J. Soc. Occup. Med. (1976) 26, 21-30
An Approach to the Financial Evaluation of Occupational Health Services G. R. C. ATHERLEY, R. W. CALE, M. F. DRUMMOND* and H. KOLOZYN University of Aston in Birmingham Whilst acknowledging this principle we have advocated, in specific instances, the use of accounting costs as the method of valuation of costs and benefits. This is because these costs are more readily available, and also they are the ones more readily understood by, and relevant for the company's financial directors, with whom doctors and nurses working in industry will have to liaise in undertaking this work.
The Financial Evaluation of Occupational Health Services The main deterrent to the financial evaluation of services has been the intangible nature of many of Introduction the benefits. Nevertheless, a number of attempts at Occupational health services (OHS) of one form or quantification have been made. Eich (1967) evaluated the occupational health another have been in existence in many companies for a number of years. During this period they service at Ford, Cologne. He considered the costs have been widely credited with providing a range of to the company of the service; namely, salaries of services which benefits many persons and organiza- the service's employees, consumable supplies, tions. Statements in the policy documents of the and general administrative overheads. These were TUC (1965) and the BEC (now CBI) (1965) stress compared with the benefits arising from the the advantages in terms of benefits to employees, service, expressed in terms of savings in operating to the company and to society in general. The costs. These included savings in lost production global benefits claimed include: savings in lost time, savings in payments to outside bodies, production time; savings through the reduction of savings through the correct pre-placement of sickness absence; and increased worker productiv- workers or re-allocation of workers. Eich claimed ity. The possibility that financial return may not in that for every DM spent on the medical service an itself justify expenditure on occupational health average of at least 1-84 DM would be saved. services has not deterred socially-conscious comWe acknowledge the usefulness of Eich's panies from providing and extending these services. approach, which covers a wide range of the service's Strictly speaking in economic terms, costs and activities. The figures he obtained, however, benefits should be valued in accordance with the depended on a series of estimates, some of which opportunity cost principle—the real costs of we find hard to justify. Also, an important omission consuming units of a given resource are those was the cost in terms of lost production owing to benefits foregone by not using that resource in its employees' attending the medical centre. Eich conbest alternative use. fined himself to costs and benefits to the company because the company is the investor. We consider that there are other parties with a stake in occupa•Present position: Institute of Social and Economic Research, tional health services. We discuss these later. University of York. 21
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Summary This paper attempts to provide a method for estimating the value in financial terms to the company and employees of various activities comprising a company occupational health service, as well as the costs of those activities. Benefits are allocated to 'hard' or 'soft' categories depending on the degree of availability of current methods of analysis and the sophistication needed for their quantification. An equation is proposed to provide a framework for the evaluation of occupational health services by occupational health practitioners. The method has been developed in conjunction with a number of occupational health practitioners (listed in Appendix 2) who have applied it to activities in their own services. Questions concerning the overall allocation of health care resources are also discussed.
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Bond and colleagues (1968) studied the Mountain position of having to choose between various comStates Telephone Company. Their approach was peting 'profitable' activities. Rather, they as yet are similar to Eich's. They considered the benefits, in trying to establish whether any of the activities are terms of savings in lost work-time and savings in at all worthwhile in financial terms. In short, the payments to outside bodies, accruing to various data requirements for Modi's model are not yet activities in the company's occupational health satisfied in UK industry, and the data used in his service. These were treatments (for occupational paper were largely fictitious. Modi has since injuries, non-occupational illness and injury), applied the model with some success to analysis of injections, fitness examinations, pre-employment preventive health examinations (1972), but we know examinations, and periodic examinations of long- of no such application to occupational health as a service and executive employees. The quantifiable whole. savings attributed to these activities fell short of A recent paper by Phillips and Hughes (1974) the annual expenditure of the service. The authors used a system-based method. They put the emphasis suggested that the difference could be made up on the employee population as the central feature from the savings in sickness-absence payments in the occupational health service. Other inputs which were seen to decrease in the 4 years after the were capital, operating costs and policy decisions. service was introduced. As they acknowledged, They defined the outputs of the service in terms of however, it is difficult to identify the service's con- net cash value and non-dollar benefits. The model tribution to the improvement. We add that the is now being developed at the Fontana Works (Co.) making of global claims such as improvement in of the Kaiser Steel Corporation. It is too early to sickness-absence rates or employees' morale seems tell how successful this approach will be, but one generally unprofitable because there are so many potential advantage is the predictive nature of the factors that influence these and because a con- model: for predicting outcome in terms of net cash trolled experiment to establish causation would be flow and non-dollar benefits of various changes in difficult to arrange. company policy, or capital invested in occupational Bond and colleagues considered only company health services. We have doubts at this stage about costs and benefits. Also, some of the benefit the suitability (in the strictly financial context) of valuations were not concerned with the outputs choosing the employee population as the central from the occupational health service. For instance, feature of the model and we doubt whether many the benefits from the periodic health examinations practitioners would be able to reproduce this type were valued at £2860 on the basis that this is the of study without specialist assistance. extra amount that thecompany would have to pay to Craig (1974) proposed a simple approach to the have the examinations carried out elsewhere. We cost analysis of occupational health services of the believe that the question is whether there is any iden- Tennessee Valley Authority. However, he contifiable output from performing these examinations sidered only the costs of the various activities in (e.g. detection and avoidance of disease) and what terms of the resources that they consume. He this is worth to the company or to the employee. concluded that in the main, benefits are difficult to Modi (1970) proposed a method whereby a quantify. company could decide which activities its occupaWe believe that despite the inadequacy of the tional health services should contain. The tech- tools available at present, it is necessary to pursue nique proposed was linear programming. It was methods of identifying and quantifying benefits aimed at selecting those activities which give the because these provide the key for true evaluation of most contribution to profit for the resources (in occupational health services from a financial terms of manpower, materials, etc.) that they viewpoint. consume, assuming that most companies have limits (or constraints) on the resources available for The Proposed Method occupational health. Essentially, the technique was Specification aimed at optimization of profitability of occupa- From a consideration of the literature and the tional health activities. We acknowledge the useful- problems we see, we think that any method for ness of linear programming in this context but we financial evaluation should have the following think that many practitioners are not yet in the attributes:
EVALUATION OF OHS
Development From the requirements which we had laid down in
the specification it seemed that: 1. Activities in the OHS should be considered singly. 2. The 'boundaries' of the study should be set at the company and the employee. 3. A clear distinction should be made between quantifiable benefits and non-quantifiable benefits. 4. Occupational health practitioners should be involved from the start. Therefore the approach used was to ask a group of practitioners to select a particular activity from their service and to identify the costs and benefits attributable to that activity under the company and employee headings. When the lists of costs and benefits had been agreed, the practitioners were asked to collect data (either retrospectively or prospectively) about the selected activity in order to substantiate the existence of the costs and benefits that they had identified. In the light of the results, and following further discussions between the practitioners and ourselves, we developed the following generalized model intended for the evaluation of any occupational health service from the financial viewpoint. The model includes general groupings of the costs and benefits (for the company and employee) and suggests methods of quantification where possible. It is hoped that the individual studies listed in Appendix 2 will be repeated over a longer period using the developed model. The Generalized Model Company Costs The company makes the major investment in OH services (i.e. incurs the greatest costs). In Table I we propose groupings of costs and methods of quantification of company costs. Company Benefits The benefits are divided into two categories: hard benefits, corresponding to quantifiable benefits, and soft benefits, which include benefits not quantifiable for various reasons. We describe hard benefits as those where the process by which these accrue to the party concerned is adequately understood; they can be clearly identified and allocated to a particular OHS activity; and they can be quantified. An example of hard benefit to the company would be the averted loss in employees' time through treatment at the workplace rather than at the nearest NHS facility.
