Determining ROI in Early RTW Programs - Part 2
Saturday, March 12, 2005 | 0
This is the third in a series of articles that reviews return to work (RTW) programs, and how to measure returns on investment in such programs. This article reviews specific investment return measuring techniques. The first article reviewed the benefits of RTW programs, and the last article looked at some measures used to value RTW programs.
by Robert Hall, Ph.D., CRC, CDMS
ROI Step #1: Use the Key Metric of "Lost Days"
Of all possible metrics against which the value or ROI for Early RTW programs can be measured, lost days is still the most valuable. This is because "lost days" deals with both of the key elements in work disability and absence:
1. The frequency or incidence of the injury / illness (occupational and non-occupational) or other absence issue (FMLA, etc.);
2. The severity or duration of the incident.
As background, the following data provides a good overview of the impact of lost days due to occupational factors on the national level. The median days away from work for all cases was 7 days in 2002, with over one-fourth of the cases resulting in 31 days or more away from work. The following broad patterns were also found in the BLS data:
* Among major disabling injuries and illnesses, median days away from work were highest for carpal tunnel syndrome (30 days), fractures (29 days), and amputations (26 days).
* Among the most frequent events or exposures, repetitive motion, such as grasping tools, scanning groceries, and typing, resulted in the longest absences from work - a median of 23 days. Falls to a lower level resulted in the next longest absences from work with a median of 14 days.
* Of the occupations with 0.5 percent or more of the total days away from work cases, truck drivers had the highest median days away from work with 13 days. Plumbers, pipefitters, and steamfitters; industrial machinery repairers; electricians; and industrial truck and tractor equipment operators had the next highest median days away from work, 10 days.
* Injuries to the wrist or shoulder resulted in the longest absences from work - a median of 15 days, followed by injuries to the knee - a median of 14 days.
Although it is always preferable for an employer to gather their own baseline data so that current costs and other descriptors can be established, many employers do not have access to this kind of data. In this situation, the following metrics can provide a starting point for employers as a baseline against which to compare actual lost days:
| Average Cost per Workers Compensation Claim | $5,244 |
| Injuries per 100 Full time Workers per Year | 5.8 |
| Average Cost per Medical Only Claim | $422 |
| Average Indemnity Cost per Lost Time Claim | $10,126 |
| Percentage of Lost Time Claims to Total Claims | 48.3% |
| Average Medical Cost per Lost Time Claim | $11,490 |
| Average Cost of Workers Compensation per F/T EE | $511 |
| Number | Median days away from work | |
| Total muscoloskeletal disorders | 487.9 | 9 |
| Agriculture, forestry, and fishing | 6.6 | 9 |
| Mining | 3.3 | 23 |
| Construction | 42.9 | 12 |
| Manufacturing | 101.4 | 12 |
| Transportation and public utilities | 58.2 | 13 |
| Wholesale trade | 38.6 | 8 |
| Retail trade | 85.1 | 7 |
| Finance, insurance, and real estate | 11.7 | 10 |
| Services | 7 | |
| Numbe | Median days away from work | |
| Total musculoskeletal disorders | 487.9 | 9 |
| Nursing aides, orderlies, and attendants | 44.4 | 6 |
| Truck drivers | 36.8 | 12 |
| Laborers, non-construction | 24.9 | 8 |
| Janitors and cleaners | 15.2 | 7 |
| Assemblers | 15.2 | 14 |
| Construction laborers | 11.1 | 10 |
| Registered nurses | 10.8 | 6 |
| Supervisors and proprietors, sales | 9.9 | 7 |
| Cashiers | 9.3 | 8 |
| Stock handlers and baggers | 8.8 | 5 |
| Sales workers, other commodities | 7.8 | 7 |
Step #2: Determine the Value of the "Lost Days"
Although seemingly simple, calculating the value of the "lost day" can be quite complex. Technically, a value should be assigned this lost day metric based on the salary/benefits and/or indemnity benefit paid to the employee (who is not at work), administrative cost of the programs to manage the claim, utilization of medical services, replacement worker costs (hiring a temp, paying overtime, etc.), and lost productivity. This approach is very labor intensive and requires sophisticated integrated data systems, which most employers dont have.
Studies have shown that when all of the main cost drivers are accounted for, absence and disability costs are as follows:
* The total average costs for workers' compensation, sick pay, short-term disability (STD) and long-term disability (LTD) as a percentage of payroll were 6.3 percent, up slightly from 6.1 percent in 1998/99.
* The indirect costs of disability also continue to rise. Total average costs for overtime, replacement employees and workstation/job accommodations stand at 8 percent of payroll, up from 6.7 percent in 1998/99. This jump is almost entirely due to the rising cost of replacing employees in a tight labor market.
A simple, but still very effective, way to provide a quick measure of the cost of lost days for ROI purposes is to calculate the value of a single lost day. This metric includes the multiple factors outlined above.
According to a study done by Watson Wyatt and the National business Group on Health, each lost workday costs the employer 150% of their combined salary and benefits . Calculating lost days and using the multiplier as demonstrated above can provide a simple, but very useful cost metric against which the cost of the RTW program, i.e. program staff, contracted services, cost of accommodations, training costs, software/materials, etc.
The following examples illustrate how this general statistic cab be used to estimate costs:
* According to the BLS, the typical non-surgical back injury has six days of lost time. Assuming an average wage plus benefits of $18.75/hour, each day away from work costs the employer $225, or a total of $1350;
* The average carpal tunnel case has a mean lost time of 27 days, which results in a total cost of $6075.
* Depression, one of the fastest growing workplace disorders, has an average of 24 lost work days, or $5400/case.
This value can range somewhat, depending on the type of workforce and average pay, the relative "richness" of the benefit package, and employee replacement strategy, etc. However, using a figure somewhere between 100-150% of the average workers combined salary and benefits should provide a meaningful basis for estimating the cost of lost days.
Conclusion
Any employer wishing to implement an effective Early RTW program will eventually want to estimate the ROI for that program. The information discussed above provides a starting point for determining baseline absence and disability costs. With experience and systematic evaluation of an organizations unique cost drivers employers can refine their Early RTW efforts to most efficiently utilize their resources towards reducing the human and economic costs prevention of absence and disability in the workplace.
Article series by Robert Hall, Ph.D., CRC, CDMSRobert Hall, Ph.D., CRC, CDMS. For more information, please contact AtWork Resources at 1-866-463-0562 or visit http://www.atworkresources.com.
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FOOTNOTES
. http://www.wcb.state.ny.us/content/main/Small_Business/sifrtw.htm
2. Supra note 26.
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The views and opinions expressed by the author are not necessarily those of workcompcentral.com, its editors or management.
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