The occupational health (OH) field, which embraces anything relevant to the impact of work upon health and of health upon work, would in theory seem vulnerable to the current economic downturn on a range of fronts.
Emphasising the importance of ensuring that employees remain as fit as possible to cope with increasingly stressful working environments and mounting workloads is all very well, but in practice, you might assume, some employers will surely be tempted to make short-term economies. When unemployment is high and potential replacements are plentiful they may try and find ways of circumnavigating the law to get rid of those with health problems rather than bend over backwards to ensure they get better.
Shrinking workforces will require diminishing OH care, and cash-strapped companies will become less able to invest in new absence management and other systems. Furthermore, the OH providers themselves will benefit little from the surplus supply of labour in the economy. The field has for long suffered from a serious shortage of qualified OH doctors and nurses and it is hard to see how a massive increase in the availability of experienced City or construction workers would help in this respect.
Being a highly labour intensive field, and one in which prices are increasingly being driven down by procurement taking control of OH purchases for larger companies, margins have tended to be uncomfortably slim. Providers commonly acknowledge that they have to settle for a margin of 10%, and even this can be eroded by discounts offered in conjunction with broader health insurance packages and by plentiful hidden costs.
SOLID PROGRESS
In practice, however, the OH field appears to be faring remarkably well. Although the last Market & Business Development OH market report refers only to progress made to the end of 2007 (see box 35), feedback from providers suggests that the steady momentum in evidence during recent years is still very much continuing.
Some players acknowledge that reduced recruitment activity has resulted in a sharp downturn in demand for pre-employment screening. Occupational Health from Aviva, for example, reports its volume to be one third lower this February than a year ago and Health Management reports a drop of “probably 50%” in the nine months since July 2008. But when it comes to the progress made across their range of OH products and services, many providers volunteer highly respectable growth rates.
For 2008, revenue growth is reported to have been around 15% by Roodlane Medical, around 10% by Atos Healthcare and around 12% by vielife – a CIGNA HealthCare subsidiary which focuses on the provision of online corporate health and productivity solutions. All three players also maintain that they are continuing these rates of progress this year. Additionally, AXA ICAS reports that it has experienced an 8% growth in revenue in the year to April 2009 and has the strongest sales pipeline that it has had for several years.
The most spectacular success story, however, comes from Health Management, which refers to growth of 60% for 2008 and is expecting to continue to grow by 50% during 2009. The company, which is predominantly based in London, the South East and Manchester, attributes this progress both to an increase in outsourcing from large corporates and to winning market share from other OH providers but stresses that it represents a triumph of personal care and attention as opposed to rock bottom pricing.
Its ability to attract very high quality clinicians has been an important contributory factor.
So has the fact that it is unusual for a major player in being an independent organisation. All shareholders work in the business, and operations are structured in a way that allows clinicians to take the lead. There are no sales targets, only quality targets.
Andrew Noble, managing director of Health Management, says: “Everything flows from recommendation because employers are drawn to wanting to work with a successful team.
OH is a very different field to medical insurance because it’s a service, more akin to law or accountancy. There are so many contracts we’ve won from established players trying to push people through decentralised call centres. The clinician sits at the front of our process and the rest of us sit in the back office.”
Even those who point out that few concrete actions have yet resulted from the publication of Dame Carol Black’s Working for a healthier tomorrow in March 2008 (see box on page 36) tend to acknowledge that it has made a major contribution towards the buoyancy of the OH field simply by promoting the importance of health in the workplace and, in particular, the notion that work is good for you.
Dr Gill MacLeod, chief executive of Roodlane Medical, says: “I would certainly say that OH is holding up better than I expected, and I’m an optimist, and the Carol Black report will have had an influence. The main failing of this report, however, is that it did not address the question of who is going to pay for everything. We have a big finance problem as a nation so, if we are going to address workplace wellness in a major way, it’s got to be up to the major employers. Those that do so will reap the rewards.”
The Healthy Work report published this March by Bupa in partnership with The Work Foundation, The Oxford Health Alliance and RAND Europe, is also likely to have given the OH field a boost. This warns that, unless addressed, the worsening health of the British workforce will damage the long-term productivity of companies of all sizes.
It predicts that in the next 20 years the number of workers with diabetes or respiratory diseases will increase by at least seven percent to over four million, while the rate of mental illness in the workforce will rise by five percent to affect 4.2 million. Rates of major disease will escalate through the impact of ageing alone, with musculoskeletal disease increasing by eight percent to impact more than seven million people in the working age population and heart disease rising by 11% to affect over a million.
