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By JARED SHELLY, senior editor/web editor of Risk & Insurance®

It's no secret that cities and municipalities have been facing serious financial pressures over the last few years, so the last thing they need is fraud and abuse in their disability and workers' compensation programs.

In its worst year, 2006, the town suffered 3,600 lost work days from the 1,000 workers employed by the municipality. To think that all those people were out on legitimate workers' comp, disability or sick leave is simply incorrect.

"To a certain extent they were treating (disability and workers' comp) like a supplemental pension," said Robert H. P. Finnegan, Islip's director of labor relations and personnel. "The idea of anyone implementing any type of controls, or the town acting on its rights to send [employees] for independent medical evaluation, to offer light duty, to use surveillance was oppressive."

Sean Brady, president of Brady Risk Management Inc., which consults with Islip, said there was "a history of neglect" at the town that led to so many unwarranted absences.

Just five years later, a culture of abuse and mismanagement has given way to an innovative, no-nonsense approach to workers' comp and disability, leading to the town being honored as a recipient of a 2011 Theodore Roosevelt Workers' Compensation and Disability Management Award in the nonprofit sector. The Teddy Award is sponsored by Sedgwick Claims Management Services Inc.

The transformation started when Phil Nolan was elected a town supervisor in 2006. By 2008, he had hired Finnegan to clean things up and crack down on the abuse in the workers' comp system.

With his glasses, bowtie and confident demeanor, Finnegan carries a fair but firm approach to work that was sharpened in 20 years of working with the Metropolitan Transit Authority in New York.

Finnegan's philosophy is simple: If you're able to come to work, you should come to work.

To clean up all the waste, Finnegan started small. He made employees out on disability and workers' comp sign in at the office or call in between 9 a.m. and 10 a.m. each day of their absence. If a worker didn't show up or call, their pay was docked by one day or they were disciplined.

During talks with injured workers, Finnegan asked his version of 20 questions: How's the healing process going? When was the last time you saw your doctor? What's your daily routine at home? Do you have another source of income?

One question was perhaps more important than the rest: Are you willing to take a light-duty assignment, at the same pay rate, and come back from leave early? Surprisingly, the town didn't even offer light-duty assignments before Finnegan and Nolan came aboard, so there was no wiggle room to slot employees who were able to come back to work, even if in a different capacity than when they were employed.

Finnegan's actions made employees take notice and realize that the good old days of abusing the system and getting easy days off was ending.

Changing the culture from mismanagement to strict management made a difference for the town's bottom line and taxpayers.

The initiatives saved $2.8 million in 2008, its first year, easily surpassing the town's goal of saving $500,000. Not bad for a public sector employer that had not been immune to the economic crunch facing cities and municipalities across the country. Like many other municipal governments, Islip had to cut its workforce from about 1,000 full-time employees in 2006 to 790 in 2010, a slash of about 20 percent.

"With the public sector being so scrutinized on the local, state and federal level, I think there are things that can be done (to increase) accountability, responsibility and management oversight,"Finnegan said. "We are indicative of that."

Other stats also were telling:

* Total annual workers' comp claims went from 353 in 2007 to 107 in 2010, a drop of 88 percent.

* Average lost days per workers' claim fell from 76 in 2008 to 38 in 2010

* Total incurred losses dropped from $1.5 million in 2007 to $737,000 in 2010, a drop of 52 percent.

* Lost work days fell from 3,553 in 2007 to 1,314 in 2010, a 63 percent drop. That's equivalent to 11 additional employees available for work each day. If you combine that with those who are no longer abusing sick time, it's like having 22 extra workers per day.

With a large union workforce, the stricter rules were met with some backlash, especially as Islip began laying workers off.

"They were showing up for all the interviews, as if it were an investigatory interview," said Finnegan of the initial meetings with injured workers. To counter that, Finnegan explained that he wasn't attacking them for making a workers' comp or disability claim. He just wanted to see how they are feeling and if they were open to taking on light-duty assignments.

He said the workers soon came to realize that working a lighter load--at their existing salary--was a pretty good deal, especially since they don't even accrue vacation, sick time or pension benefits while on disability or workers' comp leave.

"Finnegan handled the unions artfully, focusing on providing a safe workplace and enhanced availability," said Brady, noting that Finnegan tried to include union representatives in meetings with injured employees.

He also found instances of egregious fraud, something that employees, unions and city officials could all agree was not acceptable.

In one instance, Finnegan met with an employee who had been out of work for a year with an injured back. The employee claimed he couldn't drive, walk or sit for long periods. He was irate when Finnegan offered a light-duty assignment.

So Finnegan decided to use surveillance video, which repeatedly found the person driving, walking and even executing a limber move or two while washing a sport-utility vehicle. The employee was eventually arrested and prosecuted.

Another worker, who was out of work with a leg injury, was caught on surveillance video removing his knee brace then working as a bouncer at a strip club--just days after signing paperwork claiming that he was too hurt to work and didn't have other employment. He even escorted someone out of the establishment. That person faced legal action.

Making an example out of employees committing fraud helped the union and employees realize that Finnegan meant business, and that he was committed to countering the culture of abuse.

"Finnegan's actions speak louder than words," Brady said. "You have to sign in (at work) every pay period or every day. You take notice. Employees committing workers' comp fraud are pursued to the fullest extent of the law and get arrested. People take notice."

Now several years into the program, Finnegan is happy with Islip's ability to weed out fraud, and believes that many employees were sick of people fraudulently taking workers' comp leave while honest workers stayed on the job.

"I think they reacted affirmatively," Finnegan said. "I think they're doing a great job. I think we're getting a lot more accomplished in a work day than we did before. This will really help the town in years to come."

Finnegan said the ultimate goal is to help employees get healthy and back to work when they're ready.

"We're trying to achieve the goal of getting you rehabilitated, back to work, acclimated to working and get you back full-time," he said.

November 1, 2011

Copyright 2011© LRP Publications