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1. It must be possible for the method to be understood by those doctors and nurses working in industry who will make the evaluation. 2. For any activity of the service it must be possible to identify specific benefits from engaging in that activity. That is, specific rather than global benefits should be laid claim to. 3. It must be clear who incurs the costs and who receives the benefits from a particular activity. We think it is particularly important to distinguish between those benefits that go to company and those that go to employee. For instance, one global benefit often claimed for services is that employees' morale is raised. We have previously discussed the limitations of such claims. The separation of employees' and company's costs and benefits enables us to discover to what extent employees' and employers' interests are the same with respect to services or aspects of services. 4. Although the company and the employee are the two major parties with a stake in occupational health, the existence of a third party, the State, should be recognized. The Department of Health and Social Security (DHSS) may make no conscious investment in occupational health services (except for its own establishments) but it is nevertheless involved through the payment of sickness and other benefits, through the provision of free health care by the NHS, and through the provision of trained manpower which is lost to the NHS when it accepts posts in industry. We considered including the DHSS as a third party in the analysis to be carried out by occupational health practitioners, on the basis that socially-conscious managements would be keen to identify any benefits accruing to society as a whole from their occupational health services. However, there are complexities in the analysis which prevent us from including the DHSS's stake. In Appendix 1, we comment on the DHSS's stake. 5. Attempts must be made to quantify as many of the specific benefits as possible. Also nonquantifiable benefits should be included so that any individual company could establish its own tradeoff between these and the quantified benefits. This may reduce any bias of our method towards those activities that yield a greater proportion of quantifiable (rather than non-quantifiable) benefits.
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Soft benefits are those where the process by which these accrue to the party concerned is not adequately understood; or benefits that are difficult to identify and allocate to a particular OHS activity; or that are difficult or impossible to quantify, and likely to remain so. An example of a soft benefit to the company would be the reduction in sickness-
absence rates through improved morale of employees arising from, say, a medical screening programme. The justification is: first, we do not adequately understand the process by which the benefit accrues to the company—even if the employees' morale is raised (which is difficult to show) how is this benefit transferred to the company
Table I. Company costs Costs
CC2 Heating CC3 Lighting and extra electricity CC4 Medical equipment
Strictly speaking this should be valued as the worth of the accommodation in its best alternative use. This implies that if the accommodation has no alternative use, its use for a particular OHS activity is costless. However, as a compromise, we suggest that this could be valued in accordance with the company's accounting policy which probably uses afixedannual rental per square foot An apportionment of total departmental bill for each activity. The apportionment could be based on a rough assessment of how much time is devoted to each activity As heating for lighting. Where a large quantity of electricity is used (e.g. X-ray machines) a specific charge should be made The cost of equipment over the time period of the costing study can be considered to have three components* Interest charge We can consider that the company borrows money to buy the equipment. Hence the charge over the time period of the study is the interest paid on the amount borrowed. The interest rate used in the calculation should be the company's cost of capital (consult the company accountants) Repairs charge The cost entered should be based on the average of the last 3 years' bills Depreciation charge This charge is made to allow for the cost of replacing the equipment at the end of its useful life. The amount entered here will depend both on the lifespan of the equipment and the type of depreciation calculation employed. We suggest that it is best to discuss, this matter with the company's accountants Value at replacement cost (i.e. current market price) Value at cost (i.e. market price)
CC5 Consumable medical supplies CC6 Cash payments made to outside bodies laboratories consultants DHSS CC7 Travel expenses paid to OHS staff Value at cost (i.e. market price) If these are true overheads (i.e. they would still have to be met if the activity CC8 General administrative ceased) then allocation to a particular activity is meaningless. However, as far as overheads (excluding salaries) possible all costs should be allocated to activities and valued at cost (i.e. market price) Allocate the time spent on any OHS activity by all grades and value at salary CC9 Time taken by OHS staff to (market price for labour), i.e. £2000 pa = £40 per week = £1 per hour. Account perform a given activity must be taken of staff overheads such as National Health Insurance and superdoctor annuation nurses clerks/secretaries CC10 Staff time taken in other Value at salary as above departments referring to OH service making reports for the OH service
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CC1 Accommodation
Method of quantification
EVALUATION OF OHS
in terms of a reduction in sickness absence? Secondly, any change in morale may be difficult to allocate to a particular occupational health activity rather than to the company's other employee services. Table II shows the hard and soft benefits to the company, with quantification. Our categorization
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into hard and soft reflects our uncertainty about many of the benefits often claimed for occupational health services. We make no judgement about which group of benefits is most important. We hold, however, that uncertainty in the returns from the investment in occupational health should be identified. Nevertheless, we do not see the hard and
Employee being paid
Employee not being paid
No production lost (i.e. office workers)
Salary/wage being paid/ hourf
0
Production delayed
Salary/wage being paid/ hour
0
Any extra wage bill incurred (overtime etc.)
Extra wage bill incurred
+
+
Production lost for ever
Any delay costs (i.e. latedelivery penalty)
Delay costs
Salary/wage being paid/ hour
0
Loss of contribution to profit X
Loss of contribution to profit
+
CC12 Time lost by employee as a result of OHS action referral to the NHS by OHS sickness absence advised by OHS
(1) If short term (i.e. less than 1 day) value in the same way as for CC11 (2) Longer period of absence (1 day or more), if no replacement obtained, values as for CC11 Employee being paid Employee not being paid If replacement obtained
Salary/wage being paid to replacement (or agency)
Salary/wage of replacement less salary,' wage of employee
CC13 Extra costs imposed on company pension fund as a result of OHS action
Not quantified
CC14 Compensation claims as a result of OHS action§
Cost = [(probability of claim with OHS—probability of claim without OHS) x (likely cost of claim with OHS-likely cost of claim without OHS)]
•We treat expenditure on medical equipment in this way since we want to attribute a cost for the specific time period of the costing studies rather than calculate the cost over the whole lifespan of the particular OHS activity. The inclusion of a depreciation charge is particularly arguable but we include it since it is likely to be in line with the company accounting procedure. tAssumption is that the company employs the right amount of people to do the required work. Therefore, although other workers may absorb the absentee's work this could not carry on indefinitely. It may be that for very short absence the employee's time is worth almost zero (i.e. this work has been satisfactorily carried out by others and there are no other effects). We suggest that agreement should be reached with management over this valuation. JContribution to profit (revenue—cost) per item x number of items. §These costs may be changed by insurance premiums.
