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Contract Occupational Health Services in the United States

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Employers in the United States have long provided medical care for injured workers through the use of private physicians, clinics, immediate-care facilities and hospital emergency departments. This care for the most part has been episodic and rarely coordinated, as only the largest corporations could provide in-house occupational health services.

A recent survey of 22,457 companies of fewer than 5,000 employees in a suburban area of Chicago found that 93% had less than 50 employees and only 1% employed more than 250 employees. Of this group, 52% utilized a specific provider for their work injuries, 24% did not utilize a specific provider and another 24% allowed the employee to seek his or her own provider. Only 1% of the companies utilized a medical director to provide care. These companies make up 99% of all employers in the surveyed area, representing over 524,000 employees (National Health Systems 1992).

Since the passage of the act which created the Occupational Safety and Health Administration in 1970, and with the accompanying changes in health care financing that have taken place since that time, the focus and priorities of care have changed. Insurance costs for workers’ compensation and group health care have risen from 14 to 26% annually from 1988 to 1991 (BNA 1991). In 1990, health care costs accounted for the single largest portion of the $53 billion spent in the United States for workers’ compensation benefits, and in 1995, medical benefits are expected to reach 50% of a total $100 billion price tag for workers’ compensation costs (Resnick 1992).

Premium costs vary by state because of differing workers’ compensation regulations. The Kiplinger Washington Letter of 9 September 1994 states, “In Montana, contractors pay an average of $35.29 in compensation insurance for every $100 of payroll. In Florida, it’s $21.99. Illinois, $19.48. Same coverage costs $5.55 in Indiana or $9.55 in South Carolina.” As the need for economical workers’ compensation care has evolved, employers are demanding more assistance from their health care providers.

The bulk of this medical care is rendered by independently owned medical facilities. Employers may contract for this care, develop a relationship with a provider or secure it on an as-needed basis. Most care is rendered on a fee-for-service basis, with the beginnings of capitation and direct contracting emerging during the later half of the 1990s.

Types of Services

Employers universally require that occupational health services include acute treatment of injuries and illnesses such as sprains, strains, back and eye injuries and lacerations. These make up the majority of acute cases seen in an occupational health programme.

Often, examinations are requested that are given pre-placement or after a job offer, to determine prospective employees’ ability to safely perform the work required without injury to themselves or others. These examinations must be evaluated consistently with US law as embodied in the Americans with Disabilities Act. This law forbids discrimination in hiring based on a disability that does not prevent an individual from performing the essential functions of the prospective job. The employer is further expected to make a “reasonable accommodation” to a disabled employee (EEOC and Department of Justice 1991).

Though required by law only for certain job categories, substance abuse testing for drugs and/or alcohol is now performed by 98% of the Fortune 200 companies in the United States. These tests may include measurements of urine, blood and breath for levels of illicit drugs or alcohol (BNA 1994).

In addition, an employer may require specialized services such as OSHA-mandated medical surveillance tests—for instance, respirator fitness examinations, based on a worker’s physical capacity and pulmonary function, assessing the worker’s ability to wear a respirator with safety; asbestos examinations and other chemical exposure tests, tailored to assess an individual’s health status with respect to possible exposure and long-term effects of a given agent on the person’s overall health.

In order to assess the health status of key employees, some companies contract for physical examinations for their executives. These examinations are generally preventive in nature and offer extensive health assessment, including laboratory testing, x rays, cardiac stress testing, cancer screening and lifestyle counselling. The frequency of these examinations is often based on age rather than type of work.

Periodic fitness examinations are often contracted for by municipalities to assess the health status of fire and police officers, who are generally tested to measure their physical ability to handle physically stressful situations and to determine whether exposures have occurred in the workplace.

An employer may also contract for rehabilitative services, including physical therapy, work hardening, workplace ergonomic assessments as well as vocational and occupational therapies.

More recently, as a benefit to employees and in an effort to decrease health care costs, employers are contracting for wellness programmes. These prevention-oriented screenings and educational programmes seek to assess health so that appropriate interventions might be offered to alter lifestyles that contribute to disease. Programmes include cholesterol screening, health risk appraisals, smoking cessation, stress management and nutrition education.

Programmes are being developed in all areas of health care to meet the needs of employees. The employee assistance program (EAP) is another recent programme developed to provide counselling and referral services to employees with substance abuse, emotional, family and/or financial problems which employers have determined have an effect on the employee’s ability to be productive.

A service that is relatively new to occupational health is case management. This service, usually provided by nurses or clerical personnel supervised by nurses, has effectively reduced costs while ensuring appropriate quality care for the injured worker. Insurance companies have long provided management of claims costs (the dollars spent on workers’ compensation cases) at a point when the injured worker has been off work for a specified length of time or when a certain dollar amount has been reached. Case management is a more proactive and concurrent process which may be applied from the first day of the injury. Case managers direct the patient to the appropriate level of care, interact with the treating physician to determine what types of modified work the patient is medically capable of performing, and work with the employer to ensure that the patient is performing work which will not worsen the injury. The case manager’s focus is to return the employee to a minimum of modified duty as quickly as possible as well as to identify good quality physicians whose results will best benefit the patient.

The Providers

Services are available through a variety of providers with varying degrees of expertise. The private physician’s office may offer pre-placement examinations and substance abuse testing as well as follow-up of acute injuries. The physician’s office generally requires appointments and has limited hours of service. If the capabilities exist, the private physician may also offer executive examinations or may refer the patient to a nearby hospital for extensive laboratory, x-ray and stress testing.

