Workers' Comp Role Models Share Their Formulas For Success

Sam Friedman,

NU Editor In Chief:

To set the stage for today's discussion, Peter Burton, representing the National Council on Compensation Insurance–the sponsor of our award program–will outline some of the top challenges facing risk managers in the workers' comp market.

Peter Burton,

Senior Division Executive, State Relations, NCCI:

The number one challenge is medical cost containment. Almost 60 percent of a comp claim dollar paid today is for an injured worker's medical care, and in some states it's up as high as 70 percent. Keeping a lid on the pharmaceutical component is a particular concern.

Number two is the challenge of continuing the downward trend in the frequency of lost-time claims, where we've seen more than a 50 percent aggregate reduction over the past 15 years. It's a phenomenon for all industry groups, all age groups. Something positive is happening due to the activities of risk managers.

The concern is whether it can be sustained going forward. That's a great story to tell, but at some point there's going to have to be a bottoming out, or flattening, and I'd like to hear from the risk managers what they are doing to continue to keep lost-time claims low.

Number three, with the economy slowing, what are risk managers doing to prevent fraudulent claims? I'm not sure if they're seeing an uptick, but generally, when the economy slows down, fraud by those fearful of losing their jobs is a concern.

Number four, I'd like to talk about the challenge of how these organizations are adapting to a changing work force–one that increasingly speaks English as a second language, for example.

Sam Friedman, NU:

I'd like to start our discussion by asking our award winners to talk about where their respective organizations came from in terms of workers' comp risk management, and where they are today. How do they stand out from the crowd?

David Hopps,

Vice President, Risk Management Operations and Environmental Safety and Health,

ServiceMaster,

2008 NU Champion:

As far as standing out with your insurer goes, well, that wasn't too difficult for ServiceMaster. We used to be Zurich's number-one customer–in terms of claims produced, that is. That is not an accolade I like to carry around. Fortunately, we're no longer their number-one claims producer and now have become one of their preferred accounts because of how we turned our experience around.

We tend to focus on four key areas for success in safety and claims management. Leadership, commitment and accountability is one area. Employee involvement and awareness via education is number two.

Process improvements in safety, claims and medical management is number three. And since we have one of the top-10 commercial fleets in the country, a relentless focus on preventing collisions is four.

An overarching theme is the moral and financial imperative to this. A lot of what you're going to hear today depends on where you are in terms of the maturity of your overall program. Some of these ideas will work for you, but some of them won't simply because of the structure of your organization, your size, or just the maturity of your overall effort.

When I first came on board, our cost of risk for workers' comp was over $100 million, so obviously our initial efforts were being financially driven. But our company also jumped on board for improved prevention activities, because of our company objectives, looking at the moral side of the house.

And with over 5,000 employees being injured every year, and multiple fatalities, this was about more than just cold, hard cash. Our focus became making sure that people coming to work every day went home to their families in the same healthy shape they came in.

Fred Pach?n,

V.P. of Risk Management,

Select Staffing,

2008 Honorable Mention:

How many of you think that $50 million is a lot of money? How about $100 million? What about $200 million?

Well, a couple hundred million dollars is exactly what our company would have paid in workers' comp losses per year if a risk control program wouldn't have been put in place. Today we have been able to drop it down to $30 million per year. So there's no question that our program is effective, and exactly the issue that CEOs and CFOs and insurers pay attention to.

One of the factors that sets our program apart is the commitment we made to risk management to make sure we had the resources to turn our loss experience around. We grew our [risk management] department from three members to over 2,000–including 60 on a full-time basis.

So we have definitely expanded risk management tremendously, and I think it is the force behind the success of our program.

Tim East,

Director of Risk Management,

The Walt Disney Company,

2008 Honorable Mention:

Our success with workers' compensation grows out of three distinct areas, and they all start with "P"–people, processes and our properties.

