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Tuesday, May 24, 2022

INSURANCE—L.A. Slammed By Workers’ Claims

With the city facing an estimated $100 million in workers’ compensation claims this fiscal year, Los Angeles officials are finally waking up to the urgent need to contain the out-of-control spiraling costs.

By the end of the month, the city plans to hire its first safety administrator since 1994. Meanwhile, Mayor Richard Riordan has set aside $250,000 to hire three consulting firms to conduct an extensive survey of the city’s larger departments to determine where safety improvements are warranted. In addition, the city is stepping up its existing safety and fraud prevention programs.

While welcomed by city observers, the steps come more than five years after the first of several studies outlined ways to reduce the number of claims. Despite those numerous studies, most of their specific recommendations were never implemented.

“There’s been (almost) no focus, interest, political will or leadership to implement the very common sense, logical recommended changes,” said Councilwoman Laura Chick, chair of the council’s Government Efficiency Committee. “This is a hit to the general fund, money that could be spent in so many better ways putting more police on our streets, more paramedics and ambulances, paving more streets, trimming more trees, and on and on and on. The city needs to find ways to stretch the dollars that we have and not waste them.”

And the number of dollars “wasted” on workers’ comp claims has exploded in recent years.

Specifically, the bill for job-related injuries and sicknesses jumped from $57.9 million in fiscal 1994-95 to $84 million last fiscal year. And with such costs hitting $47.4 million in the first half the current fiscal year, which ends June 30, the annual tab is expected to hit $100 million.

Peter Hidalgo, press secretary to Riordan, said the Mayor’s Office did not realize the situation was out of control until last year, shortly before he began streamlining government offices.

He removed the risk management office from deep in the organization chart of the former chief administrative office and placed it under the Office of Finance, giving it more visibility.

“It appears this escalating issue wasn’t brought to the Mayor’s Office until recently,” Hidalgo said. “A significant challenge within the city has been the ongoing bureaucracy that we’ve seen, and that, the Mayor is trying to eliminate.”

While the jump in the value of claims is uniformly attributed to rising health care costs that are beyond the city’s control, critics complain that enhanced worker safety programs would have reduced the number of claims and stabilized payments.

“The whole program of occupational safety is seriously lacking,” said Chris Sobel, who as the city’s safety administrator saw his staff reduced from 17 to four during a 15-year tenure that ended in 1994. “There’s very little coordination between the departments. Nobody in management positions seems to care. There are no penalties for ignoring Cal OSHA.”

The Occupational Safety and Health Administration-mandated safety training programs were systematically ignored within the city’s 1,100 buildings, he said, while distribution of manuals informing department supervisors about their responsibilities for creating a safe work environment for 35,000 to 40,000 employees was discontinued six years ago.

The workers compensation figures reflect medical care, temporary and permanent benefits, and private legal and investigators’ fees.

Study after study

The city’s efforts to combat soaring workers’ comp claims, while clearly ineffective, date back to 1995 when it paid consulting firm Johnson & Higgins $14,000 to conduct a study on how to curtail costs to the city.

But that study focused primarily on staffing needs and how to best administer the claims after work-related injuries and sicknesses occurred, not on how to reduce injury and sickness claims.

Prior to 1995, claims adjusters were handling more than 1,000 cases each at any given time, while the state labor code recommends a caseload of 200 to 250, according to Jurutha Brown, the city’s chief personnel analyst.

During fiscal 1995-96, the workers’ comp office increased its staff by 20 people bringing the total to 104 positions allowing for quicker processing of claims.

But it was not until last summer that Riordan implemented the study’s recommended early-return-to-work initiative.

Under that program, employees still recuperating from injuries can temporarily assume less-strenuous responsibilities until they are healthy enough to return to their regular jobs.

The city followed the Johnson & Higgins report with a $20,000 study in 1997 by accounting/consulting firm Coopers & Lybrand (now PricewaterhouseCoopers), which did little more than reevaluate the recommendations by Johnson & Higgins.

“This is a study done of a study,” said Brown.

The number of claims filed against the city has remained relatively steady since the mid-1990s, with 9,839 submissions during fiscal 1995-96 and 9,809 claims filed last fiscal year. During the first half of this fiscal year (July 1-Dec. 31, 2000), 4,445 claims were filed.

Sources of claims

As might be suspected, firefighters and police officers are most frequently injured on the job, with the Department of Public Works’ sanitation workers suffering the most injuries among non-sworn personnel, records show.

Officials said they did not know the number of fraudulent claims filed each year, in part because many employees who fake sickness often return to work before their deception is uncovered.

Aiding the workers’ comp office’s loan fraud investigator and supervisor are five investigators with the City Attorney’s Office and 15 private firms that contract with the city.

But the system lacks a tough-on-crime approach for those who attempt to receive long-term benefits illegally.

“The more common result of fraud is that we cut off benefits,” said Brown, who couldn’t remember the last time a city employee was prosecuted for filing a fraudulent claim. “That (cutting off benefits) doesn’t necessarily result in a fraud filing in criminal court, but in fact, we have saved the money. That in itself is a good outcome.”

Maybe so, but while the number of claims being filed has remained relatively flat in recent years, the average per-claim payout has continued to climb. The city’s average claim payout was $10,853 last fiscal year, up more than 30 percent from $8,319 five years ago, records show.

Another study, which the city Personnel Department submitted last month to the City Council’s Government Efficiency Committee, shows that medical expenses have increased by $1 million a month and temporary disability payments by $250,000 a month in the past two years.

Fire Capt. Steve Ruda, the department’s spokesman, blamed the delay in safety improvements on budgetary cuts that plagued firefighters and other city departments during the 1990s.

Preventive measures

But he said his department has finally begun implementation of a “wellness program,” which requires firefighters to sweat through an hour and a half of rigorous physical exercise and stretching before each of the minimum 11 24-hour shifts that they work each month.

“It’s a luxury in a budget to provide a positive physical environment in the budget,” Ruda said. “With it, you’re workers’ compensation will go down because you have less injuries.”

Police Lt. Horace Frank would not comment on the matter and directed questions to chief personnel analyst Brown.

The new surveys commissioned by Riordan, which have yet to be funded by the City Council, would provide a more comprehensive look at the types of injuries and illnesses that employees suffer, as well as whether safety regulations, proper infrastructure and ergonomic equipment and furniture are in place. They would also make specific recommendations, including identifying where additional staffing is needed, to alleviate safety hazards and ensure that potential dangers are addressed.

The new safety administrator will be charged with developing a citywide worker safety program, the details of which are not yet known.

Parks and Recreation Department employees have already been surveyed.

Surveying of fire, sanitation, transportation and general service employees began two weeks ago and is expected to be complete within 90 days, while the police and building-and-safety studies are expected to be funded in the next fiscal year’s budget, officials said.

“The surveys are very expensive and it’s well worth it,” said Antoinette Christovale, the city’s finance director. “You need to evaluate each department because (injuries and illness) are unique to the type of work they do. You don’t need to add positions and resources if they are not warranted.”

The effectiveness of those surveys, of course, will depend on how many, if any, of the resultant recommendations are implemented.

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