Occupational Health Business Plan

Market Analysis Summary

In 1998, U.S. health care costs were over $1 trillion, far more than any other nation in the world. Work place injuries, illnesses, and fatalities resulted in 125 million days of lost work and cost more than $120 billion in 1994. Of that, approximately 40 percent relates to the cost of lost time/work, 40 percent to medical costs and 20 percent to legal and related costs. The service and trade industry have emerged as a major safety and health problem and today account for 47 percent (3.1 million) of all work place injuries and illnesses. The average annual health care cost per person in the United States far exceeds $3,000 of which employers paid 30 percent. In a recent report of the Bureau of Labor Statistics, U.S. Department of Labor, injuries which accounted for the most days lost from work included Carpal tunnel syndrome, hernia, amputation, fracture, sprain/strain, cuts/laceration and chemical burns.

Recent studies indicate returns on investment in wellness programs for various companies ranging from $1.91:1 to $5.78:1. General Electric's aircraft engines division, for example, saves $1 million per year through its wellness programs. Traveler's Corporation reported a $3.40 return for every dollar invested in health promotion, yielding total corporate savings of $146 million in benefits costs.

The health of a business is affected by the health of employees. Consider these facts:

• Absenteeism costs businesses in the U.S. $30 billion per year.
• Unhealthy lifestyles account for 40% of U.S. health care costs.

Statistically it has been shown that for every 100 employees:

1. 50 have a risk factor of moderate stress.
2. 35 are at least 20% overweight.
3. 30 smoke.
4. 25 have cardiovascular disease or high cholesterol.
5. 10 have high blood pressure.

Employees with 4 - 5 health risk factors have four times the medical expenses. Those with six or more have eight times the medical costs.

U.S. Employment/Economic Profile

Important demographic changes are taking place in America that point to the importance of worker productivity in coming decades.

• 19 million new jobs will be created by the year 2006, but there will only be 17 million workers to fill them.
• Service-producing industries (i.e. hotels, advertising, health care etc.) will account for virtually all the job growth. Only construction will add jobs in the goods-producing sector, offsetting declines in manufacturing and mining.
• The Manufacturing industry's share of total jobs is expected to decline, as a decrease of 350,000 manufacturing jobs is projected.
• An estimated 80 percent of jobs to be filled in the immediate future will require more than a high-school education. Only 74 percent of Americans, however, finish high school, and only 67 percent graduate with adequate skills.
• The number of skilled workers available to fill new jobs is decreasing, meaning that employers are facing more severe competition for labor. Thus, the health and productivity of each employee becomes crucial to a company's success.

Within the Killeen ZIP codes we have identified 40 major employers with approximately 20,000 total employees. A total of 18 major employers have been identified in the Belton ZIP codes representing 3,390 employees. And, within the Copperas Cove zip codes, 37 major employers have been representing 3,339 employees. Although Workwell will concentrate its initial efforts in the Killeen market, both Belton and Copperas Cove are areas where Workwell should consider expanding its services to. By the end of 2000 it is anticipated that Workwell will expand its service area to cover all employers in Bell, Lampasas and Coryell Counties.

4.1 Market Segmentation

The market for Workwell is not particularly segmented, as potential customers include all Bell, Lampasas and Coryell county employers that offer their employees some type of medical benefits, are experiencing escalating health care costs, and wish to more effectively manage those costs. Workwell, however, segments its services for individual employers. Workwell works with senior management to design and develop personalized health and wellness programs for its employees.

-	1998 Pop	2003 Pop	Pop-Armed Forces	Pop-Labor Force	Pop-Ages 18-64	Pop-Labor Force-Unemployed
Bell	136,192	150,700	16,995	49,815	85,286	5,727
Coryell	72,625	76,971	25,543	17,698	48,532	2,054
Lampasas	16,082	18,769	417	9,687	9,089	743
Total	224,899	246,440	42,955	77,200	142,907	8,524

• During 1987 to 1997 this target area gained approximately 23,000 new jobs. Fifty-seven percent of these new jobs (13,000) were gained during the five-year period of 1993 to 1997. The trade, services and government sectors accounted for 12,090, or an astounding ninety-three percent of the new jobs during this period. In 1998, over three-fourths of the area's employment, or 57,900 jobs, out of an employment total of 77,200, was concentrated in these three sectors.


• Between February 1997 and February 1998, employment in the target area increased by 4,200 jobs, or 4.9 percent, the third highest rate of increase among the state's 27 metropolitan areas and over half a percent higher than the state average.


• During 1997 the greatest job growth in the target area occurred in the trade and services sectors followed by high growth in the construction, manufacturing and government sectors. In February 1997, the trade sector employed approximately twenty-six percent of the total labor force and accounted for twenty-nine percent, or 1,200 total new jobs. Construction jobs increased by 16.2 percent, or 600 jobs. The manufacturing sector brought an additional 400 new jobs to the area for a 4.2 percent increase.


• The government sector makes up almost on-quarter of the Killeen metro area employment. Fort Hood, large school districts, state prisons, as well as a variety of local, regional, state and federal agencies contribute to government employment. As of February 1995, the active duty population assigned to the base was 45,000, thus making it the largest employer in the state of Texas. Fort Hood has a direct financial impact of $1.8 billion annually to the local economy.