I mention people first because that is the most important element. Walt Disney himself said that you can design and build the most beautiful and spectacular place in the world, but it takes people to make the dream a reality, and I think nowhere is that more true than in workers' compensation.

You have to hire the best supervisors you can out in the field, the best operators, the best leaders, the best executives, and that holds true for the workers' comp side, where everyone must work together as a team to prevent injuries and to get people back to work if they are hurt.

Then you have to put the best processes in place, including risk assessment, safety and loss control, medical case management and return-to-work, plus insurance and self-insurance programs. All those are essential processes that drive results.

Finally, you've got to give your people the right properties or facilities, the safest infrastructure to work in, along with the best equipment and the best tools to work with.

For example, when I started out in the custodial department at Disneyland back in the 1970s, we bought $350 surgical-steel mop buckets to clean up with. As I got into management, I asked why we spend so much on these things, and the manager said that it reflected Walt Disney's philosophy, because when you invest in the best tools and the best equipment, you're backing up the fact that you really believe in your people.

And so when you provide them with a safe workplace with the best floors you can, the best warehouses, the best ergonomic equipment, you send a message that safety is really important.

There are a lot of companies that put safety stickers on the wall and little buttons on peoples' vests, but they don't invest in what really makes a difference. But quality organizations like the three you see up here today know it's absolutely essential to invest in your physical property.

Sam Friedman, NU:

What is your organization's top workers' comp concern, and what do you do to address it? Essentially, what keeps you up at night when it comes to workers' comp?

Tim East, The Walt Disney Company:

While there's no one issue, the breadth of exposures we deal with is remarkable. ABC News and ABC's owned stations send reporters and TV and camera crews to cover natural disasters and conflicts, so those people must be properly prepared and trained.

Meanwhile, for our TV and motion picture productions, we have stunt performers and actors that are performing action that can't all be done with computer-generated images.

At our theme parks in Florida and California and around the world, we have thousands of employees engaged in the full gamut of industrial trades. Then we have all of our resort and service businesses, with their own unique exposures. So it's quite a range of risks to all our various workers.

We deal with this by making sure we are covering everything–not just in an insurance sense, but from a risk management perspective. We assess and address all these diverse exposures by having the right people, processes and facilities in place.

David Hopps, ServiceMaster:

We face the same problem as Disney when it comes to diversity of risk, since our people do so many different types of work in so many different work spaces–many of which we have no control over before we arrive to do our jobs.

But the one exposure that keeps me awake nights is collisions. Because we have one of the largest commercial fleets, I'll get a call somewhere along the line that there's been a major collision. Whether we were at fault or not, it still drains your business and impacts your people.

So we do a lot on the collision prevention side, starting with motor vehicle record checks on a quarterly basis, with our own internal risk-rating system. We do background checks. We do a significant amount of defensive driver training. We spend millions on technology, such as Terminix installing GPS, TruGreen installing event data recorders, and both installing backup video monitors in their vehicles to be able to track what's going on while they back up their vehicles.

Slips and falls are another huge challenge in terms of prevention. If you look at our operations, we do not work in any of our own facilities. We work in your homes and businesses. We're climbing 100-to-150-foot trees, and we're climbing on your roofs for termite treatments. So we have an assessment process to identify potential slip-and-fall exposuress and how to prevent them, through better training, attire and equipment.

For example, with our Merry Maids operations, we have people slipping and falling on the floors they clean in your homes. So we've invested in slip-resistant foot protection and other process improvements to substantially reduce the frequency and severity of slips and falls.

Lastly, a number of our businesses have a significant manual labor component to them, so strains and sprains are a big item for us. We've invested quite a bit in working with some outside consultants on ergonomic assessments to prioritize what jobs we can change. We also have changed our vehicle and equipment designs to reduce exposures to strains and sprains.

Fred Pach?n, Select Staffing:

Not having control over our peoples' work space is a big problem for us as well.

