Every company executive is on the hot seat in this difficult economy, and risk managers are no exception. But those who can cut workers' compensation claim frequency and severity, as well as get injured employees back on the job faster while boosting both productivity and morale, will still be sitting pretty with their senior managements, according to the heads of three award-winning programs.
To spotlight examples of outstanding loss control and safety in the workplace, the third annual National Underwriter Award For Excellence In Workers' Compensation Risk Management--sponsored by the National Council on Compensation Insurance--was presented to a trio of innovative organizations: Starwood Hotels & Resorts Worldwide (this year's award Champion), along with INTEGRIS Health and Snap-on (both of which received an Honorable Mention).
The risk managers from all three award winners shared the secrets of their success in company profiles appearing in NU's Aug. 17 edition (also available online at the bottom of NU's home page, www.property-casualty.com, under "NU Exclusives.")
But the trio also gathered in person to discuss the challenges facing risk managers today, during a panel discussion at the Workers' Compensation Educational Conference in Orlando on Aug. 18. The panel was part of the National Trends Program put together by National Underwriter in conjunction with the conference organizer, the Florida Workers' Compensation Institute.
The following is an edited transcript of their live appearance, in which they describe their successful approaches to getting people back on the job quickly and humanely, while keeping costs under control.
NU Editor In Chief:
To set the stage for today's discussion, Peter Burton, representing the National Council on Compensation Insurance--the sponsor of NU's award program--will outline some of the top challenges facing risk managers in the workers' comp market.
Senior Division Executive, State Relations, NCCI:
I see a number of key issues in workers' comp challenging risk managers today, starting with the economy. Pressures to cut costs make it more difficult for risk managers to get the budgets they need to control losses and improve safety.
Another challenge related to the struggling economy is how it affects the emergence of fraud, both by claimants and providers--by doctors, chiropractors, etc.
Rising medical costs continues to be a big issue in workers' comp. Almost 60 percent of the benefit dollar is going to medical claims. Growth had slowed down a tad from previous years, and NCCI statistics show that there was a 6 percent rise last year versus the 5 percent rise in indemnity costs. That's down from almost double-digit increases a couple of years ago.
But we've heard in some states--such as Alabama and South Dakota--that medical is already over 70 percent of the benefit dollar. So risk managers are challenged to control medical costs--in particular for pharmaceuticals, which are a big component of the medical dollar.
Another threat is the erosion of earlier enacted workers' comp reforms. Due to the last cycle of legislative races there's been a demographic shift in many state legislatures, with a predominant amount of legislatures in the country looking more favorably on organized labor as well as trial lawyer initiatives, and there are very few benefit-driven reforms.
The pendulum has shifted, and if it wasn't for the sour economy, a lot more states would have passed benefit adjustments. It didn't come to fruition because legislatures were reluctant to pass bills to increase costs to the business community in these tough times. If you see the economy recovering, however, some of that reluctance by legislatures to pass benefit increases will evaporate.
Perhaps the most vexing issue for risk managers in this economy will be how to make their pleas to allocate a finite amount of capital to their loss control and safety operation. They'll need hard numbers to sell their programs.
Therefore, risk managers must keep an eye out for analytical data to help them make a strong business case to top management. They should be aware of the analytical data NCCI puts out every year in their state advisory forms, showing what is driving costs in a given state.
Is it frequency of injuries? Is it severity of injuries? Is it the indemnity costs? Is it the medical costs? And we contrast that with the national average so a risk manager can compare their own experience in their own state as well as against national benchmarks.
Sam Friedman, NU:
Let's start our panel discussion today with a brief summary of what each of our winning organizations do. Then please discuss your biggest workers' comp challenges, and what you are doing to address them.
V.P., Risk Management & Insurance
Starwood Hotels & Resorts Worldwide
2009 NU Champion
Starwood is the owner, operator and franchisor of hotels around the globe. You probably know us better by our brands--including St. Regis, W Hotels, Sheraton, Westin, LeMeridien, Four Points, Aloft and Element. We have almost 1,000 hotels in 100 countries.
Of these nearly 1,000 hotels, Starwood owns about 65 properties, franchises approximately 450 properties, and operates and manages about another 450 properties. Together, these hotels comprise almost 295,000 rooms worldwide.
Starwood has approximately 145,000 employees globally, with about 50,000 in the United States. Note that in the U.S., the employees at the hotels that Starwood operates on behalf of third-party owners are employees of Starwood.
If we manage the hotel, all of the expenses associated with it are charged back to the owner, so workers' compensation expense is obviously a cost the owners are looking at very carefully, and it's one of many criteria they measure us on.