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Table I (com.). CC11 Employee's time taken in attendance to OHS
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Table II. Company benefits Hard benefits Benefit
Method of quantification Find time that would be taken by referral to the NHS or other outside body. Value the time loss avoided in accordance with table in CC11; e.g. if the employee is not being paid for his lost time, and no production is lost, the time saving is worth zero to the company —and so on
CB2 Avoided sickness absence (directly attributed to a specific OHS activity)
Value as indicated in CC12 taking into account whether replacement would normally be obtained and whether employee would have been paid or not. Management can advise about the normal policy. Strictly speaking the full value of this saving should only be entered if the employee returns to his own job, and if required the OHS and management could come to some agreement about how much the full saving should be discounted if the employee is in another job where his contribution would be less than normal
Avoidance through quicker return to work than otherwise possible without OHS supervision Being allocated less taxing work Being allocated work in an area where risk of contamination is lessened or absent Returning to own job under supervision Avoidance through the pre-symptomatic detection and treatment of illness
Estimate reduction in absence as follows: medical probability mean length of absence of the condition with this illness at Saving = symptomatic stage becoming serious so as to warrant absence Value the absence savings as in CC12
CB3 Avoided medical costs (to the company) through early OHS action
Value at cost (i.e. market price)
CB4 Savings in staff time in other departments due to OHS activity
Estimate time saved then value at salary
CB5 Savings in legal claims and compensation
Value of the saving
•id( claim without OHS probability of
_ probability of claim \
with OHS / /likely cost of claim _ likely cost of claim \ "| \with OHS without OHS )J We appreciate that this might be difficult to calculate. We suggest that it should be based on actual past experience of the company in these matters or on comparison between different divisions of the company with varying degrees of environmental control Soft benefits Here, rather than indicate methods of quantification, we make comments on the difficulties of claiming these as benefits. Benefit CB6 Reduction in sickness absence through: Correct placement of employees from a medical point of view Generally improved health status of employees
Improvement in the general morale of employees The policing action of the OHP
Comment Difficult to substantiate except possibly in the case of initial rejection of potential employees on medical grounds. It is also not proven that sickness absence is in the main medically related (see Taylor, 1973) Again we doubt the relationship between employees' health and sickness absence generally. We would hope that most of the medically-founded sickness absence would be located to the outcomes of specific OHS activities (under CB1 and CB2). Also health status is very difficult to measure (see Goldsmith, 1972, 1973) Difficult to substantiate as one does not know the effectiveness of the OHS in this respect when compared with the company's other employee services and general company policy Most occupational health practitioners, we suspect, do not consider this their main function nor wish to justify their existence on these grounds
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CB1 Avoided loss of employee's work time at time of treatment
EVALUATION OF OHS
Table II (com.) CB7 Reduction in labour turnover through: Correct placement of employees from a medical point of view Improvement in the general morale of employees
We do not doubt that employees respect the fact that the company is willing to provide health facilities for them. Also, we acknowledge that employees will be very grateful for the health care given at the time of treatment. However, we are at present uncertain about this benefit since the following questions remain unanswered: (1) Is this improvement in morale after contact with the OHS longlived or does it diminish over time? (2) How important is the OHS effect with respect to morale compared with other company activities, such as job design, holidays, social facilities? (3) Will OHS provided by the company be perceived by workers to be of great value if some similar services are provided free by the State? (4) When the decision to join or leave the company is made, how important is it whether or not the company provides a health service? Most of what was said for CB6 and CB7 applies to this
soft benefits as being essentially different in character. Hence, as our understanding of this problem increases, more benefits may be moved from the soft to the hard category. Employee Costs and Benefits We now turn our attention to a previously neglected aspect of the overall economic effect of occupational health services—the employee's costs and benefits. Because the company bears the greatest burden of the costs of occupational health it is easy to forget that the employee may incur costs too. This is also true of the NHS where traditionally the public's costs, such as travelling to hospitals as patients or visitors, or in waiting for treatment, are ignored. Few people would doubt that the employee benefits from an occupational health service, because he is a consumer of the service. We think, however, that there has been confusion in the earlier work between the benefits from occupational health that go directly to the company, in terms of savings in actual financial outlays or savings in production costs, and those benefits that may or may not go to the company via the employee. We argue that this phenomenon of transference of benefit is not adequately understood and should be treated with caution. This has influenced us in including items such as reduction in sickness absence through improvement in the health status of employees in the soft category of company benefits. Moreover,
aspects of occupational health services are intended to safeguard the company, or its pension fund, or its insurers. These activities may well be a cost to the employee by his transfer to lower-paid work, his rejection at pre-employment examination or his retirement on medical grounds. In Table III we consider employees' costs and benefits separately enabling us to include them as separate terms in the cost/benefit equation. Tables I-IV list costs and benefits accruing to the company and to the employee. To obtain the net effect for either party, Table I should be taken in conjunction with Table II, and Table HI in conjunction with Table IV. The Cost/Benefit Equation Having quantified the costs and hard benefits to company and employee and having taken note of any potential soft benefits, we submit that the practitioner can evaluate OHS activities singly as follows: Hard Test of Financial Viability For a given activity to be worthwhile to the company the sum of the hard company benefits should exceed the sum of company's costs:
E CB,- S CC,>0 I =1
i =1
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CB8 Increase in worker productivity through: Correct placement of employees Improvement in morale Generally improved health status
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Table III. Employee costs Cost
Method of quantification Value as the actual money loss (less 30 % for income tax) less any sickness benefit from DHSS. Very often the money lost will only be bonus. In order to find this accurately, data would have to be collected on the pay position of the employees involved in particular OHS activities in practice; however, it might be possible to use an average figure
EC2 Money outlay as a result of OHS action Travel expenses to the NHS Expenditure on medicines
Value at cost
EC3 Personal time lost as a result of OHS action Waiting at NHS facilities outside of worktime
Value at the local rate for part-time labour*
'Argument here is that if one does not take a part-time job, say in a bar at 40p an hour, this implies that one values one's leisure time by at least that amount.