Picture this–at any given day we have about 130,000 temporary employees on assignment. We are serving, on average, 10,000 clients at any given time, so we are at the mercy, in many cases, of the safety program of the client.

Our biggest challenge, and what keeps us up at night, is trying to sell our safety initiative to our clients, and to convince them that safety is a good practice that can save them on production and performance.

The second challenge is the people we have to hire sometimes, who often are rolled over from our prospective clients. So we don't always have direct control over the work force itself, and we have to bring them up to speed on the way we do business.

The way we circumvent that whole challenge is by providing quite a bit of training and safety incentives, and really get out there and confirm that our clients are providing a safe work environment.

We also really try to match the job to the individual. That's probably the biggest challenge in the staffing world. You've got to make sure the expectations are clear, and then follow through with all of the different safety initiatives we've created.

Sam Friedman, NU:

What steps does your organization take to secure the job site for workers, and what changes have been implemented to improve your loss experience over the last few years?

David Hopps, ServiceMaster:

It starts at the top, or it doesn't start at all–engaging senior leadership in terms of not only saying risk management is important but visibly demonstrating that credo. You also have to establish the right structure in the organization.

Over the past year we've moved to what's called "centers of excellence," including claims, environmental and safety centers, as well as centers for risk assessment analysis and reporting.

You also must put in the investment from a staffing standpoint. Take one of our businesses–Terminix. Back in 2003, it was almost a billion-dollar business, yet it did not have a single safety professional in the entire organization. Today, they have 10 full-time safety professionals, and other staffing investments have been made in the rest of our business units as well.

Performance reporting is critical. It's all about the data–what gets measured, gets managed. You need to set goals. You need premium allocation, deductible and rebate programs to impose accountability and reward improvements in safety.

Get down to the branch level so that those operations folks see the impact on their [profit-and-loss statement], feel it on their P&L. They all really pay attention to their P&L on a daily basis, so we hit that hard and we hit that frequently–if for nothing else, to get their attention.

The next piece is employee involvement, awareness and education. It's not rocket science here. We put together safety teams and branch safety coordinators to ensure that every location at least has somebody part-time paying attention from a safety perspective.

I'm sure everybody does some type of employee survey to figure out what the workers think about their organization. We added safety questions on our last survey so that we can get a baseline on some basic points: Do you think the organization provides you with safe equipment and a safe place to work? Does your supervisor care about you from a safety perspective and lead in a proper way?

Employee training is crucial, from every new branch manager on down the line.

We also focus on process improvements when it comes to handling return-to-work issues, nurse case management, medical care management, pharmacy management–putting in aggressive processes to figure out where the money is going and to share that information. If you don't report on it, no one knows what's going on, or whether you're improving or not.

Again, I must emphasize our relentless focus on collisions. We have invested significantly in safety technology and training. We do drug testing on every new hire, as well as on every workers' comp claim, and on every collision, where we're allowed to by law.

Fred Pach?n, Select Staffing:

For us, it was actually not a revolution, but an evolution, taking several years. When I joined the company back in 2001, serious problems with workers' comp almost forced closure of the company, so we knew we had to make some radical changes, but it took quite a bit of time to put the whole program into place and make it part of our culture.

For one, I negotiated with our CEO to transfer responsibility for the safety team to myself–the risk manager–rather than letting the operations team handle it, because in our industry that could be a conflict as far as pricing goes. We also expanded our safety network to close to 2,000 members in the risk management department.

Perhaps one of the most powerful changes we put in place is our safety officer program. We elected, trained and certified individuals–regular, temporary employees–and gave them all the skills to become our safety officers, our eyes and ears out in the workplace. We basically knighted these individuals to keep their peers safe.

In simple terms, when you walk into one of the warehouses or any type of setting that we serve in, you will see an individual wearing a safety vest or a pin who is designated as a safety officer. Their job is to really make sure their peers are safe, either in a specific department or area.

