Survey Tracks Claims Success
What makes a claims organization successful? They tend to measure their performance using outcomes-based metrics, employ claim decision support tools such as workflow automation and predictive modeling, and use an “advocacy-based” claims model that puts employees’ needs first.
So says the 2016 Workers’ Compensation Benchmarking Study by Chicago-based Rising Medical Solutions, which surveyed 492 claims leaders representing large carriers, third party administrators and employers, as well as midsize and smaller organizations such as risk pools and government entities.
This year, for the first time, the fourth annual study identified claim operational best practices in higher-performing organizations, as defined by having a claims closure ratio of 101 percent or greater.
Proof that the study is gaining industry-wide traction was evidenced in that more than 600 people signed up for an early-November Risk & Insurance webinar on the topic.
“One of the major goals of the report is to provide an opportunity for like organizations to benchmark what other organizations are doing to drive better results,” says the study’s author, Denise Zoe Algire, director, managed care and disability, corporate risk management at Albertsons Cos. in Pleasanton, Calif.
“Within that, the report shows a really clear picture of what higher-performing organizations are doing and what initiatives are moving the needle.”
According to the study, such organizations are more likely to use key performance indicators (KPIs) that clearly show how desired claim outcomes are being achieved or not achieved. About half of all of the claims leaders who responded to the survey said they do not yet apply KPIs that measure their desired outcomes.
“Looking at what organizations say are the most important outcomes to a claim, I was really pleased to see that the highest priority was functional recovery of injured workers,” Algire says. “I think we have some work to do in terms of how we connect KPIs to what we say is most important. Through current KPIs, how do we measure and reinforce performance focused on desired outcomes?”
Dan Holden, manager, corporate risk and insurance at Daimler Trucks North America in Portland, Ore. and one of the members of the advisory council for the study, says he was surprised that in 2016 professional claims organizations are either still trying to figure out how to measures outcomes, are incorrectly measuring outcomes, or just aren’t measuring them at all. Of the 40 percent of organizations that do not measure outcomes, just under 50 percent of that group stated it wasn’t a business priority.
“If gauging outcomes isn’t a business priority for a claims outfit,” Holden says, “I’m not sure what is?”
Two-thirds (66 percent) of the survey’s participants use workflow automation and just over 50 percent use push technology or predictive modeling to some degree, a significant improvement from prior studies. Higher-performing organizations are particularly more likely to use claim decision support tools and use them more frequently throughout the claim lifecycle.
“One of the major goals of the report is to provide an opportunity for like organizations to benchmark what other organizations are doing to drive better results.” — Denise Algire, director, managed care and disability, corporate risk management at Albertsons Cos.
Holden says there is “finally” an understanding that predictive modeling isn’t meant to replace the claim professionals’ thought process, but rather a tool to support the claims professionals in their decisions.
The study also showed that higher-performing organizations are also more likely to have implemented an advocacy-based claim model and are more likely to be early adopters, front runners and innovators – including implementing value-based care models, linking provider quality and outcome measures to provider agreements, and employing formal knowledge transfer strategies.
Holden says that while the adoption of an advocacy-based claim model isn’t a new concept, especially for self-insureds, it has yet to be adopted by the majority. However, he anticipates that more claims organizations should switch to that model in the future.
Holden was also pleased that the latest study placed increased emphasis on succession planning and knowledge transfer.
“This can be a challenge for claims departments with limited staff and thin profit margins,” he says. “Be that as it may, the Boomers are in the process of vacating so employers need to figure out how to attract the best and brightest.”
The study also found that claims organizations rank psychosocial/co-morbidity factors as the top barrier to achieving successful outcomes, indicating recognition that these factors – not litigation or return-to-work accommodation – are the most significant drivers of disability and cost.
Dr. Marcos Iglesias, medical director at The Hartford and another member of the study’s advisory council, says he was gratified to see that this issue has reached “the level of attention that it has today.”
“The medical community has known for many years that oftentimes it is not medical or biological issues that keeps injured workers from returning to work, but rather psychosocial risk factors that delay recovery,” Iglesias said.
Such barriers are not necessarily psychiatric issues like schizophrenia or major depression, but pertain more to the way people think, feel and behave, he says.
“The medical community has known for many years that oftentimes it is not medical or biological issues that keeps injured workers from returning to work, but rather psychosocial risk factors that delay recovery.”– Dr, Marcos Iglesias, medical director at The Hartford.