Hotels are really mini-cities, having many of the same complexities and services. While many of you may think about hotels as a place to sleep and eat, there is much more that goes on, both in front and behind the scenes. Think about a conference of this size in this hotel, which probably employs several thousand individuals.
Hotels have many of the issues a city would face--operating the infrastructure, construction and renovation, maintenance of the buildings, the food and beverage service, the restaurants and catering, convention planning and management, transportation, grounds-keeping, pool and beach activities, recreation services, parking and security services.
So while on the surface it seems like a fairly innocuous industry, if you peel back the onion you'll realize the hospitality sector actually has a lot of embedded challenges and risks.
In workers' compensation, one of our challenges, which is somewhat unique to our industry, is that we have a fairly limited ability to automate and utilize material-handling devices. My prior experience was within the manufacturing sector, which lent itself to many more opportunities to automate and/or influence the workplace design or process.
In the hospitality business, however, making up a room is pretty much a manual task. There is really no way to automate it.
Plus the workload is getting heavier--literally, if you've noticed the better beds that you have in many hotels. Those mattresses are much heavier than the old ones. So if you think about cleaning your own house, do that 15-to-18 times daily and think about how you are going to feel at the end of the day.
It goes without saying that one major claim exposure is the cumulative trauma impact on associates--the bending, lifting and twisting involved in many of our jobs.
We have a fairly short list of alternative jobs--also known as modified duty--that associates can do. For example, you can't simply put a room attendant at the front desk, and moving a room attendant into banquet-catering, or vice-versa, does not provide the relief often needed.
This notwithstanding, Starwood has implemented transitional-duty and modified-duty programs, but they are obviously limited to the skill set that the associate has and is able to perform.
Another issue that hotels need to manage through, and has implications for alternative duty, is language. For many associates, English is their second language. In a property of this size, I would venture to guess you could have more than seven languages spoken by the associates. Everything you do in terms of communicating loss control and safety information has to take that into account.
System V.P., Risk Management
2009 Honorable Mention
Our health care system is contained completely within Oklahoma. We have 14 hospitals and nearly 70 physician clinics, staffed by about 9,000 full-time-equivalent workers.
Similar to the hotel industry, we're 24/7. Many of our patrons, however, have difficulty ambulating, and the average weight of patients who come to our facilities has gradually increased over the years.
Our highly skilled nurses and clinical support staff historically have been very giving and caring when it comes to the needs of patients. Many years ago, Hippocrates designed the Hippocratic Oath, one key element of which was "first, do no harm"--to the patient, that is. But the health care field forgot about the caregivers.
When I came onboard I saw employees lifting people weighing 200, 300, 400 pounds--twisting, bending over a bed to move that patient.
In the operating room, for example, people were going, "One, two, three, LIFT!" to move a completely anesthetized patient weighing in excess of 300 pounds. We've had some physicians as well as nurses over the years end their careers due to the stress of this transfer activity.
The nurses are very sacrificial and very giving people. There is a certain type of person that does that job, but they're trained to care for individuals from a medical standpoint. They were not trained to be, nor are their bodies designed to be lifts, moving patients who can offer little or no assistance.
The struggle we've gone through is to help those caring, giving, sacrificial people realize what they were doing is harming themselves in the process of caring for patients. It took and continues to take a reorientation of mindset.
We also have housekeeping--again, similar to a hotel setting. And just like at the hotels, we have a variety of languages--Vietnamese is a major language in Oklahoma City, for example, and the Hispanic community is growing dramatically in our state. So we have language challenges within our system.
One rising claim trend we are noticing of late is lots more slip-and-falls, because of staffing allocations in some areas. As the nurses move from one area or patient to another to meet patient needs, there is a greater tendency for them to fall due to the greater demands of the job.
Assistant Treasurer, Risk Management
2009 Honorable Mention
Snap-on is a Fortune 500 company based in Kenosha, Wis., that was founded in 1920. We are a global company, with 40 percent of our sales outside the U.S. We do business everywhere from the European Union to Argentina, Canada and China, to just highlight the breadth of our footprint.
We have approximately 10,000 employees, with about half of our associates outside the United States. So when we talk about workers' compensation and safety, one of our challenges is that we are not only concerned with the differences between the systems among states in the U.S. but around the world.
The key to our improvement in workers' compensation, however, is to have strong, top-down management support for loss control initiatives, with a drill-down approach and accountability for safety.
We had a new CEO in 2005 come in, and he put safety front and center. Our current CEO has continued to emphasize the importance of workplace safety and reduction of work-related injuries.
