Adviser LeadingAge New York Summer 2015 July 2015 | Page 18

This Is
COOL

Insurance Made Simple

Safety Programs and Return
on Investment

O

ccupational Safety and Health Administration (OSHA) statistics clearly illustrate
that health care facilities that establish safety and health management systems can
dramatically reduce injury and illness costs. In some cases, you could reduce costs by up
to 40 percent. If you could save your company money, improve productivity and increase
employee morale by implementing these systems, why wouldn’t you?
In today’s business environment especially in a healthcare-related field, these safety-related
costs can impact the actual viability of your organization. Use these tips to understand how
safety programs will directly affect your facility’s bottom line.
Proving ROI
OSHA studies indicate that for every $1 invested in effective safety programs, you can save
$4 to $6 on occupational illnesses and injuries. With a good safety program in place, your
costs will naturally decrease. It is important to determine what costs to measure to establish
benchmarks, which can then be used to demonstrate the value of safety over time.
But keep in mind that your total cost of safety is just one part of managing your total cost of
risk. When safety is managed and monitored, it can help drive down your overall cost of risk.
Proving the Value of Safety
Demonstrating the value of safety to management is often a challenge because the return
on investment (ROI) can be cumbersome to measure. Your goal in measuring safety is to
balance your investment vs. the return expected. Where do you begin?
There are many different approaches to measuring the cost of safety, and the way you do so
depends on your goal. Defining your goal helps you to determine what costs to track and
how complex your tracking will be.
You may want to track your company’s total cost of safety to show the correlation with
reduced fixed expenses (in the form of workers compensation premiums), which would
include more specific data collection like safety-related wages and benefits,
operational costs and insurance costs.

Health care facilities that establish safety
and health management systems can
dramatically reduce injury and illness
costs in the long run.

Since measuring can be time consuming, general cost formulas are
available. A Stanford study conducted by Levitt and Samuelson places
safety costs at 2.5 percent of overall costs, and a study published by the
Economist Intelligence Unit (EIU) estimates general safety costs at about 8
percent of payroll.

If it is important for your organization to measure safety as it relates
to your costs of operation, more accurate tracking should be done. For
measuring data, safety costs can be divided into two categories: direct (hard) costs, which
include wages, operational costs, insurance premiums, attorney fees, accident costs and fines
or penalties, and indirect (soft) costs. Indirect costs go beyond those recorded on paper and
include factors like:
• Accident investigation
• Overtime expenses
(See Safety Programs on page 18)

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Adviser a publication of LeadingAge New York | Summer 2015