Soft Test of Financial Viability If the hard test fails, an activity can still be justified from the company's viewpoint if: 1. There is reason to believe that the sum of the company soft benefits exceeds the discrepancy found in the hard test:
£ CBf> S CC,- S CB, I =6
i =1
i -1
and/or (noting the wider effects of occupational health services). 2. The company thinks that employees' costs and benefits should be taken into account: 7
2J i -1
3
EB, —
2J
EC,
i =1
We suggest that in this way the practitioner can obtain a ranking of the various activities in terms of whether they pass the hard or soft test. This will form a basis for discussion with management and unions about which activities the service should emphasize. Overview We have proposed a method to enable practitioners to evaluate their services from a financial viewpoint. An attempt has been made to allocate hard benefits to particular activities whilst acknowledging the existence of soft benefits which are as yet unquantifiable, and which may remain so. We have also noted the wider economic effects of OH services, in particular, the employees' costs and benefits. Many questions remain unanswered, in
particular those relating to the overall allocation of health care resources; we mention some of those in Appendix 1. The DHSS' Stake in Occupational Health Although the original impetus for this work was the need for a generalized method to evaluate occupational health services from a financial viewpoint we have always been conscious of the wider economic issues regarding the allocation of health care resources. The Committee on Safety and Health at Work (Safety and Health at work, 1972) was conscious of the same issues. Strictly speaking it is the company and the employee that make the major investment in OHS and it is they that receive the major returns from the investment. However, as this work progressed it soon became apparent that the DHSS incurred costs due to the existence of occupational health services, and also received benefits. Three main questions then are raised: (a.) Is the State subsidizing private industry or vice versa? (b.) Is there an inefficient allocation of resources and, (c.) is any misallocation sufficiently large to warrant State intervention? We cannot yet tackle these questions but they are clearly important, and we put them forward as a basis for further research. DHSS Costs and Benefits A list follows of DHSS costs and benefits arising from the existence of an occupational health service in industry (Appendix 1). The DHSS has effectively
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EC1 Loss of earnings
EVALUATION OF OHS
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Table IV. Employee benefits
Hard benefits Benefit
Method of quantification Find the average time for treatment at the NHS or other outside body and the amount that the employee would have lost depends on his pay status. Adjust for tax as in EC1
EB2 Avoidance of earnings loss through reduction in absence Earlier return to work possible under OH supervision Possibility of pre-symptomatic detection of illness by OHS thus avoiding a long absence
Estimate time for recovery at the symptomatic stage (take average recovery rates) then value at the money amount (adjusted for tax) that the employee saves (less any sickness benefit he would have received from the DHSS)
EB3 Money outlay avoided through: Not travelling to NHS Not having to pay prescription charges
Ascertain the visits that would have to be made if OHS was not in existence. Value at cost. Also value at cost any medicine etc. provided by the OHS that would not have been provided free by other bodies
EB4 Personal time loss avoided
Value any savings as in EC3
EB5 Compensation claims as a result of OHS action
Value as in CC14
Soft benefits Benefit
Comment
EB6 Financial benefits through: Increased productivity (and possible higher earnings) General improvement in own health status and that of workmates General improvement in morale Less probability of loss of earnings through accidents or occupational illness/ injury to himself or his workmates
We believe that it is difficult to assign these to the OHS (see comments on CB6 and CB7). The medical component cannot be easily separated from that of the Safety Department, management or the employees themselves
EB7 General wellbeing through: Assurance over medical problems Improved health status Improved morale Knowing that hazards are controlled
No attempt has yet been made to quantify these
two stakes; through the provision of health care by the NHS and through the payment of benefits by Social Security Offices. We have not taken into account its own OHS, because these are not relevant in the present context.
REFERENCES Bond M. B., Bulkwater J. E. and Perkin D. K. (1968) An occupational health program—costs v. benefits. Archives of Environmental Health 12,408.
British Employers Confederation (1965) The Advantages of a Company Health Service. London. Craig J. L. (1974) A practical approach to cost analysis of an occupational health program. Journal of Occupational Medicine 16, 445. Eich J. (1967) Study of the economic viability of a company medical service. Arbeitsmedizin, Sozialmedizin, Arbeitshygiene 2, 389. Goldsmith S. B. (1972) The status of health status indicators. Health Service Reports 82, 212. Goldsmith S. B. (1973) A re-evaluation of health status indicators. Health Service Reports 88, 937.
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EB1 Earnings loss avoided at time of treatment through: Not having to leave the workplace when treatment is necessary
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Modi J. A. (1970) Linear programming in occupational medicine. Journal of Occupational Medicine 12, 77. Modi J. A. (1972) Test of a technique for planning medical procedures in preventive health examination programs. Socio-Economic Planning Science 6, 173. Phillips R. M. and Hughes J. P. (1974) Cost benefit analysis of the occupational health program: a generic model. Journal of Occupational Medicine 16, 158.
Safety and Health at Work (1972) Report of Robens Committee 1970-72. Cmnd 5034. London, HMSO, para. 379. Taylor P. J. (1973) Absenteeism—Causes and Control. London, Industrial Society. Trades Union Congress (1965) TUC Policy for Health at Work through a Comprehensive Occupational Health Service. London.
Appendix 1
Costs and Benefits to the DHSS due to the Existence of an OHS Benefits to NHS Averted treatment costsf By treatment by OHS at the time of illness or injury By prevention of re-use of NHS services after illness-injury By earlier detection of disease by OHS Benefits to Social Security Averted payments, namely: Averted sickness claims (including 'earnings-related' payments) Averted industrial injury compensation payments Averted social security payments due to the prolongation of working-life by OHS *We acknowledge that referrals from the OHS increase congestion thereby imposing costs on other NHS clients. fWe also acknowledge a benefit to NHS clients through the reduction in congestion generally. It may be that some benefits may cancel some costs. Appendix 2
Occupational Health Personnel Involved in the Study Name Company OHS activity studied GPO Letter Sorting Office Health Interviews Mrs M. Berry Dr P. Gilbert GPO Telecommunications Senior Staff Medical Examinations Mrs T. Graham John Lewis Partnership Health Interviews after Sickness Absence Miss D. M. Jury Ford Motor Company Laboratory Services Miss J. Moffit Physiotherapy Gillette Industries Other OH personnel involved were Mrs M. Davies Surrey Area Health Authority Miss Y. Lester HM Dockyard, Devonport Dr D. Pattison GPO Telecommunications Requests for reprints should be addressed to: Professor G. R. C. Atherley, Department of Safety and Hygiene, University of Aston in Birmingham, West Midlands.