Stephen Truono, Starwood:
Starwood, as we know it today, really came into being in 1998 with the acquisition of Westin and Sheraton Hotels, so we're a relatively new corporate firm. For the first few years, the company was busy integrating businesses. So in respect to safety management, we just adopted the safety programs that Westin and Sheraton had.
The company had an epiphany on the need for better risk management and loss control in December 2003--predating my tenure at Starwood--when it became evident that our captive effectively was underfunded for existing liabilities by $21 million. As a result, Starwood had to take a $21 million hit to earnings at year-end to fund these liabilities. It was then that management said we've got to do something.
In 2004, Starwood re-launched its safety initiative, known as "Be Safe." The nuts and bolts are very much Safety 101. We developed a comprehensive safety program complete with the tools and resources the hotels needed to execute the plan. We implemented accountability measures. We established performance goals, and managers' bonuses were now impacted by safety and workers' comp results.
We introduced a hotel workers' comp deductible so they now have financial skin in the game. We utilized the services and framework of Starwood's Six-Sigma team to develop management reporting and track results. However, the key was that management made it important.
We engaged every level of management. The North American president holds quarterly meetings with his team and with risk management to review results and accomplishments. The president will commend hotels doing well, and will get on the phone to those that are doing poorly and say what's up, and how are you going to effect a positive change?
We have reports listing the 10 best and 10 worst in terms of comp frequency and severity. You don't want to be on the 10-worst report--you can expect to get a call from executive management.
William Wandel, INTEGRIS:
One of the things I did when I got to INTEGRIS was simply walk around and see what our people do. I watched them straining to move patients and I thought, this is unbelievable. So we looked for and found equipment that was just starting to be offered in the marketplace to assist in the lifting and transfer of patients.
One device is kind of cool. We went to a convention and there was a guy laying on an air mattress that you see at swimming pools, and they were bowling with this guy. The air mattress had perforations at the bottom, lifted about one-eighth of an inch off the floor--flat surface, no friction. You could shove a 200-pound man down the hall and knock down bowling pins. With two hands I can move 600 pounds.
So we started to introduce this device into our system at a single site to see if there was receptivity to using it.
While I was checking the test site, one of our workers came over to me. He looked like a former Marine--with biceps like my thighs. He stared me down and said, "If you take this away, I will be very angry."
He said that before using the air mattress, he would go home and take all sorts of medications just to make his back and shoulders feel normal. We had walking wounded like that all over the system. With the physical stress they are under, and with the aging work force, I could see a tidal wave of claims coming, and knew we had to get ahead of it.
We took the same initiatives with new equipment to help nurses lift people and move them throughout our facilities.
This investment was critical. We have a captive program, with the CEO, COO and CFO sitting as board directors, and we introduced the thought--give us money to buy equipment and we'll give you $1 million back.
At the time we were spending about $5.4 million per year for workers' comp costs. Our losses were over 1,000 when I arrived. Our return-to-work initiative was nonexistent, and so I felt it was critical we start this transition as soon as possible.
We began to look for the proper equipment, and where we did not find it, we utilized an engineering firm to develop devices that would take away the stressors the human body was not designed to bear.
We informed the engineer that we have beds that weigh 500 pounds. People have to push them up an incline, often on carpeted surfaces. Please help us!
He gets back to us and says, here's the deal: Tow trucks pick up the front end of the car. I'll design something that does that, then motorize it so it can drive these heavy beds up the ramp.
We also have housekeeping and food service exposures to control--slips and falls in particular. We had people falling down in the kitchen, slipping on water and grease. We incurred injuries costing us $5,000, $10,000, sometimes $15,000 per event.
So we said to these workers--who make a little bit above minimum wage--how about if we buy you some safer shoes, with better traction? They were excited to get a free pair of shoes. We were excited because in one hospital alone the slips and falls disappeared. We saved more than enough money at that one facility to pay for the shoes for the entire system.
You also have to reward workers in some way for safety. If we see someone doing something right, we stop them and say thank you, and give them coupons they can use in the cafeteria and gift shop, or movie ticket passes. It's amazing the positive reaction you'll get from your employees, and it reinforces what they should be doing.
Stephen Truono, Starwood:
Slips-and-falls are a big loss driver in our business as well. We also instituted a safety shoe program, where the hotels may subsidize the cost of safety shoes for associates, depending on job function and program experience.
As mentioned earlier, a typical room attendant may clean up to 18 rooms a day. That means cleaning at least 18 bathrooms a day. We found that many of our room attendants were having difficulty cleaning the upper portion of bathroom walls, which are seven- and eight-feet high.
