4 Reasons Why Hospitals Need to Revamp Their Absence and Disability Programs

When it comes to the work environment, few organizations employ more people than hospitals and health systems.

According to the American Hospital Association, U.S. hospitals have created jobs every year since 1994. In 1994, hospitals had roughly 4.3 million full- and part-time employees, and that figure grew to almost 5.5 million in 2011.

However, with numerous employees come numerous benefits. Health plans and retirement programs consume a large portion of a hospital's labor budget, and according to David Osterhaus, CEO of consulting firm Sagewell Partners, another important benefit component is commonly overlooked: absence management.

Disability, life and absence management programs do not consume many resources or attention, but their impact could be huge. On any given day, 5 percent of the national workplace is absent for a variety of unplanned reasons, and these unplanned and extended disability absences can average up to 8.7 percent of payroll costs.

Mr. Osterhaus and Sagewell Partners work with hospitals, usually with 1,000 employees or more, on their disability, life and absence management programs, and the most common barrier to reforming these programs is, like most things today, finding the time and money.

"The direct spend is so low [with disability and life programs] compared to what hospitals spend on retirement and medical programs. If you think about a one-hour meeting to review benefits, it would only capture five minutes," Mr. Osterhaus says. "Although our sense is this concept around disability and absence management is catching on, hospitals don't have the capacity or money to think about how to start this type of initiative."

Instead, hospitals may treat these programs like other common contracts.

"Healthcare organizations have a tendency to treat disability and life programs like commodities," Mr. Osterhaus says. "You do a request for proposal every three to four years, find the lower price and improve services. But there are really significant opportunities through well-designed disability, life and absence management programs."

Although these programs may seem like a blip on the radar, any savings to a hospital's bottom line are welcome, especially in an age of healthcare reform, sequestration and austerity. Mr. Osterhaus explains four reasons why hospitals should consider reforming their disability, life and workplace absence programs.

1. Hospitals have a higher age demographic. According to Mr. Osterhaus' research, hospitals and other healthcare organizations have older employees compared with private industry as a whole. The average hospital employee is roughly 46 years old, and the older someone is, the more likely it is he or she may miss time. "The demographics within hospitals lend themselves to higher rates of incidence of disability and absence," Mr. Osterhaus says.

Further, due to the overall economic environment, nurses are working longer, driving the average age of nurses higher and precluding younger nurses from entering the workplace, he adds.

2. Hospitals have unique working environments that lead to more disability and absences. A prototypical business office is a fairly tame environment, especially when compared with hospitals. Although hospitals are overall sterile places, the working conditions and introduction to diseases make them more vulnerable to employees taking disability and absences more frequently.

"Just think about nurses and others: The work is demanding. It's a 24/7 operation. They are exposed to illness and disease. There's an increased chance of injury," Mr. Osterhaus says. "On top of that, there's going to be a shortage around nursing in the upcoming decade, and that further exacerbates the problem of having an older demographic."

3. Employed physicians will lead to higher benefits costs. Hospital CFOs have plenty on their plate right now, from declining reimbursements to quality-based payments. Another trend — hospital employment of physicians — is tacking on extra costs to the hospital, as physicians may require the same or better benefits of any other employee, Mr. Osterhaus says.

4. Hard savings can be obtained.
Although disability, life and absence management programs represent a small slice of the hospital budgetary pie, Mr. Osterhaus says there are material savings in every organization.

For example, he says one hospital client had 5,000 employees and $2 million of premium costs tied to disability and absence management. The hospital was able to slash premium spend by 25 to 30 percent, or roughly $500,000. "In addition to achieving 25 percent of direct premium savings, a sustainable absence management strategy will have continued cost savings," he adds.

More Articles on Hospital Benefit Programs:

Taking Care of Employees: 5 Trends on Hospital Benefit Plans
5 Steps for Hospitals Reviewing Executive Benefits
Pension Management Predicaments? 3 Dominant Hospital Pension Strategies

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