“Fear of activity, fear of re-injury, catastrophic thinking and even perceived injustices – blaming something or someone else for their situation – can become the barrier to function,” he says. “These thoughts are powerful in terms of how they can delay recovery.”
The Hartford has “very robust” data analytics to help identify such claimants, and the Hartford, Conn.-based carrier has developed a number of solutions to help individuals overcome these barriers.
“That’s the challenge the industry faces – what to do with that knowledge,” Iglesias says. “It’s now incumbent upon payers and other carriers to start looking for how to identify how they are going to help.”
Other key findings of the study include:
— Claims leaders have embraced employee functional recovery as the main benchmark for claims success; however, only 24 percent actually measure functional outcomes.
— Claims organizations rank access to care as the lowest-ranked barrier to successful outcomes, indicating that the Affordable Care Act didn’t have the impact some in workers’ compensation thought it might.
— Claims leaders say how they measure the performance of medical providers, and what they do when they identify sub-optimal performance.
Caring for the Caregivers
Hospital workers face a dizzying array of health and safety risks for workers, but Sonni Burrell and her team at Adventist Health Central Valley Network in Hanford, Calif., are committed to protecting every employee who cares for their patients and keeps operations running smoothly.
The organization realized a 23 percent drop in injury frequency since 2012, despite a steadily growing employee population. And since 2011, the organization achieved a nearly 79 percent drop in its average total incurred cost per claim, along with a 74 percent drop in its average medical cost per indemnity claim.
Risk & Insurance® recognizes these results with a 2016 Teddy Award Honorable Mention.
One major challenge had been exposures to blood-borne pathogens from accidental butterfly needle sticks during venipunctures, said Burrell, the network’s human resources and workers’ compensation manager.
These occurred when clinical staff removed the needle from use and began to activate the safety mechanism.
They had been using a safety-lever butterfly needle, requiring them to slide forward the safety device over the needle. The safety device was located on the back housing of the needle, causing the employee’s finger to often slip when activating the device, up to the point of the needle and causing a blood-borne pathogen exposure.
“When I was hired, I went to our employee health department to get a pre-employment physical, and the nurse working with me mentioned that she was having such trouble with the butterfly blood draw needles,” Burrell said.
Burrell researched network records, validated the nurse’s concerns and collaborated with materials management, infection prevention, and finance to make a change.
The network switched to a retractable butterfly needle, which retracts into the housing unit by depressing a button after use, while the needle is still engaged in the vein, never exposing the dirty needle.
Since the switch in the fourth quarter of 2013, there have been no new butterfly needle sticks.
“We are focused on keeping our employees engaged in order to fulfill our vision to be the best place to receive care, the best place to practice medicine and the best place to work.” — Sonni Burrell, human resources and workers’ compensation manager, Adventist Health Central Valley Network
After a significant investment in patient-lift equipment across all facilities, Burrell’s team wasn’t satisfied with the reduction of injuries related to patient handling. The team investigated the problem, and uncovered a training disconnect.
They implemented additional mandatory training sessions to stress the importance of the proper use of the lift equipment and to give employees a better understanding of when to use the equipment.
Patient handling-related injuries have been trending steadily downward since the additional training was implemented.
In 2015, the organization applied for a grant to create an ergonomics program. They were able to train two employees as Certified Ergonomic Evaluation Specialists (CEES), who are now conducting ergonomic assessments in all office, lab, industrial and health care environments.
They also purchased web-based software, currently being used by 1,300 employees, that guides employees through the process of setting up ergonomically sounds workstations.
In an industry with the most non-fatal injuries according to the Bureau of Labor Statistics, it’s important for hospital staff to be safe, Burrell said.
“If they are injured and are unable to work, or cannot work at full capacity, they may not be able to deliver the best patient care — which is our goal as an organization,” she said.
“It’s also important to employee engagement. We are focused on keeping our employees engaged in order to fulfill our vision to be the best place to receive care, the best place to practice medicine and the best place to work.” &
Read more about the 2016 Teddy Award winners:
Bringing Focus to Broad Challenges: Target brings home a 2016 Teddy Award for serving as an advocate for its workers, pre- and post-injury, across each of its many operations.
The Road to Success: Accountability and collaboration turned Hampton Roads Transit’s legacy workers’ compensation program into a triumph.