To clean the shower stalls, they would invariably step up on the side of the tub with a sponge and wipe it down. Many would end up falling into or outside the tub, and they hurt themselves. It's not pleasant falling onto porcelain.
So what did we do? In certain cases we provide them with a tool--basically a paint roller with an extendable handle, with a sponge on the end and a towel attachment. So now they don't have to step and climb.
We also modified cleaning carts to make them easier to roll. We experimented with different vacuums, and we provide extensive training on how to clean rooms and handle bedding and linens.William Wandel, INTEGRIS:
We had a similar situation. It's all about common sense. We had five-foot, two-inch ladies in kitchens getting shoulder injuries all the time until we observed firsthand that the shelving and the pegs where the pots were hung were six-feet, four-inches off the ground. So we lowered the pegs where you put the pots, and our shoulder injuries went away.
This isn't rocket science. Sometimes all you have to do is go right to the source. Have a suggestion box, and hold little roundtables with departments that have these types of injuries and ask them why.
We have employees who have been hurt come to our roundtable and tell us how it happened, and then we ask what they would suggest to prevent these types of injuries. It's amazing what these people have to say if somebody would only listen.
Dan Kugler, Snap-on:
We built and implemented a process that included action items, and every two months we have a safety review board meeting at Snap-on's headquarters in Kenosha and all other major locations. Snap-on's CEO is the chair for the Kenosha meeting, and each one of our Business Unit leaders is also in attendance. Presentations are made by Snap-on facilities.
One of the major outcomes of these meetings and presentations is accountability at the locations for safety and workers' compensation activities, with senior leadership in attendance.
Another major outcome is there truly is a sharing of best practices between the facilities at the meeting.
But our safety and workers' compensation programs today are not just top down--they are also bottom up. It is a decentralized program where the locations develop their own safety programs within their individual culture, under a common group of 29 action items that they enhance and personalize.
Each of these location's safety and workers' compensation performance is monitored by various metrics.
When Snap-on put its safety program together, we put in place the 29 action items that each facility needed to address and implement. A project team would assist them and give the facility examples, but at the end of the day it was their creativity that had to implement the safety program.
What our metrics at those times were, you've got 20 of the 29 done--when are you getting the next nine done? How are you going to get these done? Can the project team assist?
That's the engine driving safety and loss control at Snap-on. The caboose is the cost. And, yes, we do charge 100 percent back to our facilities.
A key to success in workers' compensation administration is communicating workers' comp as you would any employee benefit. We communicate to our associates about workers' comp being a benefit for them. Workers' comp is there to get you well and back to work.
We call Snap-on's workers' comp program, "Security on the Road to Recovery." We show a video of actual employees who have had workers' comp injuries and returned to work successfully.
The associates in the videos were not scripted--they told their stories and about their own personal successful return to work.
Within that video, we highlight, discuss and reiterate that there are rights and responsibilities for each one of the participants in the workers' comp process--the employer, the associate, the claims adjuster, the insurance company and the doctor. We emphasize that we want our employees back at work, and what everyone within the workers' compensation process must do to achieve that.
We deeply believe in non-negotiable product and workplace safety. This is "Who We Are," and one of our core beliefs. This has become our focus in administering our program. This can shield you from bad instincts. It is how you keep your program actively engaged in this current economy.
Stephen Truono, Starwood:
Communications need to be targeted to your audience. Messaging needs to be clear and concise. When we're sitting among the executives, the focus may be accident frequency and severity, with much emphasis on direct costs.
However, when addressing associates, we focus on their health and well-being. We concentrate on what we mutually can do to provide a safe place for them to work. We understand that if you're talking to associates about dollars and cents, you risk alienating them pretty quickly.
We therefore emphasize care, consideration and empathy, and that is the driver of associate messaging.
William Wandel, INTEGRIS:
When we talk to the nurses, they are less interested in the money saved as a result of the workers' comp initiative. If we get up in front of our nurses and say we had a bang-up year, we're going to put some money in the bank, thank you very much, the audience is usually not very responsive.
But if you talk to the nurses and clinical support staff about what matters most to them, the patients and their health and safety, a significant interest is stirred.
I encourage the allocation of expenses by department and by facility based on loss experience, especially if you have a self-insured program. We developed an allocation program that looks exactly like an insurance company premium rating model.
When the department is not doing what they're supposed to do in terms of loss control and safety, there is an additional allocation ladled on top of that department's routine charge. The department then feels the financial pain due to the negative loss experience more so than other departments that had very few losses.
They call and want to know what happened, and we tell them flat out that it's a result of the frequency and severity figures coming out of their department. Correct that, and the charges over time will decline.