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Costs to NHS Treatment costs* Direct costs of treatment through reference from OHS Manpower costs Loss of training investment made on staff leaving NHS to work in OHS Costs to Social Security Payments made through: Early retirement being advised by the OHS Enforced absence or loss of job on medical grounds due to OHS
An Approach to the Financial Evaluation of Occupational Health Services G. R. C. ATHERLEY, R. W. CALE, M. F. DRUMMOND* and H. KOLOZYN University of Aston in Birmingham Whilst acknowledging this principle we have advocated, in specific instances, the use of accounting costs as the method of valuation of costs and benefits. This is because these costs are more readily available, and also they are the ones more readily understood by, and relevant for the company's financial directors, with whom doctors and nurses working in industry will have to liaise in undertaking this work.
The Financial Evaluation of Occupational Health Services The main deterrent to the financial evaluation of services has been the intangible nature of many of Introduction the benefits. Nevertheless, a number of attempts at Occupational health services (OHS) of one form or quantification have been made. Eich (1967) evaluated the occupational health another have been in existence in many companies for a number of years. During this period they service at Ford, Cologne. He considered the costs have been widely credited with providing a range of to the company of the service; namely, salaries of services which benefits many persons and organiza- the service's employees, consumable supplies, tions. Statements in the policy documents of the and general administrative overheads. These were TUC (1965) and the BEC (now CBI) (1965) stress compared with the benefits arising from the the advantages in terms of benefits to employees, service, expressed in terms of savings in operating to the company and to society in general. The costs. These included savings in lost production global benefits claimed include: savings in lost time, savings in payments to outside bodies, production time; savings through the reduction of savings through the correct pre-placement of sickness absence; and increased worker productiv- workers or re-allocation of workers. Eich claimed ity. The possibility that financial return may not in that for every DM spent on the medical service an itself justify expenditure on occupational health average of at least 1-84 DM would be saved. services has not deterred socially-conscious comWe acknowledge the usefulness of Eich's panies from providing and extending these services. approach, which covers a wide range of the service's Strictly speaking in economic terms, costs and activities. The figures he obtained, however, benefits should be valued in accordance with the depended on a series of estimates, some of which opportunity cost principle—the real costs of we find hard to justify. Also, an important omission consuming units of a given resource are those was the cost in terms of lost production owing to benefits foregone by not using that resource in its employees' attending the medical centre. Eich conbest alternative use. fined himself to costs and benefits to the company because the company is the investor. We consider that there are other parties with a stake in occupa•Present position: Institute of Social and Economic Research, tional health services. We discuss these later. University of York. 21
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Summary This paper attempts to provide a method for estimating the value in financial terms to the company and employees of various activities comprising a company occupational health service, as well as the costs of those activities. Benefits are allocated to 'hard' or 'soft' categories depending on the degree of availability of current methods of analysis and the sophistication needed for their quantification. An equation is proposed to provide a framework for the evaluation of occupational health services by occupational health practitioners. The method has been developed in conjunction with a number of occupational health practitioners (listed in Appendix 2) who have applied it to activities in their own services. Questions concerning the overall allocation of health care resources are also discussed.
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Bond and colleagues (1968) studied the Mountain position of having to choose between various comStates Telephone Company. Their approach was peting 'profitable' activities. Rather, they as yet are similar to Eich's. They considered the benefits, in trying to establish whether any of the activities are terms of savings in lost work-time and savings in at all worthwhile in financial terms. In short, the payments to outside bodies, accruing to various data requirements for Modi's model are not yet activities in the company's occupational health satisfied in UK industry, and the data used in his service. These were treatments (for occupational paper were largely fictitious. Modi has since injuries, non-occupational illness and injury), applied the model with some success to analysis of injections, fitness examinations, pre-employment preventive health examinations (1972), but we know examinations, and periodic examinations of long- of no such application to occupational health as a service and executive employees. The quantifiable whole. savings attributed to these activities fell short of A recent paper by Phillips and Hughes (1974) the annual expenditure of the service. The authors used a system-based method. They put the emphasis suggested that the difference could be made up on the employee population as the central feature from the savings in sickness-absence payments in the occupational health service. Other inputs which were seen to decrease in the 4 years after the were capital, operating costs and policy decisions. service was introduced. As they acknowledged, They defined the outputs of the service in terms of however, it is difficult to identify the service's con- net cash value and non-dollar benefits. The model tribution to the improvement. We add that the is now being developed at the Fontana Works (Co.) making of global claims such as improvement in of the Kaiser Steel Corporation. It is too early to sickness-absence rates or employees' morale seems tell how successful this approach will be, but one generally unprofitable because there are so many potential advantage is the predictive nature of the factors that influence these and because a con- model: for predicting outcome in terms of net cash trolled experiment to establish causation would be flow and non-dollar benefits of various changes in difficult to arrange. company policy, or capital invested in occupational Bond and colleagues considered only company health services. We have doubts at this stage about costs and benefits. Also, some of the benefit the suitability (in the strictly financial context) of valuations were not concerned with the outputs choosing the employee population as the central from the occupational health service. For instance, feature of the model and we doubt whether many the benefits from the periodic health examinations practitioners would be able to reproduce this type were valued at £2860 on the basis that this is the of study without specialist assistance. extra amount that thecompany would have to pay to Craig (1974) proposed a simple approach to the have the examinations carried out elsewhere. We cost analysis of occupational health services of the believe that the question is whether there is any iden- Tennessee Valley Authority. However, he contifiable output from performing these examinations sidered only the costs of the various activities in (e.g. detection and avoidance of disease) and what terms of the resources that they consume. He this is worth to the company or to the employee. concluded that in the main, benefits are difficult to Modi (1970) proposed a method whereby a quantify. company could decide which activities its occupaWe believe that despite the inadequacy of the tional health services should contain. The tech- tools available at present, it is necessary to pursue nique proposed was linear programming. It was methods of identifying and quantifying benefits aimed at selecting those activities which give the because these provide the key for true evaluation of most contribution to profit for the resources (in occupational health services from a financial terms of manpower, materials, etc.) that they viewpoint. consume, assuming that most companies have limits (or constraints) on the resources available for The Proposed Method occupational health. Essentially, the technique was Specification aimed at optimization of profitability of occupa- From a consideration of the literature and the tional health activities. We acknowledge the useful- problems we see, we think that any method for ness of linear programming in this context but we financial evaluation should have the following think that many practitioners are not yet in the attributes:
EVALUATION OF OHS
Development From the requirements which we had laid down in
the specification it seemed that: 1. Activities in the OHS should be considered singly. 2. The 'boundaries' of the study should be set at the company and the employee. 3. A clear distinction should be made between quantifiable benefits and non-quantifiable benefits. 4. Occupational health practitioners should be involved from the start. Therefore the approach used was to ask a group of practitioners to select a particular activity from their service and to identify the costs and benefits attributable to that activity under the company and employee headings. When the lists of costs and benefits had been agreed, the practitioners were asked to collect data (either retrospectively or prospectively) about the selected activity in order to substantiate the existence of the costs and benefits that they had identified. In the light of the results, and following further discussions between the practitioners and ourselves, we developed the following generalized model intended for the evaluation of any occupational health service from the financial viewpoint. The model includes general groupings of the costs and benefits (for the company and employee) and suggests methods of quantification where possible. It is hoped that the individual studies listed in Appendix 2 will be repeated over a longer period using the developed model. The Generalized Model Company Costs The company makes the major investment in OH services (i.e. incurs the greatest costs). In Table I we propose groupings of costs and methods of quantification of company costs. Company Benefits The benefits are divided into two categories: hard benefits, corresponding to quantifiable benefits, and soft benefits, which include benefits not quantifiable for various reasons. We describe hard benefits as those where the process by which these accrue to the party concerned is adequately understood; they can be clearly identified and allocated to a particular OHS activity; and they can be quantified. An example of hard benefit to the company would be the averted loss in employees' time through treatment at the workplace rather than at the nearest NHS facility.