Improve the Well-Being of Every Life: Excela Health changed the way it treated injuries and took a proactive approach to safety, drastically reducing workers’ comp claims and costs.
The Family That’s Safe Together: An unwavering commitment to zero lost time is just one way that Harder Mechanical Contractors protects the lives and livelihoods of its workers.
More coverage of the 2016 Teddy Awards:
Recognizing Excellence: The judges of the 2016 Teddy Awards reflect on what they learned, and on the value of awards programs in the workers’ comp space.
Fit for Duty: 2013 Teddy Winner Miami-Dade County Public Schools is managing comorbid risk factors by getting employees excited about healthy living.
Saving Time and Money: Applying Lean Six Sigma to its workers’ comp processes earned Atlantic Health a Teddy Award Honorable Mention.
Caring for the Caregivers: Adventist Health Central Valley Network is achieving stellar results by targeting its toughest challenges.
Advocating for Injured Workers: By helping employees navigate through the workers’ comp system, Cottage Health decreased lost work days by 80 percent.
A Matter of Trust: St. Luke’s workers’ comp program is built upon relationships and a commitment to care for those who care for patients.
Keeping the Results Flowing: R&I recognizes the Metropolitan Water Reclamation District of Greater Chicago for a commonsense approach that’s netting continuous improvement.
The Cost of Compliance
Across the construction industry — from single-family homes to high-rise office towers to new highways — contractors struggle to comply with a myriad of federal, state and local regulations that are putting pressure on margins.
Take residential construction. On average, regulations imposed by government at all levels account for 24 percent of the final price of a new single-family home, according to the National Association of Home Builders in Washington, D.C.
Roughly 60 percent of that is due to costs during the lot development stage, including delay costs from having to seek approval or wait for government decisions, said Robert D. Dietz, the trade group’s chief economist.
“If a company has loans outstanding on particular projects, delays cause those firms to incur additional interest expense,” Dietz said.
“There are also costs for zoning and subdivision approval, as well as costs for leaving land undeveloped for green space, per government requirements.”
Regulatory costs imposed during the home construction phase include permit and hookup fees, development impact fees and costs to meet building code requirements, and costs to keep projects compliant with ever-increasing environmental regulations.
The Environmental Protection Agency and the Army Corps of Engineers are seeking to expand the types of land that require a clean water permit, which can cost tens of thousands of dollars per lot, Dietz said.
Ongoing effects of requirements associated with complying with stormwater regulations are also included in embedded costs.
As for general building requirements, typically the market demands energy-efficient windows and envelope of the house, but in some cases those requirements are being increased, which in turn increases the costs of the materials and construction, he said.
Residential contractors need to stay up-to-date on the rapidly changing application of each state’s right-to-repair statutes for owners of new homes and condominiums by courts and insurance carriers, as failure to strictly adhere to the evolving laws can greatly increase the contractor’s exposure, said Rodney Moss, senior vice president with Aon Risk Solutions’ construction services group in Dallas.
Until 2013, Moss served as in-house counsel for Balfour Beatty Construction (formerly Centex Construction).
All types of contractors also need to be up-to-date on the latest environmental regulations not only from the EPA, but also from applicable state and even local jurisdictions, such as rules on construction equipment emissions in California, Moss said.
“The regulations are becoming increasingly difficult to comply with, particularly for national contractors working in multiple states with different standards,” Moss said.
“Investigations and enforcement actions often result in the jobsite getting shut down, and there are balance sheet risks beyond just the fines because regulatory citations can also become a default under the construction contracts and often spawn expensive civil litigation from the injured parties,” he said.
Moreover, regulatory compliance has almost become a strict liability issue, as regulators are less flexible: They issue punitive citations first, and then contractors must go through an appeals process, Moss said.
“Contractors are terrified that they will be the one that the regulators try to make an example of,” he said.
‘Blacklisting Executive Order’
Jimmy Christianson, regulatory counsel at the Associated General Contractors of America, said that the trade group is concerned by a number of recent federal actions, including President Barack Obama’s 2014 Fair Pay and Safe Workplaces Executive Order, or what the AGC refers to as the “Blacklisting Executive Order.”
Per the Federal Register, the order requires federal contractors to report whether there has been an administrative merits determination, civil judgment, or arbitral award or decision rendered against them during the preceding three-year period for violations of any of 14 identified federal labor laws, executive orders or equivalent state laws.