DULL SPOTS
Capita Health Solutions – which, along with Bupa and Atos Healthcare, is generally considered one of the three market leaders – has, on the other hand, contracted in size during the last year. While some competitors report that it has been losing accounts, Capita itself refers to a deliberate trimming programme that reduced its book to around 50 core customers between December 2008 and March 2009 and laid off around one in 10 of its clinical and non-clinical staff.
Dr Simon Sheard, medical director at Capita Health Solutions, says: “We had a very large number of small contracts because of past acquisitions and these didn’t work for us, and in some cases we have passed them onto competitors because we didn’t want them to be disenfranchised. The problem with small accounts is that you need to generate bills for each one and there is a lot of paperwork and accompanying costs. The plan is now to move forwards and increase activities again, and the mood is positive.”
Of significantly greater concern was the closure of Vitality Healthcare in December 2008. The Simplyhealth subsidiary, acquired in 2005 under the name of Adastral Health, made the majority of its 75 staff redundant rather than sell off any part of its operations. Simplyhealth acknowledges that Vitality Healthcare was losing money but says the fact that it was closed down rather than sold off was a reflection of a caring attitude towards staff and clients as opposed to an indication that it had become worthless.
Romana Abdin, corporate affairs director for Simplyhealth, says: “When we originally acquired Adastral Health we were clear that we didn’t want to provide anything other than a very high quality service to our clients on a national basis, and this required a lot of investment. By mid 2008 we had decided that the level of investment needed over a number of years didn’t sit comfortably with our desire to focus on our core business areas.
“Potential buyers were only interested in cherry picking and we couldn’t find one willing to take the whole operation and make the investment necessary for the benefit of our staff and clients. We thought it better for clients to have a managed transfer and we worked with them to find new providers and to handle the transfer process, and our staff were spared from a long-winded process and knew what their future was.”
ACQUISITION ACTIVITY
Dame Carol Black can also claim credit for helping to instigate the field’s one significant acquisition during the last year. Prior to acquiring Grosvenor Health in June 2008, support services organisation Serco Health already had interests in several other health related activities – such as providing out of hours GP referral services for some PCTs, a forensic medical service for police and custodial healthcare to prisons. The publicity surrounding the Black review could, however, have proved decisive.
Crishni Waring, managing director of Serco Occupational Health, says: “Carol Black’s report certainly raised the profile of OH and made us realise that it is an area that will become increasingly important, so we felt that it presented a huge opportunity and one that would complement things we are already doing with our wider capability.
The transition was formally signed off this February and, although we have done a lot of work to back office systems and rebranded as Serco Occupational Health, the actual service formerly offered by Grosvenor Health hasn’t fundamentally changed.” Capita Health Solutions reports that it was very close to an acquisition last October which would have doubled the size of its business.
MBD REPORT PREDICTS CONTINUED GROWTH
MBD’s UK Occupational Health Market Development reports are widely considered to provide the most authoritative estimates of the size of the UK market for OH provision and of the progress being made within it. The latest full report, published in September 2008, indicates that the market increased by seven percent to £394m in 2007, consolidating growth of nine percent recorded in the previous year. The public sector, which is less influenced by economic cycles, has been a major growth factor.
The development of the outsourcing sector has been stronger than that of the OH market as a whole, and an estimated 53% of UK OH services was outsourced to private companies in 2007. MBD expects the proportion to increase to 61% by 2012 as more organisations accept the long-term cost savings that can be achieved by outsourcing non-core activities.
The OH market overall is expected to increase by 16% in real terms between 2007 and 2012, with annual growth moderating to between one per cent and two per cent in the short-term before returning to four percent to five percent. MBD believes that further strong growth potential exists due to the increasing awareness of OH issues but acknowledges that the lack of trained OH specialists and the economic downturn will impose restrictions.
The UK Occupational Health Market Development report (£600 – or £725 for annual subscription for four reports) can be obtained from MBD Tel: 0161 233 7094. Further details are available on www.mbdltd.co.uk.
Although the deal was scuppered as a result of the credit crunch playing havoc with costings, Capita is still considering a number of other acquisition possibilities this year – in primary care and rehabilitation as well as in OH.
The only other significant recent acquisition news relates to the continued integration of ICAS International Holdings, acquired by AXA in September 2007 and subsequently rebranded AXA ICAS. A project to integrate all the various parts of AXA ICAS onto a new IT platform is reported to be on track, with a six month long implementation roll-out due to begin in the fourth quarter of this year. In addition to enabling individual clinicians to view the whole client picture, there will be significant improvements in management reporting capability and in drilldown capability to look at clients and businesses in more detail.