We also convinced our CEO, despite the fact that the company was struggling financially at the time, to give us some safety incentives. Early on we got a budget of about $100,000–today it is $2.4 million.

Safety incentives touch everyone in our corporation, from vice presidents all the way down to the temporary employee on assignment, and it has produced incredible results. It also goes along with what my peers have said, which is to provide a lot of tender, loving care and reward for their great practice and endorsement of safety.

I would suggest that if you're trying to sell your senior management on this, ask for a pilot incentive program with a small budget, show great performance, benchmark it, and then expand it.

Tim East, The Walt Disney Company:

When Walt Disney first opened Disneyland, he set four operational priorities–safety, courtesy, show and operational efficiency, with safety being the highest operating priority, and that's pervasive throughout the company. Since he set the tone, we've consistently had strong executive leadership and support, as well as the processes and the staffing.

Our real success in recent years has been driving that attitude down to the field level. In the motion picture business, for example, we assign a safety professional to every major production.

Sam Friedman, NU:

How do your organizations handle medical care case management, as well as return-to-work programs?

Tim East, The Walt Disney Company:

At some of our businesses, we have on-site doctors and medical facilities. We have on-site physical therapy at our larger locations so people can get treatment right away. Those are the nuts and bolts of just delivering medical care in the most fast and efficient way possible.

If you can manage the delivery of medical treatment, you can manage the claim to the best outcome. It's about getting the right treatment at the right time, and taking it out of an adversarial legal process, because that is often about building up disability sometimess, not getting people back to work.

Integration is the biggest advantage of using on-site clinics as a first response to injuries. Medical providers that are included as part of the Disney team will understand the unique demands of our workplace and environment.

On-site medical centers also mean less loss of time in transportation, waiting at home for an appointment, being sent home from work unnecessarily–all of those things are inefficient from the viewpoint of Disney as an employer.

But delays are also frustrating for the injured worker, because when you've been hurt at work, you want to get treatment as soon as possible. So being close to work, nearby, or actually on the work site is the best solution for everyone.

We've also developed strategies designed to assist injured employees in returning to work quickly and safely as part of an approach we call: "Recover While Working." Our focus is helping employees remain employed throughout the recovery process and minimizing any time away.

If an injury occurs, we look to establish a clear understanding and documentation of the demands of the job. Next, we educate physicians by describing work restrictions consistent with the demands of the job.

We focus on capability rather than disability. It is important to know limitations, but it is also essential to know what the injured worker can do. We then coordinate with the injured employee's operating department to facilitate a return to the workplace.

David Hopps, ServiceMaster:

We have a very aggressive return-to-work program. Five years ago it was an option, now it's a requirement. We report on it at the branch level.

We have a job bank where we have transitional duty assignments, and at times video people at work, so there should be no reason why a doctor might not understand what jobs someone can do to come back to transitional duty.

Again, metrics is what it's all about, so we are looking at doctor and pharmacy metrics–to see if a particular clinic or physician is prescribing a specific drug too many times compared to the average. We're putting scorecards down to that level so we can figure out where our money is going.

Fred Pach?n, Select Staffing:

We focus on the claimant. Right out of the gate, we set some pretty clear expectations depending on the type of injury or claim–and, of course, the length of time we think the claim will last. We have a medical case management group with our own nurses, and they have that crucial conversation with the claimant the minute the claim is filed.

We understand the diagnosis and we basically use independent benchmarks to outline exactly what the length of the condition or treatment should be, and what the recovery expectation should be.

We also at the very beginning send a get-well letter to the individual–and we send them a box of candy along with that. On top of that, we actually follow their recovery on a daily basis through our workers' comp coordinator, and on a weekly basis we have them each do a self-assessment of their medical condition with a ranking of one-to-10. We monitor that, and if the individual continues to show improvement, obviously we know we are on the right path.

If the person has a flat line, we definitely step in and do more resource management, and, if necessary, we bring in a nurse case manager and put a lot of pressure and emphasis on managing the claim.

