If you want to lower costs, contact your injured employees and their doctors -- often
Nancy Scheerer bent over to clean an office-building elevator one evening, just as she had done a thousand times before. But this time the elevator door closed unexpectedly and pinned her against the wall, causing a painful back injury.
Had the accident occurred a year earlier, Scheerer would have become caught in the sticky web of the workers' compensation system and her employer would have been without her services indefinitely. But her employer, Millennium Building Services Inc., which provides janitorial services to office buildings in Portland, Ore., decided on the spot to pursue a new workers' compensation strategy. By bringing injured employees back to work at lighter jobs as soon as possible, Millennium creates a better relationship with injured employees and limits the payment for lost wages. Although unable to perform her normal duties, Scheerer returned to the company a few weeks after her accident and began to work four-hour shifts as a quality-control inspector.
For Millennium, which has about $3 million in sales and 125 employees, the results of its new policy are impressive. Two years ago the company's loss ratio -- the claims paid out as a percentage of the workers' compensation premium -- was 118% of a $146,000 premium. But in the year ended June 30, 1989, the loss ratio dropped to just 23% of the company's $124,000 premium, which means that Millennium can expect to receive a refund of more than $50,000.
That result bucks a national trend that has seen workers' compensation costs rise by a compound annual rate of 15% for more than a decade. In 1985, the most recent year for which statistics are available, employers paid $21 billion in compensation claims, excluding administrative and litigation costs, compared with $5 billion a decade earlier. About one-third goes for medical care and the rest is pay-ment for lost wages. It's in the management of lost work time -- which translates into lost wages -- that companies like Millennium can make the greatest reductions in their overall costs.
Most companies manage their claims poorly or not at all. An injured worker typically stays at home, goes to a doctor or therapist, and rarely if ever hears from the company. Alternative jobs usually are not available or are not offered, even though most doctors will approve an employee's doing some limited-duty tasks, unless the injuries are severe. As days turn into weeks, bad feelings start to surface: the worker feels that the company doesn't care, and managers feel that the worker is a malingerer.
"The problem is the employers' assumption that out of sight is out of mind," says Steve Fowler, Millennium's president and CEO. "Once an employee is off the job, they let the insurance company handle it. But the day-to-day management of claims is the responsibility of the employer."
Fowler came to that view gradually, after many years of regarding workers' compensation as anyone's problem but his own. Back in 1987, the company was entering a deep financial crisis that has begun to ease only recently. The crisis forced him to scrutinize Millennium's workers' compensation costs, which by then were out of control.
The last few months of 1987 brought four injury claims that cost the company more than $100,000. Three claims were from women who had injured their backs while hoisting 30-pound trash bags into a dumpster. Out of sight, out of mind -- Fowler didn't consider any of the three to be top performers, so would it be so bad if they disappeared into the maw of the workers' compensation system?
He ignored them as he had everyone else who had gone out on injuries over the years. He didn't inquire after them. He didn't try to bring them back to work to take on other jobs. Months went by. They worked a few hours after that, then left for good. The insurance company finally settled each case for lost wages and medical expenses: $16,019 for one, $21,138 for the second, $30,572 for the third.
Meanwhile, the elevator door had kayoed Nancy Scheerer. A supervisor who also performed janitorial tasks, Scheerer was a top performer. With the company sliding into trouble, Fowler needed every steady hand he could get. So he arranged with Scheerer's physician to release her for four to six hours a day to do the less strenuous quality-control job. Later, when the doctor decided that only surgery could correct the back problem, Fowler promised her a better job when she came back. Four months later she returned as a customer-service representative. "This was our first big success," says Fowler. "Since then, we've had a definite downward course in the length and cost of our claims. We learned that as soon as a person is ambulatory, you have to get them doing something."
Fowler also realized that he could no longer afford to use the workers' compensation system to rid the company of people he didn't want. "Some employers will say, 'Good, there's a human-resource problem I don't have to deal with,' " he says. "What the employer does by using the system to exile them to never-never land is subsidize their retirement."