The industrial clinic generally offers acute care of injuries (including follow-up care), pre-placement examinations and substance abuse testing. They often have x-ray and laboratory capabilities and may have physicians who have experience in assessing the workplace. Again, their hours are generally limited to business hours so that employers with second- and third-shift operations may need to utilize an emergency department during evenings and weekends. The industrial clinic rarely treats the private patient, and it is generally perceived as the “company doctor”, since arrangements are usually made to bill the employer or the company’s insurance carrier directly.

Immediate care facilities are another alternative delivery site. These facilities are walk-in providers of general medical care and require no appointments. These facilities generally are equipped with x-ray and laboratory capabilities and physicians experienced in emergency medicine, internal medicine or family practice. The type of client ranges from the paediatrics patient to the adult with a sore throat. In addition to acute injury care and minor follow-up of injured employees, these facilities may perform pre-placement physicals and substance abuse testing. Those facilities which have developed an occupational health component often provide periodic exams and OSHA-mandated screenings, and may have contractual relationships with additional providers for services that they do not themselves offer.

The hospital emergency room is often the site of choice for treatment of acute injuries and has generally been capable of little else in terms of occupational health services. This has been the case although the hospital has had the resources to provide most of the required services with the exception of those offered by physicians with expertise in occupational medicine. Yet an emergency department alone lacks the managed care and return-to-work expertise now being demanded by industry.

Hospital-Based Programmes

Hospital administrations have become cognizant that they not only have the resources and technology available but that workers’ compensation was one of the last “insurance” programmes which would pay fees for service, thereby boosting revenues hurt by discounting arrangements that were made with managed care insurance companies such as HMOs and PPOs. These managed care companies, as well as the federally and state funded Medicare and Medicaid programmes for general health care, have demanded shorter lengths of stay and have imposed a payment system based on “diagnosis-related grouping” (DRG). These schemes have forced hospitals to lower costs by seeking improved coordination of care and new revenue-producing products. Fears arose that costs would be shifted from group health managed care to workers’ compensation; in many cases these fears were well-founded, with costs for treating an injured back under workers’ compensation two to three times the cost under group health plans. A 1990 Minnesota Department of Labour and Industry study reported that costs of treatment for sprains and strains were 1.95 times greater, and those for back injuries 2.3 times greater, under workers’ compensation than under group health insurance plans (Zaldman 1990).

Several different hospital delivery models have evolved. These include the hospital-owned clinic (either on campus or off), the emergency department, the “fast-track” (non-acute emergency department), and administratively managed occupational health services. The American Hospital Association reported that Ryan Associates and Occupational Health Research had studied 119 occupational health programmes in the United States (Newkirk 1993). They found that:

  • 25.2% were hospital emergency department based
  • 24.4% were hospital non-emergency department based
  • 28.6% were hospital free-standing clinics
  • 10.9% were independently owned free-standing clinics
  • 10.9% were other types of programmes.


All of these programmes assessed costs on a fee-for-service basis and offered a variety of services which, in addition to treatment of acutely injured workers, included pre-placement examinations, drug and alcohol testing, rehabilitation, workplace consulting, OSHA-mandated medical surveillance, executive physicals and wellness programmes. In addition, some offered employee assistance programmes, onsite nursing, CPR, first aid and case management.

More often today hospital occupational health programmes are adding a nursing model of case management. Within such a model incorporating integrated medical management, total workers’ compensation costs can be lowered 50%, which is a significant incentive for the employer to utilize providers that afford this service (Tweed 1994). These cost reductions are generated by a strong focus on the need for early return to work and for consultation on modified work programmes. The nurses work with the specialists to help define medically acceptable work that an injured employee can perform safely and with restrictions.

In most states, US workers receive two-thirds of their salary while receiving temporary workers’ compensation for total disability. When they return to modified work, they continue to provide a service for their employers and maintain their self-esteem through work. Workers who have been off work six or more weeks frequently never return to their full employment and are often forced to perform lower-paying and less skilled jobs.

The ultimate goal of a hospital-based occupational health programme is to allow patients access to the hospital for work injury treatment and to continue with the hospital as their primary provider of all health care services. As the United States moves to a capitated health care system, the number of covered lives a hospital serves becomes the prime indicator of success.

Under this capitated form of health care financing, employers pay a per capita rate to providers for all health care services that their employees and their dependants may need. If the individuals covered under such a plan stay healthy, then the provider is able to profit. If the covered lives are high utilizers of services, the provider may not earn enough revenue from premiums to cover the costs of care and may therefore lose money. Several states in the United States are moving toward capitation for group health insurance and a few are piloting 24-hour coverage for all health care, including workers’ compensation medical benefits. Hospitals will no longer judge success on patient census but on a ratio of covered lives to costs.

Comprehensive hospital-based occupational health programmes are designed to fill a need for a high-quality comprehensive occupational medicine programme for the industrial and corporate community. The design is based on the premise that injury care and pre-placement physicals are important but alone do not constitute an occupational medicine programme. A hospital serving many companies can afford an occupational medicine physician to oversee medical services, and therefore, a broader occupational focus can be gained, allowing for toxicology consultations, worksite evaluations and OSHA-mandated examin-ations for such contaminants as asbestos or lead and for equipment such as respirators, in addition to the usual services of work injury treatment, physical examinations and drug screening. Hospitals also have the resources necessary to provide a compute-rized database and case management system.

By providing employers with a single full service centre for their employees’ health care needs, the occupational health programme can better ensure that the employee receives quality, compassionate health care in the most appropriate setting, at the same time reducing costs to the employer. Occupational health providers can monitor trends within a company or an industry and make recommendations to reduce workplace accidents and improve safety.

A comprehensive hospital-based occupational health programme allows the small employer to share the services of a corporate medical department. Such a programme provides prevention and wellness as well as acute care service and permits a sharper focus on promotion of health for US workers and their families.



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