How do you keep 22,000 employees in 12 states safe and get them back on the job quickly after an injury when they work for one of the country's largest electric companies, featuring power-generating facilities, miles of transmission and circuit lines, 10,600 vehicles, three airplanes, 52 tug boats, 2,300 barges, 7,000 rail cars, and a maintenance facility?

It helps to have an advocate like Loyd A. Hudson, integrated disability manager for American Electric Power Company in Heath, Ohio, whose “zero harm” loss control policy complements AEP's program to tackle work- and non-job-related absences under one umbrella program.

Over the past dozen years, AEP has cut its workers' comp compensation costs in half–from $16 million annually to $8 million–all while growing the employee population via mergers and acquisitions.

The positive results of AEP's aggressive loss control and back-to-work programs, along with its integrated disability management approach helped earn the company the coveted title of “2010 Champion” as one of three winners in the fourth annual National Underwriter Award For Excellence in Workers' Compensation Risk Management program, sponsored by NCCI.

Mr. Hudson, who holds a master's degree in safety management, has worked for the company for 22 years. As a former engineering technician for AEP, he understands first-hand the risks employees face. He also knows that most people injured on the job just want to get back to work.

“It all comes down to helping injured employees and working as their advocate to see that they have the best care and advice possible,” he said. “It really comes down to forming effective partnerships. It's sometimes organized chaos when you look at the different programs we have to understand.”

As manager of the Integrated Disability Center, Mr. Hudson is responsible for all claims management. Still, the best way to manage a claim is to prevent it from happening, which is why AEP in 2004 moved safety from human resources to become a separate department, reporting directly to Chief Executive Officer Mike Morris–who, according to Mr. Hudson, always emphasizes safety whenever communicating with employees. “While other companies have safety programs, we truly have a safety culture,” he said.

While the Integrated Disability Recovery Center works to manage claims and medical treatment, AEP's Safety Department strives to prevent accidents from happening in the first place, “with a corporate goal of having no fatalities, no injuries and no occupational illnesses–a condition we call 'zero harm,'” Mr. Hudson explained.

“Because of the hazards associated with our jobs, safety is part of everything we do, and upper-level management understands and supports the safety initiatives,” he said.

The risk management efforts have paid off, with AEP's recordable OSHA incidence rate falling from 1.76 in 2007 to 1.57 last year. (The incidence rate represents a calculation of the number of injuries and/or illnesses per 100 full-time workers, according to the Bureau of Labor Statistics http://www.bls.gov/bls/glossary.htm#I.)

The OSHA severity of incidents dropped from 42.84 in 2007 to 29.13 in 2009.

To cut frequency and severity, the company has trained employees in “human performance principles”–teaching them specific ways to prevent errors and share their knowledge in an effort to reduce claims, Mr. Hudson noted. There also are substantial penalties for those managers who do not meet their safety objectives.

Mr. Hudson said that in 1998, the company undertook a new initiative to manage both its occupational and non-occupational absences. “The idea is that a person absent from work for a broken leg from a home accident is just as important as a person out from a work-related injury,” he said. “Our workers' comp program is unique in the fact that it is integrated into our total benefits packages and plans.”

The result has been decreased litigation, according to Mr. Hudson, who added that “we eliminate cost-shifting between benefit plans by owning all absences.”

AEP's sick pay plan “provides 100 percent wage replacement to most employees for six months, for both occupational and non-occupational injuries,” Mr. Hudson noted in his award essay.

As head of the Integrated Disability Management Recovery Center, Mr. Hudson oversees renewals, assessment and claims reserving. He also is responsible for booking the admitted and probable expenses to company ledgers, while managing claims, litigation and third-party administrator oversight. (AEP's record-only, medical-only claims and lost-time medical approvals are managed by Avizent.)

“The checks and balances of having both internal and external oversight helps make our claims better managed than those without the same scrutiny,” he added in his award essay.

The focus remains the same as most workers' comp programs–returning employees to the job as quickly as feasible–as that is the most cost-effective way of managing claims. Sick pay, long-term disability, the Family Medical Leave Act and workers' comp are all actively managed through the AEP Recovery Center.

One of AEP's biggest challenges over the last few years has been returning employees to work in a restricted duty capacity. “It was becoming more and more prevalent that supervisors were telling our claims managers that if the employee could not be returned back to work unrestricted, that they did not want them back,” Mr. Hudson recalled. “As we all know, this attitude was detrimental in cutting absence durations, indemnity and medical costs.”

A cultural change in the company was needed. To prove their case, Mr. Hudson let the data do the talking.

Data showed that a company's OSHA safety severity rating appeared to be directly related to the percentage of restricted duty hours each company offered. For every 1 percent increase in restricted duty, the safety severity dropped four points. By increasing AEP's restricted duty by 1 percent, absences were shortened by an average of 4.8 days.

“The data supported what we already knew–that returning employees in a 'restricted' capacity shortened the overall duration of absences,” he said.

The data also revealed that AEP ranked 43 out of the 62 electric utilities in returning employees back to work. This presented a great opportunity for improvement and “a platform on which to champion our cause,” Mr. Hudson said.

“Opportunities are windows in time and they open and shut. One's ability to get through is usually dependant on who is prepared and ready at the time the window opens,” he added. “We were ready, and the economy provided a platform for our initiative.”

With a freeze on hiring, it made even more sense for AEP to utilize its employees to the fullest. It became more obvious that workers with restrictions were an undeveloped resource for the company.

To make their case, an education campaign for top management was launched in late 1997. After presenting the data, “it became clear that a gap between our leadership and supervisors existed,” said Mr. Hudson. “Our leaders were surprised and shocked that we were not trying to return our own employees back to work.”

Once upper management understood the issue, they were fully supportive of the program. Supervisor training was next.

The program has paid off in a big way for AEP. In the last three years, the Integrated Disability Recovery Center has returned to work 12,062 employees with injuries and illnesses from both occupational and non-occupational conditions. Of those employees, only 26 filed a workers' comp claim within six months of getting back on the job.

At a rate of 0.2 percent, employees returning to work from the AEP Integrated Disability Center were five times less likely to file a claim than those working full duty.

By year's end, the program resulted in a 68 percent increase in the number of employees returning to work in a restricted capacity. It also provided an increase in productivity by using a part of the work force that had been underutilized.

Another aspect of Mr. Hudson's work is controlling the company's costs and exposure by influencing workers' comp rules and regulations.

Since he began managing AEP's workers' comp program in 1995, he has been heavily involved with state self-insured organizations in Virginia, West Virginia, Ohio and Texas. He also sits on the board of the National Council of Self-Insured Employers, as well as the Employer Advisory Board for the Disability Management Employers Coalition.

“AEP management understands that by allowing me to serve in these voluntary positions, we can help influence legislation and policies within the states where we operate,” according to Mr. Hudson, who noted that one of the largest accomplishments has been to work with others on the West Virginia Self-Insured Association to help frame, draft and pass Senate Bill 2013 in 2004.

By doing this, he added, “we have successfully reformed the state's workers' compensation system to improve claims handling, establish rules and guidelines, remove the monopolistic approach, and allow privatization…”

All of their efforts have also received positive marks from employees. Those who have been off from work due to illness or injury complete a survey upon their return to the job. Of those surveyed, he said, his division was graded 4.2 out of a possible five for the services they provide.

What do employees like about AEP's disability services? “Mostly the communication,” he said, emphasizing that “our focus is to ensure that every AEP employee and contractor can return home to friends and family without having to deal with the workers' comp system.”

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Integrated Disability Management Fuels Power Company&#039;s Comp Claim Success

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