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1. It must be possible for the method to be understood by those doctors and nurses working in industry who will make the evaluation. 2. For any activity of the service it must be possible to identify specific benefits from engaging in that activity. That is, specific rather than global benefits should be laid claim to. 3. It must be clear who incurs the costs and who receives the benefits from a particular activity. We think it is particularly important to distinguish between those benefits that go to company and those that go to employee. For instance, one global benefit often claimed for services is that employees' morale is raised. We have previously discussed the limitations of such claims. The separation of employees' and company's costs and benefits enables us to discover to what extent employees' and employers' interests are the same with respect to services or aspects of services. 4. Although the company and the employee are the two major parties with a stake in occupational health, the existence of a third party, the State, should be recognized. The Department of Health and Social Security (DHSS) may make no conscious investment in occupational health services (except for its own establishments) but it is nevertheless involved through the payment of sickness and other benefits, through the provision of free health care by the NHS, and through the provision of trained manpower which is lost to the NHS when it accepts posts in industry. We considered including the DHSS as a third party in the analysis to be carried out by occupational health practitioners, on the basis that socially-conscious managements would be keen to identify any benefits accruing to society as a whole from their occupational health services. However, there are complexities in the analysis which prevent us from including the DHSS's stake. In Appendix 1, we comment on the DHSS's stake. 5. Attempts must be made to quantify as many of the specific benefits as possible. Also nonquantifiable benefits should be included so that any individual company could establish its own tradeoff between these and the quantified benefits. This may reduce any bias of our method towards those activities that yield a greater proportion of quantifiable (rather than non-quantifiable) benefits.
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Soft benefits are those where the process by which these accrue to the party concerned is not adequately understood; or benefits that are difficult to identify and allocate to a particular OHS activity; or that are difficult or impossible to quantify, and likely to remain so. An example of a soft benefit to the company would be the reduction in sickness-
absence rates through improved morale of employees arising from, say, a medical screening programme. The justification is: first, we do not adequately understand the process by which the benefit accrues to the company—even if the employees' morale is raised (which is difficult to show) how is this benefit transferred to the company
Table I. Company costs Costs
CC2 Heating CC3 Lighting and extra electricity CC4 Medical equipment
Strictly speaking this should be valued as the worth of the accommodation in its best alternative use. This implies that if the accommodation has no alternative use, its use for a particular OHS activity is costless. However, as a compromise, we suggest that this could be valued in accordance with the company's accounting policy which probably uses afixedannual rental per square foot An apportionment of total departmental bill for each activity. The apportionment could be based on a rough assessment of how much time is devoted to each activity As heating for lighting. Where a large quantity of electricity is used (e.g. X-ray machines) a specific charge should be made The cost of equipment over the time period of the costing study can be considered to have three components* Interest charge We can consider that the company borrows money to buy the equipment. Hence the charge over the time period of the study is the interest paid on the amount borrowed. The interest rate used in the calculation should be the company's cost of capital (consult the company accountants) Repairs charge The cost entered should be based on the average of the last 3 years' bills Depreciation charge This charge is made to allow for the cost of replacing the equipment at the end of its useful life. The amount entered here will depend both on the lifespan of the equipment and the type of depreciation calculation employed. We suggest that it is best to discuss, this matter with the company's accountants Value at replacement cost (i.e. current market price) Value at cost (i.e. market price)
CC5 Consumable medical supplies CC6 Cash payments made to outside bodies laboratories consultants DHSS CC7 Travel expenses paid to OHS staff Value at cost (i.e. market price) If these are true overheads (i.e. they would still have to be met if the activity CC8 General administrative ceased) then allocation to a particular activity is meaningless. However, as far as overheads (excluding salaries) possible all costs should be allocated to activities and valued at cost (i.e. market price) Allocate the time spent on any OHS activity by all grades and value at salary CC9 Time taken by OHS staff to (market price for labour), i.e. £2000 pa = £40 per week = £1 per hour. Account perform a given activity must be taken of staff overheads such as National Health Insurance and superdoctor annuation nurses clerks/secretaries CC10 Staff time taken in other Value at salary as above departments referring to OH service making reports for the OH service
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CC1 Accommodation
Method of quantification
EVALUATION OF OHS
in terms of a reduction in sickness absence? Secondly, any change in morale may be difficult to allocate to a particular occupational health activity rather than to the company's other employee services. Table II shows the hard and soft benefits to the company, with quantification. Our categorization
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into hard and soft reflects our uncertainty about many of the benefits often claimed for occupational health services. We make no judgement about which group of benefits is most important. We hold, however, that uncertainty in the returns from the investment in occupational health should be identified. Nevertheless, we do not see the hard and
Employee being paid
Employee not being paid
No production lost (i.e. office workers)
Salary/wage being paid/ hourf
0
Production delayed
Salary/wage being paid/ hour
0
Any extra wage bill incurred (overtime etc.)
Extra wage bill incurred
+
+
Production lost for ever
Any delay costs (i.e. latedelivery penalty)
Delay costs
Salary/wage being paid/ hour
0
Loss of contribution to profit X
Loss of contribution to profit
+
CC12 Time lost by employee as a result of OHS action referral to the NHS by OHS sickness absence advised by OHS
(1) If short term (i.e. less than 1 day) value in the same way as for CC11 (2) Longer period of absence (1 day or more), if no replacement obtained, values as for CC11 Employee being paid Employee not being paid If replacement obtained
Salary/wage being paid to replacement (or agency)
Salary/wage of replacement less salary,' wage of employee
CC13 Extra costs imposed on company pension fund as a result of OHS action
Not quantified
CC14 Compensation claims as a result of OHS action§
Cost = [(probability of claim with OHS—probability of claim without OHS) x (likely cost of claim with OHS-likely cost of claim without OHS)]
•We treat expenditure on medical equipment in this way since we want to attribute a cost for the specific time period of the costing studies rather than calculate the cost over the whole lifespan of the particular OHS activity. The inclusion of a depreciation charge is particularly arguable but we include it since it is likely to be in line with the company accounting procedure. tAssumption is that the company employs the right amount of people to do the required work. Therefore, although other workers may absorb the absentee's work this could not carry on indefinitely. It may be that for very short absence the employee's time is worth almost zero (i.e. this work has been satisfactorily carried out by others and there are no other effects). We suggest that agreement should be reached with management over this valuation. JContribution to profit (revenue—cost) per item x number of items. §These costs may be changed by insurance premiums.
