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A suburban transit system in Pennsylvania is proving that it's possible to buck the nationwide trend of spiraling workers' compensation costs, according to executives connected with the program.

The success story comes from the Southeastern Pennsylvania Transportation Authority, a railroad system that services Philadelphia and its suburbs with a 9,000 member workforce.

Since it implemented a new system SEPTA has reported millions of dollars in savings and a huge drop in claims.

SEPTA took action to reduce its workers' comp costs after they escalated in the early nineties from $20.2 million in 1992, $21.4 million in 1993 and up to $25.8 million in 1994.

A key move came in 1999 when SEPTA switched from a self-administered program to the Philadelphia based third party administrator, CompServices Inc. (CSI), a firm that is a subsidiary of Independence Blue Cross of Philadelphia.

One of the immediate changes, CSI advised SEPTA to implement was the use of a capitated managed-care program, which provides medical services to beneficiaries for a fixed per-person fee. Under this system, SEPTA pays one price for an annual contract covering all workers' comp medical care expenses.

Mark Adams, vice president of CSI said that the ownership of the company by Independence Blue Cross, the largest health insurer in eastern Pennsylvania, allows his company to pay significantly below the state of Pennsylvania's fee schedule, which allows the company 15 months to pay off expenses incurred for medical services in a calendar year.

"What sets us apart from the industry is the huge discounts we can offer [since] we pay Blue Cross hospital rates for workers' comp," Mr. Adams explained.

To put that savings in context, the state's department of Labor and Industry reported in their 2004 Medical Access Study Executive Overview that the workers' comp fee schedule, was on average 17 percent higher than Medicare, but is seen by many providers as inadequate to compensate for the extra time and administrative burden required in treating patients.

Providing quality service at below average cost benefits CSI, as their contract includes an experience refund, which allows CSI to split the possible savings per service with SEPTA if it comes in under the fixed rate.

SEPTA reported savings in excess of $7.4 million under its budget projections since 1995. Open claims decreased by nearly half from 1,006 to 520. In addition the volume of workers receiving benefits was dropped from 530 to 308, a 42 percent decline.

SEPTA said that it also worked more closely with employees to exchange ideas on improving safety and reducing workplace injuries. The company also established an in-house program, which places employees in temporary job positions while they recover from injuries. These positions are referred to as light duty assignments.

Light duty or modified duty may involve a temporary reassignment of the employee to an entirely new job with less physically-intensive requirements, or it may consist of allowing the worker to perform the regular job at less than full productivity.

In most cases, light duty workers will earn less than their pre-injury salaries, their workers' comp will make up the difference. An employee may also face a temporary exclusion of certain difficult tasks from their regular job duties.

Bob O'Connor, a representative of the Transport Workers Union Local 234, said that the light duty positions SEPTA provides typically pay $5.64 an hour and difference from their original salary is made up with workers' comp.

"We've given up the since the mid-nineties almost $100 million back in concessions in order to maintain our health care benefits," he added stating that SEPTA was able to make changes in the workers' comp program and the employees health care plan with the cooperation of the union.

Even with the savings on its comp program SEPTA spokesman Richard Maloney said the railroad remains in the midst of a serious financial crisis.

Mr. O'Connor discussing the comp program, he said the shift to a third party administrator "has been more beneficial to members as it took it [the claims process] away from SEPTA who thought everyone was a fraud."

He said he believes that CSI is more objective in reviewing claims and did not treat the union employees as badly as SEPTA did during its self-administered program.

SEPTA said partnership with CSI has allowed SEPTA to trim their workers' comp program costs down to $13.1 million last year.

The railroad is currently in negotiations with its unions since its contract expired March 15.

"We have a lot of issues. It's a big contract that is complex and very expensive for the taxpayers," Mr. Maloney said, but he added that among the issues to be dealt with workers' comp is one that is not an immediate concern.

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