Outsourcing OH: In with the out

Is outsourcing the great hope for occupational health – or a threat to both professional standards and jobs? The jury is out on this matter. Julian Topping, head of workplace health at NHS Employers, told a conference of NHS OH advisers in April that the “shark fin” of large private outsourcing organisations was circling the health service, threatening jobs. Meanwhile, other commentators believe that outsourcing heralds a boom time for OH specialists, with skills shortages putting them in a strong position in the job market.

There are a range of factors driving the trend to outsource OH services, from the need to cut costs and focus on core functions, to the move to extend the reach of OH to smaller organisations and to get people on incapacity benefit back into the workforce.

Occupational health services are provided by three broad groups: NHS consultancies, which employ OH physicians and their teams; in-house OH departments like those still employed by major employers such as Shell, Unilever, Kellogs and Cadbury-Schweppes, and the private or independent OH sector. The last group ranges from small specialist firms to major operators such as Capita – currently the leading supplier of occupational health services in the UK – as well as Bupa and Atos Origin/Sema.

Business is booming

Business is certainly booming for suppliers. In 2005, the value of outsourced occupational healthcare grew by 10%, taking the market to an estimated value of 168m, according to the UK Occupational Health Market Development 2005 survey, produced by market research company Market & Business Development. What’s more, in the next five to 10 years, the UK market for external OH services is expected to grow by more than 15% across the board, and by 35% in the public sector.

Among those organisations that have concluded that an in-house OH function does not make good financial sense are large organisations such as the Civil Service and the BBC – the latter as a part of its entire HR function. Other major employers to go down this route are BT and Westminster City Council, with other councils such as Southampton and Swindon likely to follow suit.

“Companies are keen to concentrate on their core business and manage down head costs when they can,” says Dr Mark Simpson, director of AXA Healthcare PPP. “For us, OH is our core business – and it’s not the core business of BT or the BBC.”

However, the trend is not all one way, as recent research by manufacturers’ organisation the EEF has found. Sixty five per cent of organisations in this sector have occupational health provision, comparing favourably with the Health and Safety Executive’s estimate for organisations across the board, which is only 22% to 33%. But its 2005 survey found that the number of organisations using an in-house OH service had actually risen since 2003 – from 20% to 23%. Larger organisations were more likely to have an in-house OH function, unsurprisingly, and the use of NHS occupational health units remained static at 14% of the external OH service, says the EEF.

It’s clearly a complex issue – and one that will have a profound influence on the careers of OH professionals at all levels in the next decade. So it’s important to be clear about the pros and cons of outsourcing – and how OH staff themselves can influence the way that the service develops.

The problem for ‘traditional’ in-house OH teams is that the external providers have been better at making the business case for their services.

And it might be that the need to demonstrate the value they contribute to the business results in a service that addresses organisational needs, and can demonstrate where costs have been saved by OH interventions.

By contrast, internal OH services are sometimes criticised for continuing to provide services, such as pre-employment screening, without asking whether the data collected is being used in a way that benefits the organisation, or whether it is even being used at all.

Part of the problem, according to Sayeed Khan, chief medical adviser of the employers’ organisation the EEF, is that the medical model and the traditional mentality of OH practitioners might make them shy away from showing how they can contribute to the bottom line.

“We are not good at selling ourselves,” Khan says. “We see it as distasteful, and believe that we have gone into medicine or nursing to help people, so it would be immodest to draw attention to what we are doing.”

Effective, but invisible

Ironically, the more effective an OH service is, the more invisible it might be to the employer client. “Health and safety has the same problem – we succeed in our job if things don’t happen, whether it’s work-place accidents or asthma,” says Khan. “Employers only think about OH when they go to a tribunal. We do have to learn some business speak.”

Currently, there is still a long way to go, Khan points out. “In-house services may be highly professional, but when you ask in-house OH professionals how their role fits in with the business strategy, all too often, the answer is ‘it doesn’t’. But everything should be linked to business strategy.

“There is always a link to profitability – you need to look at direct costs, increased productivity and help people to be more productive. Looking at how you fit into the business is crucial.”

At worst, an OH service can find its professional values come into conflict with business goals. Examples are the tendency to put the ‘patient’s’ needs above those of the organisation, or to be over-preoccupied with the clinical evidence base for practice, rather than focusing on the organisational issues behind workplace ill health.

Simpson agrees that internal OH can sometimes be the architect of its own demise. “It can be easier for the client to challenge the external OH provider than the in-house provider,” he says. “OH can be a law unto itself in-house.”

Technical knowledge

Despite this, there are often strong reasons for keeping OH in-house. In some industries, outsourcing is never going to be appropriate. “In the nuclear industry, you need high levels of technical knowledge,” says Simpson. “And in the armed forces, you can’t farm out confidential services.”
Even in less specialised fields, OH might be providing a higher level of service than an external provider, but decision-makers may not realise how much they are getting from their internal OH department. While external suppliers may appear to offer clarity and focus, they may not offer such a comprehensive package, no matter how carefully the contract is hammered out.