NOT YET STANDARD
There remains some way to go before OH becomes seen as an integral part of group risk or group health insurance packages and those providers who offer it as an add-on still report modest interest – although many of their clients will already have OH services from elsewhere. Legal & General, which offers income protection (IP) clients referrals to Roodlane Medical, experiences a take-up of under 10%, and Standard Life Healthcare, which has an introduction facility to Health Management for PMI clients, finds that this is used by under five percent.
Nevertheless, developments within the employee assistance programme (EAP) field could provide just the impetus needed. Until recently EAPs had represented one of the more profitable products or services offered by OH providers but prices have virtually halved during the last three years and there is also now a notable trend for group risk and other health insurance providers to offer watered down “free” EAPs.
Of particular significance has been the decision by Unum, which enjoys a 48% share of the group IP market, to offer all its group IP clients such a facility in November 2008. With Legal & General already having offered a free EAP for five years, it now seems almost inevitable that other group risk providers will follow suit. Providers of paid-for EAPs are therefore likely to have to focus more heavily on offering broader absence management and occupational health services.
A judgment made last October by the Court of Appeal in the case of Dickins v O2 plc should also help to create a switch in emphasis away from simply providing an EAP towards offering sophisticated integrated health management programmes involving a number of different tools – including urgent referral to OH.
Under previous case law employers were not considered liable for personal injury resulting from an employee’s first breakdown on the grounds that this could not normally be foreseen. Nevertheless, in this case the claimant’s psychiatric injury was deemed reasonably foreseeable on the basis that she had previously complained about the stress of her job, had often been late for work and had told her line manager she did not know how long she could keep going for.
The fact that O2 referred the claimant to its confidential counselling helpline was not considered adequate to discharge its duty of care. The Court also decided that, because she had complained of severe stress, O2 should have used managerial intervention to send her home, pending an urgent investigation by OH – despite the fact that she hadn’t been signed off sick by her GP. Simply referring severely stressed employees to an EAP may therefore no longer be sufficient in isolation.
Hopefully, in the longer term healthcare intermediaries will start to raise the subject of OH with clients as frequently as they now mention EAPs. Doings so will certainly help to lock out the competition even if fails to earn any commission – which few OH providers pay.
Mike Izzard, chairman of The Association of Medical Insurance Intermediaries (AMII), says: “Whether they are doing group risk or corporate PMI, intermediaries must look at the whole picture and provide a total advice package to clients or risk losing them to someone else who does provide one. It’s a requirement under the Disability Discrimination Act for employers to cover certain aspects of employee welfare, and OH fits into this jigsaw.”
Asking commission-based intermediaries to focus too heavily on non-income earning activities during these desperate times is probably not terribly realistic but, if the OH field continues its solid rate of progress, it should be well placed to benefit from increased intermediary involvement when the upturn occurs.
STILL NO BLACK AND WHITE CONCLUSIONS
While it is generally accepted that the publicity surrounding the publication of Dame Carol Black’s Working for a healthier tomorrow and the Government’s positive response to it last November have increased awareness of the importance of OH, little in the way of concrete measures have actually yet resulted from the review.
Dr Jonathan Cleeland, medical director of Occupational Health from Aviva, says: “So far there has been a lot of Dame Carol Black talking but nothing material happening. We are looking for commercial opportunities in this area but it is not entirely clear who will be paying for our services as the emphasis is very much on the public sector getting involved. We are unlikely to participate through altruism alone.”
A Department of Health spokesman could do little to clarify the situation, saying only that: “The initiatives contained in the government’s response are progressing and project leads have only recently been finalised. We are at too early a stage to give a comprehensive update.”
Most optimism from OH providers is evident around the prospect of the existing medical certificate being replaced by a “fit note”. The government is known to have tested a fit note last summer with around 500 GPs nationwide and to have revised the form in the light of the evaluation. It is now consulting on the revised content and format of the form and a fit note scheme could be rolled out within the next 18 months.
A national system of standards and voluntary accreditation for OH services, which the Black review identified as a need, is also considered likely to materialise. This is being taken forward by a multi-professional working group that was brought together by the Faculty of Occupational Medicine last October.
David Coggon, president of the Faculty of Occupational Medicine, says: “We are now at the stage where we have a draft set of standards approved by the various stakeholder groups and are in the process of selecting a range of OH services to pilot collection of the data that would be needed for audit of compliance. We hope to conduct the pilot within the next six months.”
The Royal College of GPs, Faculty of Occupational Medicine and Society of Occupational Medicine have also been involved in ongoing training of GPs on topics relating to health and work, and in developing training materials for GPs that can be provided in electronic format – funding from the Department for Work and Pensions and Department of Health has been secured to support these activities.