Profiting from OSHA inspections?

Want to save $355,000 over the next five years by cutting your injury rate 9.4% and your workers comp costs by 26%? New research finds that receiving a random OSHA inspection (at least in California) did exactly that. The study, entitled “Randomized Government Safety Inspections Reduce Worker Injuries with No Detectable Job Loss,” appeared in the May 18, 2012 issue of Science.

Researchers at Harvard Business School and UC Berkeley selected 818 California companies matched by size, industry and other characteristics. Half of the companies had been randomly inspected, while the other half were eligible for inspections but not chosen. Only firms with one plant were analyzed so that effects of an inspection on injury rates and costs could be clearly identified.

Compared with uninspected firms, the companies randomly inspected showed a 9.4% decrease in injuries for both large and small accidents. The researchers found no evidence of any cost (including jobs, wages, sales, credit ratings and business survival) to businesses that had been inspected. Instead, the decrease in injuries led to a 26% reduction in costs from medical expenses and lost wages, saving the average company $350,000 over the five years following the inspection.

Let’s try the math. Healthcare has historically been grossly under-inspected by OSHA despite chronically high incidence rates and workers comp losses. For example, of 97,186 state and federal OSHA inspections in FY 2011, hospitals, nursing and residential care and ambulatory health services received 1,989 (2%). With a worker population of about 11% of the 2010 U.S. workforce, their pro-rated “fair share” would have been 10,690 inspections. Applying the findings of the study, these 10,690 inspections would have yielded a five-year savings of $3.8 billion and well over 61,000 prevented injuries and illnesses.

Does it pass the sniff test? As with any research, there are a lot of important “ifs” in the full text of this study. These “limitations” define what assumptions were made by the researchers (i.e., results are limited to single-site, high-incidence rate California establishments, so results in other states and industries might vary) and why they matter. This helps us understand whether the conclusions can be generalized outside the study group, as in, “Does this apply across the country?” The short answer is no, or at least not without a lot more work and footnotes. But it’s a good start.

While the exact numbers and claimed benefits may be debated, what’s really going on is the benefit of putting an emphasis on safety, even if only because of fallout from an inspection. This academic treatment of “safety pays” gives us another measure of just how that might be evaluated. And that’s a good thing.

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