“The problem with service level agreements (with external suppliers) is that you never get every item down,” he says. “There is a lot of good stuff that in-house people do that goes unnoticed, such as nipping down and looking at that work site to see if there is something OH needs to do.”

Until internal OH services become better at demonstrating the value of what they do in financial terms, it will remain easier for employers to measure the service they are getting from external suppliers, says Dr Michael Goldsmith, executive chairman of Medigold Health Consultancy and chairman of the Commercial Occupational Health Providers Association (COHPA), a body which represents the interests of medium-sized occupational health providers.

“The advantages to organisations of outsourcing are that the external company has to deliver to an agreed contract, and then has to bid for repeat business,” he says.

“And HR professionals are getting more knowledgeable about what they are buying in. They know what they are looking for. We used to have to tell them what we could offer, now they will come to us having done six months work on their specification, and researched exactly what other organisations are getting.”

Even as an external supplier himself, Goldsmith says that OH providers do need to work hard to avoid potential pitfalls, such as being seen as focused on preventing absenteeism. “One risk is that employers will see OH not just as people who are keeping the staff healthy, but as medical policemen,” he says. “And so staff see OH as the enemy – which is sad. They end up going to see their GP to protect themselves, and then going to OH to give a good account of themselves.”

Cheap alternative

Another concern is that many services offered under the umbrella of outsourced OH are seen as a cheap alternative to core OH services by employers who do not realise the contribution of high quality OH to the bottom line. While risk management is still an essential core function, employers are now looking for a range of additional services from external suppliers, including health promotion schemes and advice on psychosocial issues through counselling and employee assistance programmes (EAPs).

Quality control is the problem here, particularly when choosing from smaller or niche suppliers offering ‘wellness’ programmes where there is little evidence of their efficacy. This can be a false economy, argues Goldsmith.

“Everyone and his dog could potentially set up as an OH provider. There are lots of hangers-on and ‘wellness’ providers competing for resources. I’ve yet to see any proof that going to the gym boosts productivity – but if you provide private treatment for someone at the right time, it can make all the difference to getting them back to work. It’s about targeting funds.”

There is still uncertainty about how the growth in outsourced services will manifest itself. Major players such as Capita have made an impact – in the public sector, especially – by delivering IT-based OH services. Their smaller competitors can find these large-scale suppliers are dominating the market.

If this all sounds somewhat unnerving, there is good news for OH practitioners. This is an area in which specialist skills are already at a premium, and with increasing demand, jobs will be available and salaries should rise. Goldsmith says there could be opportunities for more OH consultants, for example.

“There are probably only around 500 OH consultants in the country, and we need to do more to address skills shortages,” says Goldsmith.

“Physicians can’t do everything – there is a greater role for OH nurses, and for OHAs, particularly in surveillance, counselling and routine testing.”
Arguably, the trend for outsourcing part of the OH function but keeping the strategic OH function in-house is a positive way of dealing with skills shortages. Organisations such as the Royal Mail have outsourced the ‘transactional’ functions, but kept their high-level OH staff in place, so that there is a consistent OH strategy which is handled internally. All this means greater flexibility within the OH careers market, which should lead to increased opportunities for OH professionals.

“Some outsource providers are big, big organisations, amalgamated from medium-sized organisations, and they can offer a really good career structure,” says Khan. “If you get in and get qualifications, get a regional role and then head of section, it’s not a bad career structure.

“There is more to offer than in many in-house organisations, where OH staff often ask, ‘where is the career development?'”

John Wigglesworth, business development director with Capita Health Solutions (CHS), agrees that this is a positive trend in career terms.

“There are a lot of cards in the hands of OH professionals, and they do have a lot of choices,” he says.

With 475 staff and 275 healthcare professionals, CHS is the largest employer of OH professionals outside the NHS. “There is much more scope for OH professionals to develop their careers in organisations like ours,” says Wigglesworth. “Options are much more limited in an in-house function, where often you are effectively playing ‘dead men’s shoes’.”

Judy Cooke, president of the AOHN (UK) and general manager, occupational health services at British Airways, sounds a note of warning, however. While she agrees that there is scope for more flexibility in OH careers, there is the danger of focusing too much on cost reduction – for example, in expanding the use of OH technicians without understanding what OH nurses can do.

“I think the whole issue of technicians must be understood – [unfortunately] it is less about releasing OH nurses to do more relevant work, and more to do with pure cost reduction and availability,” she says. “Many OH nurses are now anxious about a lack of variety in their work.”

Outsourcing OH – the pros…

  • Clarity: Service easier to measure in cost terms
  • Focus: Core function of specialist supplier
  • Strategy: Clearer understanding of role of OH and contribution to the business
  • Professionalism: Increased career opportunities in large suppliers

… and cons

  • Expense: External suppliers are profit-making concerns
  • Inflexibility: Service-level agreements may miss hidden OH functions
  • Quality control: Broader array of OH services on market could dilute standards
  • Image: External OH consultants are more likely to be seen as ‘health police’ by staff

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