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Table I (com.). CC11 Employee's time taken in attendance to OHS
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Table II. Company benefits Hard benefits Benefit
Method of quantification Find time that would be taken by referral to the NHS or other outside body. Value the time loss avoided in accordance with table in CC11; e.g. if the employee is not being paid for his lost time, and no production is lost, the time saving is worth zero to the company —and so on
CB2 Avoided sickness absence (directly attributed to a specific OHS activity)
Value as indicated in CC12 taking into account whether replacement would normally be obtained and whether employee would have been paid or not. Management can advise about the normal policy. Strictly speaking the full value of this saving should only be entered if the employee returns to his own job, and if required the OHS and management could come to some agreement about how much the full saving should be discounted if the employee is in another job where his contribution would be less than normal
Avoidance through quicker return to work than otherwise possible without OHS supervision Being allocated less taxing work Being allocated work in an area where risk of contamination is lessened or absent Returning to own job under supervision Avoidance through the pre-symptomatic detection and treatment of illness
Estimate reduction in absence as follows: medical probability mean length of absence of the condition with this illness at Saving = symptomatic stage becoming serious so as to warrant absence Value the absence savings as in CC12
CB3 Avoided medical costs (to the company) through early OHS action
Value at cost (i.e. market price)
CB4 Savings in staff time in other departments due to OHS activity
Estimate time saved then value at salary
CB5 Savings in legal claims and compensation
Value of the saving
•id( claim without OHS probability of
_ probability of claim \
with OHS / /likely cost of claim _ likely cost of claim \ "| \with OHS without OHS )J We appreciate that this might be difficult to calculate. We suggest that it should be based on actual past experience of the company in these matters or on comparison between different divisions of the company with varying degrees of environmental control Soft benefits Here, rather than indicate methods of quantification, we make comments on the difficulties of claiming these as benefits. Benefit CB6 Reduction in sickness absence through: Correct placement of employees from a medical point of view Generally improved health status of employees
Improvement in the general morale of employees The policing action of the OHP
Comment Difficult to substantiate except possibly in the case of initial rejection of potential employees on medical grounds. It is also not proven that sickness absence is in the main medically related (see Taylor, 1973) Again we doubt the relationship between employees' health and sickness absence generally. We would hope that most of the medically-founded sickness absence would be located to the outcomes of specific OHS activities (under CB1 and CB2). Also health status is very difficult to measure (see Goldsmith, 1972, 1973) Difficult to substantiate as one does not know the effectiveness of the OHS in this respect when compared with the company's other employee services and general company policy Most occupational health practitioners, we suspect, do not consider this their main function nor wish to justify their existence on these grounds
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CB1 Avoided loss of employee's work time at time of treatment
EVALUATION OF OHS
Table II (com.) CB7 Reduction in labour turnover through: Correct placement of employees from a medical point of view Improvement in the general morale of employees
We do not doubt that employees respect the fact that the company is willing to provide health facilities for them. Also, we acknowledge that employees will be very grateful for the health care given at the time of treatment. However, we are at present uncertain about this benefit since the following questions remain unanswered: (1) Is this improvement in morale after contact with the OHS longlived or does it diminish over time? (2) How important is the OHS effect with respect to morale compared with other company activities, such as job design, holidays, social facilities? (3) Will OHS provided by the company be perceived by workers to be of great value if some similar services are provided free by the State? (4) When the decision to join or leave the company is made, how important is it whether or not the company provides a health service? Most of what was said for CB6 and CB7 applies to this
soft benefits as being essentially different in character. Hence, as our understanding of this problem increases, more benefits may be moved from the soft to the hard category. Employee Costs and Benefits We now turn our attention to a previously neglected aspect of the overall economic effect of occupational health services—the employee's costs and benefits. Because the company bears the greatest burden of the costs of occupational health it is easy to forget that the employee may incur costs too. This is also true of the NHS where traditionally the public's costs, such as travelling to hospitals as patients or visitors, or in waiting for treatment, are ignored. Few people would doubt that the employee benefits from an occupational health service, because he is a consumer of the service. We think, however, that there has been confusion in the earlier work between the benefits from occupational health that go directly to the company, in terms of savings in actual financial outlays or savings in production costs, and those benefits that may or may not go to the company via the employee. We argue that this phenomenon of transference of benefit is not adequately understood and should be treated with caution. This has influenced us in including items such as reduction in sickness absence through improvement in the health status of employees in the soft category of company benefits. Moreover,
aspects of occupational health services are intended to safeguard the company, or its pension fund, or its insurers. These activities may well be a cost to the employee by his transfer to lower-paid work, his rejection at pre-employment examination or his retirement on medical grounds. In Table III we consider employees' costs and benefits separately enabling us to include them as separate terms in the cost/benefit equation. Tables I-IV list costs and benefits accruing to the company and to the employee. To obtain the net effect for either party, Table I should be taken in conjunction with Table II, and Table HI in conjunction with Table IV. The Cost/Benefit Equation Having quantified the costs and hard benefits to company and employee and having taken note of any potential soft benefits, we submit that the practitioner can evaluate OHS activities singly as follows: Hard Test of Financial Viability For a given activity to be worthwhile to the company the sum of the hard company benefits should exceed the sum of company's costs:
E CB,- S CC,>0 I =1
i =1
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CB8 Increase in worker productivity through: Correct placement of employees Improvement in morale Generally improved health status
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Table III. Employee costs Cost
Method of quantification Value as the actual money loss (less 30 % for income tax) less any sickness benefit from DHSS. Very often the money lost will only be bonus. In order to find this accurately, data would have to be collected on the pay position of the employees involved in particular OHS activities in practice; however, it might be possible to use an average figure
EC2 Money outlay as a result of OHS action Travel expenses to the NHS Expenditure on medicines
Value at cost
EC3 Personal time lost as a result of OHS action Waiting at NHS facilities outside of worktime
Value at the local rate for part-time labour*
'Argument here is that if one does not take a part-time job, say in a bar at 40p an hour, this implies that one values one's leisure time by at least that amount.