One other incident shocked Fowler into reconsidering his handling of claims. A few months after Scheerer's injury, Safeco Insurance Co. assigned a new claims adjuster, Greig Lowell, to the Millennium account. As a matter of routine, Lowell started checking the claim forms the company was sending over for processing. Since workers' compensation paid two-thirds of an injured employee's salary, it was critically important to get the right information on hours worked and pay per hour.
One day Lowell called Fowler to confirm that an injured employee had been working 40 hours per week, as one of Millennium's managers had reported on the form. No, Fowler corrected him, only 20 hours. A few days later the same thing happened with another claim. Lowell set up a meeting with Fowler for that very afternoon. "We started going over things right away," says Lowell. "It was clear that nobody was filling out the accident reports with any care. They just said everyone was working 40 hours so they could get the paperwork done."
A nuisance, that's what it was. But now a chastened Fowler knew that sloppy management of workers' com-pensation was costing him dearly. Over a period of months he hammered home to his five managers the importance of filling out the forms correctly, keeping in touch with injured employees, and finding alternative work for them. In discussions and in the company newsletter he informed people that the company's new policy was to require light work from any injured employee who could handle it. And he offered a carrot as well: 5-per-hour bonuses each for any employee compiling a perfect attendance or a perfect safety record each quarter. "We let people know that if we have to pay the insurance company a big premium, we can't pay that money for salaries," says Fowler.
By 1989 a new attitude prevailed. On April 24, Julia Modlin was cleaning an office when she tripped on a typewriter cord and injured her hip and back. Fowler was ready. He immediately called Lowell, the claims adjuster, and let him know that Modlin's injury could be serious. Concerned about Modlin's potentially long absence from work, Lowell turned the claim over to an outside company, Intracorp, that manages workers' compensation cases with an eye to containing costs.
Lorraine Trask, a program administrator with Intracorp, talked with Modlin's supervisor, visited the job site, and prepared a job analysis that specified how much lifting, bending, and other physical tasks Modlin performed. Over the next few weeks, she made several visits to Modlin's doctor, proposing various light-duty tasks. Meanwhile, Fowler or his administrative assistant called Modlin every few days to ask about her progress and to let her know that everyone looked forward to her return.
Five weeks after the accident, Modlin returned to work. She put in four hours a day the first week and six hours the next, doing various clerical duties at company headquarters. Then she returned to such light cleaning tasks as dusting and polishing. In September her doctor released her for eight hours a day of light cleaning and a lifting limit of 30 pounds. "If this injury had occurred a few years ago," says Fowler, "she would have been out indefinitely. She might even have gone out on permanent disability. " But this year, the company saved tens of thousands of dollars, benefited from Modlin's productive work, and retained her as an employee.
"We've changed the culture of our thinkng about injured employees," says Fowler. "Most executives still think they have to lobby through the legislature to get any relief. We've learned that you shouldn't wait for a change in the laws to help you. You have to take a hands-on approach and learn how to manage the workers' compensation system. And then you have to manage it like crazy."
HOW TO TAKE CONTROL
You can aggressively manage your workers' compensation cases
Since the major expense of most claims is lost wages, you're best off if you have employees who want to come back to work as soon as possible. Here are some basic rules to follow:
* Train supervisors. Supervisors should understand the workers' compensation law and how much a continuing claim can cost the company. As the managers with the closest working relationship with injured employees, supervisors' support is the key to making a policy succeed.
* Jump on injury claims. Don't lose any time getting in touch with injured employees and their physicians.
* Reassure injured employees. Let them know how much you value their contribution and how much everyone looks forward to their coming back full-time.
* Talk with the treating physicians. Ask them to release employees for lighter duties at the earliest appropriate time, and to name specific tasks recovering employees are able and unable to perform.
* Design meaningful jobs. If possible, put injured employees back in their original job, but with restrictions on their activities. Otherwise, the alternative job should be of obvious importance to the company; no make-work.
* Upgrade the assignment. Let the employees know that the alternative job is temporary. Continually modify the job assignment as employees recover.
* Spread the responsibility around. Don't rely on one person to manage workers' compensation matters. It's a job for the entire management team.