Contracting officers and labor compliance advisers will assess whether the violations are serious, repeated, willful or pervasive, as part of the determination of whether a contractor has a satisfactory record of integrity and business ethics.
Christianson said the order is onerous because it requires prime contractors to review the labor law records of potentially hundreds of subcontractors bidding on a $50 million job, and then possibly require them to sign labor compliance agreements with federal enforcement agencies before the agencies allow the subcontractors to bid on work.
“However, there already is a suspension and debarment process so this additional step isn’t necessary — it just adds more time and paperwork to the procurement process,” he said.
“This order is really just about giving labor agencies more leverage to get down deeper into those companies, which produces more risk of blacklisting.”
The AGC is also concerned about a post-injury drug testing rule by the Occupational Safety and Health Administration set to take effect in 2017, that amends regulations pertaining to the recording and reporting of occupational injuries and illnesses, said Kevin Cannon, AGC director of safety and health services.
Per the Federal Register, while the new rule does not ban drug testing of employees, it does prohibit employers from using drug testing — or the threat of drug testing — as a form of adverse action against employees who report injuries or illnesses.
Employers should limit post-incident testing to situations in which employee drug use is likely to have contributed to the incident, and for which the drug test can accurately identify impairment caused by drug use, it said.
“OSHA views such testing as an invasion of privacy and unnecessary based on the worker’s type of injury or illness,” Cannon said. “However, we think post-incident drug testing is very important to ensure safety on the worksite — not as a stand-alone tool, but rather as part of a comprehensive safety program.”
A $5 Billion a Year Rule
Michael Halter, Northeast zone workforce strategies practice leader with Marsh Risk Consulting in Rochester, N.Y., said that OSHA’s regulations have had many positive results, including the reduction of annual workplace fatalities from 14,000 prior to the agency’s creation in 1971, to 4,821 in 2014.
Still, sometimes industries need to challenge the agency’s assertions on the cost of new regulations, Halter said.
For example, OSHA’s new rule on occupational exposure to crystalline silica significantly lowered the permissible exposure limit and provided additional worker protections. While OSHA estimated that the new rules would cost the industry $511 million per year, a study by the Construction Industry Safety Coalition concluded the change would actually cost $5 billion a year.
“We advise our construction clients on how to comply with the silica and other OSHA standards using substitution, engineering controls, work practice control, administrative controls and personal protective equipment,” Halter said. “Other control methods may include the use of prevention through design principles and pre-fabrication.”
State and local governments also have increased their regulation of employer-employee relations with increases in minimum wage, requirements for paid sick leave, options for retirement investments in the private sector and more, said E. Colette Nelson, chief advocacy officer at American Subcontractors Association Inc. in Alexandria, Va.
The trade group continues to focus its government advocacy efforts on issues that are unique to construction subcontractors, including ensuring that subcontractors have payment assurances on projects financed through public-private partnerships at both the federal and state levels; requiring federal and state government contracting entities to process and pay change orders in a timely manner; and encouraging federal and state governments to improve the transparency of their payment practices.
“This includes making the prime contractor’s payment bond more readily available to subcontractors and suppliers, such as by posting it on a website; making available information on payment to prime contractors; and by providing a report on the status of each change order on a project,” Nelson said.
Paul Becker, global industry leader, construction, at Willis Towers Watson in Nashville, Tenn., said the construction industry is grappling with medical and recreational marijuana laws state-to-state and the associated labor dilemmas.
“Since the laws are quite new, there really isn’t case law, claims history or agreed-upon levels for testing, so it’s emerging as a challenge,” Becker said.
“The industry can test employees for the drug and ban the use of it, but it’s not clear yet exactly how marijuana is going to impact an organization’s overall risk. Ultimately, marijuana will be reflected in data around worker injuries if usage increases significantly, and the industry will begin to price for it.”
Contractors also have to be cognizant of new rules by the Federal Aviation Administration concerning another emerging risk: the commercial use of drones.
Under the rules, the person actually flying a drone must have a remote pilot certificate with a small UAS rating, or be directly supervised by someone with such a certificate. Among other height, speed and operational restrictions, pilots must keep drones within visual line of sight.
The new rules should allow construction firms and their insurers to provide appropriate risk management strategies and coverage for them, Becker said.
“So in this way the new regulations are actually an example of an effective response to a new technology,” he said. &