Soft Test of Financial Viability If the hard test fails, an activity can still be justified from the company's viewpoint if: 1. There is reason to believe that the sum of the company soft benefits exceeds the discrepancy found in the hard test:
£ CBf> S CC,- S CB, I =6
i =1
i -1
and/or (noting the wider effects of occupational health services). 2. The company thinks that employees' costs and benefits should be taken into account: 7
2J i -1
3
EB, —
2J
EC,
i =1
We suggest that in this way the practitioner can obtain a ranking of the various activities in terms of whether they pass the hard or soft test. This will form a basis for discussion with management and unions about which activities the service should emphasize. Overview We have proposed a method to enable practitioners to evaluate their services from a financial viewpoint. An attempt has been made to allocate hard benefits to particular activities whilst acknowledging the existence of soft benefits which are as yet unquantifiable, and which may remain so. We have also noted the wider economic effects of OH services, in particular, the employees' costs and benefits. Many questions remain unanswered, in
particular those relating to the overall allocation of health care resources; we mention some of those in Appendix 1. The DHSS' Stake in Occupational Health Although the original impetus for this work was the need for a generalized method to evaluate occupational health services from a financial viewpoint we have always been conscious of the wider economic issues regarding the allocation of health care resources. The Committee on Safety and Health at Work (Safety and Health at work, 1972) was conscious of the same issues. Strictly speaking it is the company and the employee that make the major investment in OHS and it is they that receive the major returns from the investment. However, as this work progressed it soon became apparent that the DHSS incurred costs due to the existence of occupational health services, and also received benefits. Three main questions then are raised: (a.) Is the State subsidizing private industry or vice versa? (b.) Is there an inefficient allocation of resources and, (c.) is any misallocation sufficiently large to warrant State intervention? We cannot yet tackle these questions but they are clearly important, and we put them forward as a basis for further research. DHSS Costs and Benefits A list follows of DHSS costs and benefits arising from the existence of an occupational health service in industry (Appendix 1). The DHSS has effectively
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EC1 Loss of earnings
EVALUATION OF OHS
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Table IV. Employee benefits
Hard benefits Benefit
Method of quantification Find the average time for treatment at the NHS or other outside body and the amount that the employee would have lost depends on his pay status. Adjust for tax as in EC1
EB2 Avoidance of earnings loss through reduction in absence Earlier return to work possible under OH supervision Possibility of pre-symptomatic detection of illness by OHS thus avoiding a long absence
Estimate time for recovery at the symptomatic stage (take average recovery rates) then value at the money amount (adjusted for tax) that the employee saves (less any sickness benefit he would have received from the DHSS)
EB3 Money outlay avoided through: Not travelling to NHS Not having to pay prescription charges
Ascertain the visits that would have to be made if OHS was not in existence. Value at cost. Also value at cost any medicine etc. provided by the OHS that would not have been provided free by other bodies
EB4 Personal time loss avoided
Value any savings as in EC3
EB5 Compensation claims as a result of OHS action
Value as in CC14
Soft benefits Benefit
Comment
EB6 Financial benefits through: Increased productivity (and possible higher earnings) General improvement in own health status and that of workmates General improvement in morale Less probability of loss of earnings through accidents or occupational illness/ injury to himself or his workmates
We believe that it is difficult to assign these to the OHS (see comments on CB6 and CB7). The medical component cannot be easily separated from that of the Safety Department, management or the employees themselves
EB7 General wellbeing through: Assurance over medical problems Improved health status Improved morale Knowing that hazards are controlled
No attempt has yet been made to quantify these
two stakes; through the provision of health care by the NHS and through the payment of benefits by Social Security Offices. We have not taken into account its own OHS, because these are not relevant in the present context.
REFERENCES Bond M. B., Bulkwater J. E. and Perkin D. K. (1968) An occupational health program—costs v. benefits. Archives of Environmental Health 12,408.
British Employers Confederation (1965) The Advantages of a Company Health Service. London. Craig J. L. (1974) A practical approach to cost analysis of an occupational health program. Journal of Occupational Medicine 16, 445. Eich J. (1967) Study of the economic viability of a company medical service. Arbeitsmedizin, Sozialmedizin, Arbeitshygiene 2, 389. Goldsmith S. B. (1972) The status of health status indicators. Health Service Reports 82, 212. Goldsmith S. B. (1973) A re-evaluation of health status indicators. Health Service Reports 88, 937.
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EB1 Earnings loss avoided at time of treatment through: Not having to leave the workplace when treatment is necessary
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Modi J. A. (1970) Linear programming in occupational medicine. Journal of Occupational Medicine 12, 77. Modi J. A. (1972) Test of a technique for planning medical procedures in preventive health examination programs. Socio-Economic Planning Science 6, 173. Phillips R. M. and Hughes J. P. (1974) Cost benefit analysis of the occupational health program: a generic model. Journal of Occupational Medicine 16, 158.
Safety and Health at Work (1972) Report of Robens Committee 1970-72. Cmnd 5034. London, HMSO, para. 379. Taylor P. J. (1973) Absenteeism—Causes and Control. London, Industrial Society. Trades Union Congress (1965) TUC Policy for Health at Work through a Comprehensive Occupational Health Service. London.
Appendix 1
Costs and Benefits to the DHSS due to the Existence of an OHS Benefits to NHS Averted treatment costsf By treatment by OHS at the time of illness or injury By prevention of re-use of NHS services after illness-injury By earlier detection of disease by OHS Benefits to Social Security Averted payments, namely: Averted sickness claims (including 'earnings-related' payments) Averted industrial injury compensation payments Averted social security payments due to the prolongation of working-life by OHS *We acknowledge that referrals from the OHS increase congestion thereby imposing costs on other NHS clients. fWe also acknowledge a benefit to NHS clients through the reduction in congestion generally. It may be that some benefits may cancel some costs. Appendix 2
Occupational Health Personnel Involved in the Study Name Company OHS activity studied GPO Letter Sorting Office Health Interviews Mrs M. Berry Dr P. Gilbert GPO Telecommunications Senior Staff Medical Examinations Mrs T. Graham John Lewis Partnership Health Interviews after Sickness Absence Miss D. M. Jury Ford Motor Company Laboratory Services Miss J. Moffit Physiotherapy Gillette Industries Other OH personnel involved were Mrs M. Davies Surrey Area Health Authority Miss Y. Lester HM Dockyard, Devonport Dr D. Pattison GPO Telecommunications Requests for reprints should be addressed to: Professor G. R. C. Atherley, Department of Safety and Hygiene, University of Aston in Birmingham, West Midlands.
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Costs to NHS Treatment costs* Direct costs of treatment through reference from OHS Manpower costs Loss of training investment made on staff leaving NHS to work in OHS Costs to Social Security Payments made through: Early retirement being advised by the OHS Enforced absence or loss of job on medical grounds due to OHS