I do quite a bit of insurance reviews, and quite often I see runaway claimants, where they are basically dictating the path of the claim with a truly adverse effect. Five, six, seven years later you are paying three times what you should have, so you must control the claim.

Sam Friedman, NU:

How can risk managers prevent fraudulent claims, while respecting everyone's dignity, so workers aren't treated as 'guilty until proven innocent' when they report an injury?

Fred Pach?n, Select Staffing:

I actually worked for the department of insurance many years ago, and I also investigated claims while at Republic Indemnity, so investigating claims is close to my heart, and of course I have seen the dark side of fraud very clearly.

We invest heavily on prevention, and we have five full-time investigators on staff. Also, on every claim we run five different searches, so within a few hours we know just about everything you need to know about the individual filing the claim, and then we tailor the investigation based on the data that has been gathered.

We also work very closely with the district attorney, and we have very close relationships with three DAs in California.

Our company actually facilitated and financed the prosecution of two large medical mills in Orange County, Calif. We started the depositions of the doctors and chiropractors involved, and believe me, it was a battle because they are hidden behind many other names. We managed to shut down two big entities.

David Hopps, ServiceMaster:

We have some very similar programs in place. Additionally, we have a hotline that ultimately will go up to the CEO, so if a fellow employee doesn't want to report it locally, they have the ability to report it higher up.

When it's time to do aggressive investigation, you follow through on that, including engaging the local district attorneys, because it's often difficult to get them to agree to prosecute, given their caseloads and demands on their time.

Education is huge, so that, first of all, our management understands what true fraud is, and they realize we won't roll over and pay every claim and never go after anybody for fraud. We report on what percentage of claims we are denying, and we're working on improved scorecards that will communicate our success ratio when we bring in an investigator.

As for the dignity aspect of it, one of our company objectives is to "Honor God In All We Do." We care about people, we do the right thing, and we treat others as we would expect ourselves to be treated. It is a foundation value of our company up to the highest levels, all the way to our CEO.

Sam Friedman, NU:

How are you dealing with the emerging exposures in workers' comp, such as the challenge of having more and more people who speak English as their second language?

Tim East, The Walt Disney Company:

Language is going to be an increasing challenge. On our cruise ships, for example, there are over 40 different languages spoken by the various crew members. So we partnered with academic institutions and food service industries to develop an international language of food protection, including pictograms for keeping food at the right temperature, refrigeration, cooking and cleaning.

You also have to address differences in culture. For instance, green is the color of safety here, but we learned that a person who wears a green hat on a construction site is not respected in China.

So, if I had worn my green safety hat in China, I would have sent the entirely wrong message when I entered a Chinese construction site. We changed to red there as the sign of safety and protection, which is the lucky color and is respected in China.

So, it's both language and culture that we have to start being smarter about.

David Hopps, ServiceMaster:

Language is also a big issue for us. For many of our employees, English is definitely their second language. More importantly, some of these folks are functionally illiterate even in their primary language.

So we continue to find ways to better educate and communicate, including converting some of our key training materials to pictorial instructions.

Fred Pach?n, Select Staffing:

We make our living putting people to work. Some of these individuals may not have lots of skills, or they may be overweight, veterans returning from the war, or people who just got out of jail, so our challenge is properly matching the individual to the job.

We have created different ways of identifying and creating a good, solid match system by screening, asking the right questions and gathering the input from the applicant. There is follow-up to make sure they are happy with the job, because if they are unhappy, a comp claim is more likely to be filed, and they're more likely to stay out longer than if they enjoy their work.

We don't rely just on questionnaires. We have safety officers on duty–individual workers who are imbedded into the client's work sites–who are constantly monitoring staff on assignment.

We do walk-throughs of the job sites all the time, constantly touch base, and ask how their colleagues are doing, checking to see if they are working in a safe environment.