4.1.1 SWOT Analysis

An analysis of Centroplex Occupational Medicine Center's strengths, weaknesses, opportunities and threats concluded the following:

Strengths

• Centroplex Health System's reputation for excellent quality service along with a caring attitude.
• Convenient and easy access location from 190 and Killeen Mall.
• The only occupational medicine center in Killeen.
• Ability to offer 24-hour coverage through affiliation with Centroplex Hospital Emergency Department.
• Ability to customize programs to meet the needs of the client companies.
• Already have the equipment and space required. Only a minimal capital investment is required.
• Ability to deliver services at the work site.
• The Centroplex Health System history of utilizing a holistic approach toward health care delivery. 
• The new and improved Centroflex Rehab.

Weaknesses

• High overhead expenses along with a negative cash flow.
• Lack of an automated, controlled and coordinated financial and clinical information management system.
• Lack of any coordination and formalized relationship with Centroplex hospital emergency department.
• No marketing strategy.
• No Leadership Accountability.
• Lack of a consistent pricing schedule and discount policy.
• Poor market penetration.
• Lack of market information.
• Lack of networking/working relationship with referral sources and payers.
• Lack of clear understanding regarding COMC's role in Centroplex Health System community service efforts.
• Lack of specific expertise/resources.

Opportunities

• Companies have an increasing need for assistance with OSHA compliance issues.
• Companies have an increasing need for assistance with ADA compliance issues.
• Increasing cost of workers' compensation as well as other health care benefits to employers.
• Increasing need for companies to implement accident prevention (safety) programs.
• Renewed interest among employers for maintaining a healthy, fit workforce.
• Opportunity for Workwell program to manage many of the employee health functions and thus decrease Centroplex Health System workers' compensation costs.
• Centroplex Health System interest in increasing outpatient activities.

Threats

• Lack of automated information management system.
• Lack of a sales/marketing force.
• Medium sized industrial area.
• Competition from Scott & White.
• War.

4.2 Target Market Segment Strategy

We cannot survive just waiting for the customer to come to us. Instead, we must get better at focusing on the specific market segments whose needs match our offerings. Focusing on targeted segments is the key to our future. We have the components in place to capture and satisfy the identified need.

Therefore, we need to focus our message and our product offerings. We need to develop our message, communicate it, and make it good.

4.2.1 Market Needs

Presently there is no one providing a comprehensive industrial occupational medicine/workers' compensation program in the service area. This can be considered an untapped segment of services that neither Scott & White nor Centroplex Health System, the two main health care systems in this area, have ventured into.

1998 W/C OTJ Injury - Treatment Location

• Employer Clinic: 1,423(18%) Phy. Office: 1,695(22%) Hosp. ER: 2,785(36%)
• Urgent Care CTR: 1,363(18%) Other: 454(6%)
• 1998 Total OTJ's: 7,720

MARKET NEED ANALYSIS

YEAR	POP.	TOTAL LAB. FORCE	PROJ. OTJ'S (10%)	W/C @ COMC	W/C @ CHS E.R.**	TOTAL	MKT% W/C @CHS
1998	224,899	77,200	7,720	1,362	1,170	2,532	33%
1999	229,207	80,288	8,028	2,005	1,033	3,038	37%
2000	233,515	83,587	8,358	2,659	885	3,544	43%
2001	237,823	87,045	8,704	3,192	858	4,050	47%
2002	242,131	90,669	9,066	3,732	824	4,556	50%
2003	246,440	94,468	9,446	4,278	786	5,064	53%

**There is a 15%; 30%; 35%; 40%; and 45% per year reduction in E.R visits and added to COMC visits. This is achieved as the E.R and COMC better coordinate their scope of services. Commitment from senior leadership is crucial in making this happen.

Centroplex Health System as a major employer itself will benefit from the services provided through Workwell. In 1998, the 213 OTJs at Centroplex Health System accounted for over $437,000. By implementing an occupational medicine program and promoting its services to employees, the Centroplex hospital will be able to educate its employees on how to prevent OTJ and thus significantly reduce its own workers' compensation costs.

4.3 Service Providers Analysis

Buying patterns vary by the size of the employer and according to the internal organization.

Companies with 50 to 100 employees may have health care handled by the owner or a key executive. Often it is the responsibility of the Personnel Administrator as an individual (if that function is internal to the company). Also, Personnel Administration may be outsourced, but benefits may not. Sometimes an independent benefits brokerage firm handles all recommendations.

Larger companies from 200 to 500 employees may have Personnel Departments of several people. They might also employ a brokerage or consultant.

Thus, it is imperative that Workwell have flexible programs and sales and marketing efforts that are targeted to a diverse set of potential buying patterns.

4.3.1 Alternatives and Usage Patterns

Scott and White currently offers an Occupational Medicine program in Temple but it is not considered a strong competitor due to its distance from COMC. Scott and White does pose a threat being that they have clinics in the vicinity of COMC and the Centroplex hospital that could easily duplicate their occupational medicine services currently in Temple. Time is of the essence for developing Workwell.