business basic: the business plan. "I operate from two premises that an MBA and high-level business managers know: Budgets drive operating decisions, and if you can measure it, you can manage it," she asserts. "Build your business plan and use of resources with those axioms in mind."
But in order to do it right, you have to have the right resources and tools, she adds. "For example, an information technology system will most probably be the most efficient and accurate means used to track what you’re doing in order to get measurable outcomes," she says. "When I talk to customers, they want to know how much bang they are getting for the buck. The only way to know that is to know how much work you are doing and what the outcome is."
The proper system will enable you to present your outcome to upper management in a more meaningful way, which in turn can save money. "Once you’ve measured what you’ve done, you can sit back and look and determine whether the outcomes are acceptable, whether some processes should be fine-tuned, or whether they should be managed differently," Kalina says. "For example, if your disability management program is staffed by an RN and an MD, and the boss wants to reduce employee days away from work, you’ve got to determine if you are using them to their optimal strength, or if you need to tweak your scheduling patterns."
Patterson agrees. "The most important thing providers can do is track their outcomes and results in terms of the number of visits, average costs per case, time out of work, and so on," he says. However, he adds, there are some obstacles to getting the most accurate numbers possible. "Providers can only track the cases they follow and close; they don’t have access to the actual total costs of cases, because we miss the cases that are referred out. And in my experience, insurers are very slow to give providers that type of total claim information."
Ability to measure and market
You not only need to be able to measure, but you need to be able to market, adds Kalina. "Even before you create your plan you must sit down and talk with your customer," she advises. "See what he expects from you; you have to know what he needs from you in order to deliver it."
The type of product/service delivered must be a joint decision with the customer, Kalina continues, and it can be tricky. "What you think the customer needs may not be what they actually want or need. Also, what the customer thinks he or she needs may or may not actually be the best use of resources to attain clinical and business objectives. The challenge is to bring these two lines of thought together through really good joint communication."
How does this translate into efficient use of money? Break-even analysis can help determine this, and competitive analysis can tell what is being offered and charged by other occ health services, says Kalina. "Complete your break-even analysis, determine the profit margin, share this with your customers, and than determine where to expend some of the profit and associated freed resources on bells and whistles such as wellness programs — something that is almost always discarded."
You can demonstrate the worth of these programs to management by reviewing insurance costs associated with certain preventable disease states. "Smoking cessation programs are another example," Kalina offers. "You can give employees patches, seminars, or both. You must determine what’s more cost efficient. Remember, a process must be in place to measure a planned, agreed upon, measurable outcome. This will not happen overnight; an occupational health professional knows that good data takes three to four years to obtain. The challenge is explaining to the customer why this is so; that’s where the use of good business and marketing strategy comes into play."
Strategy before structure
What it comes down to, says Haag, is that the structure of your operation must be determined by a sound overall business strategy. "When people start up a unit, they look at the number of employees they have and decide how many nurses they need. That’s a reverse approach," she claims.
"You need to hire occupational health nurses when workers comp costs go out of sight, yet we’ve seen a lot of downsizing across the board," she continues. "Many times these positions are terminated because management doesn’t realize that by letting their most seasoned employees go it actually costs them more."
Staffing shortages could be avoided through strategic planning, says Haag. "You probably won’t see the savings in a new unit for the first six months because of start-up costs," she notes, "But you will eventually see costs that are 50% to 75% lower than they would be if you outsourced the positions."
As part of the strategic planning process, both Haag and Kalina recommend using a SWOT (strengths, weaknesses, opportunities, and threats) analysis. "It’s important to do a really good assessment," says Haag. "Don’t be afraid to name your weaknesses; they’re often not your fault. But it might enable you to show your manager that if he buys you a new computer or hires another nurse you could move into a new area, like case management or health promotion, where cost savings can be illustrated."
"A SWOT analysis looks at the internal and external environment, clinical and business processes in the occupational health service," adds Kalina. This may be done by an individual business consultant, or the consultant may coach a team of no more than five people who are mutually committed to attaining a common goal. "If you identify a lot of strengths, few weaknesses, a lot of opportunities and few threats, you know you have the strength to go forward and seize those opportunities; you are in a growth mode," says Kalina. "If you have more weaknesses than strengths, more threats than opportunities, you may have to revitalize or reinvent your business, or perhaps even harvest or eliminate that component of your occupational health service."
Haag recommends the following strategies to further enhance the financial well being of your occupational health program:
• Conduct a time study of your main activities and tasks; know where your time is going, i.e., how many physicals you do each day and how long they take. Then, put a dollar value on those services; in other words, what might they have cost had they been referred out?
• Try to get your nurses and physicians to look at an integrated approach to care.
• Practice absence-management strategies. The cost of an employee absence is much more than just direct expenses such as wages and sick pay, Haag notes. Some industry sources put indirect costs at five to 15 times as high as direct costs.
• Examine the life cycle of your products and services. Which ones are critically needed? Which continue to show value? If your staff spends much of the day performing audiograms, you might consider bringing in a technician and having your nurse spend her time analyzing programs and evaluating outcomes.
• Regard your nurses as part of the safety-health management team; make sure they coordinate with the other safety-related and medical departments.
• Encourage your nurses to take more business courses.
• Benchmark; i.e., research best practices.
"It’s no longer business as usual," says Haag. "These strategies may even have a positive impact on share value."
[For more information, contact:
• Christine M. Kalina, Christine M. Kalina & Associates, Global Consultants in Occupational Health and Safety. Telephone: (219) 934-9285. E-mail: [email protected].
• William Patterson, Occupational Health and Rehabilitation, Wilmington, MA. Telephone: (781) 741-5175.
• Annette B. Haag, Annette B. Haag & Associates, P.O. Box 2098, Simi Valley, CA 93602. Telephone: (805) 581-3234. E-mail: [email protected].]
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