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Curb skyrocketing workers’ comp costs

By Milan P. Yager

Instituted a century ago, the workers’ compensation system was created as a cost-saving mechanism to deal with the economic and personal impact that injury, illness and chronic disability have on any workforce. Job safety was deteriorating, leading to increased accidents and injuries. Employers often found themselves in court, defending civil suits. Workers’ compensation was a way of spreading the risk, while providing compensation to employees who were disabled from working.

Today, workers’ comp accounts for one the fastest growing labor costs. Premiums for workers’ comp have risen 50 percent nationwide in the last three years – the fastest pace in a decade, according to the New York City-based Insurance Information Institute. It’s simple math when every year costs in this area double due to too many claims lasting longer than expected. Some businesses are getting back-to-back increases of 25 percent to 40 percent, even if they have favorable workplace accident rates. No business owner knows how to budget for a 20 percent increase that turns out to be twice that number. And employers often don’t know what the new rates will be until a few weeks before renewal time. Then, of course, it’s too late to shop around.

There is no denying that workers’ compensation costs have had an enormous impact on the bottom line. Accidents cost money – not only through direct costs such as medical and compensation expenses, but in indirect costs as well. Losses of production, time, employee morale and client goodwill are all indirect costs that are hard to calculate. If lost, these items can easily cost you many times the direct costs.

Adding fuel to the fire is the length of time injured workers stay off the job, the continuing wages that must be paid while they are on leave, and the cost of replacement labor. You can’t reduce the level of workers’ comp benefits, as you can with health insurance. That’s because states mandate full coverage for treatment of on-the-job injuries. So how can you control costs?

Control Risks

The least expensive claim is the one that never occurs. Physicians have a strong incentive to control workplace risks and reduce claims to continue growing their practice, which often times are built on reputation and referrals. The most important step you can take is to identify and address the riskiest areas of your operations. Implementing, maintaining and supporting an ongoing risk management program can help control costs. The most effective cost control process involves a combination of elements. More specific programs may also be necessary based on the type of medicine you practice, but at a minimum these elements can be adopted to suit your practice:

· Office safety program.

· Safety rules and regulations.

· Duties and responsibilities.

· Employee selection.

· Employee orientation and training.

· Office inspections.

· Job safety analysis.

· Accident investigation.

· First aid activities.

· Recordkeeping.

Given the stringent regulations related to the medical industry, many physicians and physician offices are turning to a professional employer organization (PEO) to outsource all or some elements of risk management and workers’ compensation. There are PEOs with significant health care expertise and many who provide high levels of workers’ compensation management. Not only do many PEOs arrange coverage, but they provide assistance in directly assisting with safety and risk management, claims administration, return to work programs, and employee manuals designed to reduce costs.

The economies of scale provided by PEOs are helpful when procuring and administering workers’ compensation and health insurance. By pulling all of its clients’ insurance premiums together and aggregating all of its worksite employees, a PEO can contract with providers all over the country and keep annual premium increases lower than average yearly increases currently being experienced. Risk is also distributed and no one business will ever be hit with a shock claim, sparing a company from an increase as large as 20 percent.

Reducing the number of accidents in your workplace will directly affect your expenses for replacement labor while reducing your risk of getting hit with higher insurance rates as a result of poor workplace conditions. Insurance providers look at your track record and want to see evidence that you are taking control of your costs by getting workers the care they need, but also getting them back on the job as quickly as they are able. Add to this a training program that emphasizes safe workplace procedures to reduce the risk of accidents.

It is not advisable to introduce all of these elements at once. A PEO can assist in determining when and how to implement many of the following programs. Analyzing prior loss history is the easiest way to start, or by selecting one key element that exemplifies your support and underscores the primary objective of the program – the health and well-being of your employees.

Office safety program. A safety program statement should be written and publicized to demonstrate your support of employee safety. It should communicate that safety plays a key role in your medical practice. This element lends credence to the safety program.

Safety rules and regulations. Developing safety rules and regulations should help reduce personal injury and property damage caused by unsafe work practices. If you have multiple locations, rules and regulations should encompass both the general practice and office-specific requirements.

Duties and responsibilities. Every employee has a responsibility toward safe job performance. The duties and responsibilities, including safety expectations, should be developed and incorporated into job descriptions for all employees and doctors.

Employee selection. According to the insurance industry, some 32 percent of all workplace injuries occur to employees who are new to the job. Injury prevention begins with the hiring process. Your hiring program should focus on not only bringing the right people in, but also keeping the wrong ones out.

Between hiring and placing an applicant in a position, you have an opportunity to determine whether the person is capable of doing the job. Performing necessary testing that can range from drug and alcohol testing to credit checks is critical. Drug and alcohol abuse contributes to thousands of workplace injuries and millions of dollars of related costs every year. Recent studies have shown employers that implement drug testing have reduced workplace injury rates by 51 percent within two years. These same employers saw an average reduction of 11 percent in their workers’ compensation experience rating when they renew their insurance.

Employee orientation and training. Safety indoctrination is an important part of the orientation process, instilling a positive attitude toward safety from the start. Training should not just be limited to new employees. Employees placed in new positions and employees displaying poor or unsafe work practices should also be included in this category. Safety training that highlights job hazards can have a positive impact on job performance and productivity. New equipment can sometimes pose another risk management challenge for medical practices and clinics.

Office safety inspections. Studies indicate that slips, trips and falls are the leading cause of workers’ compensation-related injuries. Inspections are important in identifying and correcting workplace hazards, and should be documented in writing. Make sure you also schedule regular inspections of the outside premises.

Job safety analysis. Job safety analysis is a valuable tool used to review specific tasks. Potential hazards associated with the task are identified and solutions can be incorporated into the job procedure.

Accident investigation. It is important to learn from mistakes after an accident. An accident investigation will uncover the true cause and prevent recurrence of similar accidents.

First aid/medical activities. This area needs to be especially highlighted for physicians since they usually put the safety of patients first. Effective first aid and medical procedures help reduce the severity of accidents with initial treatment of minor injuries. Document procedures for dealing with more serious injuries such as who to contact for advanced medical help.

Recordkeeping. Good recordkeeping practices are necessary to document all activities. Information should include all records of accidents, accident investigations, first aid, safety meetings, employee training and office inspections.

Claims review. On a monthly basis, review and document the claims experience to understand the frequency and severity of claims. Results of these reviews help to implement corrective actions.

Medical practices and clinics are unique. Medical employees move and interact with human beings, handle drugs, deal with communicable diseases, use sharp instruments and X-ray machines. Some small medical practices know what they need to do, but become relaxed in following certain procedures such as documenting needle sticks and hiring an accredited lab to test their radiation equipment annually. Physicians understand health regulations, but they may not always understand OSHA rules.

Working with risk management professionals who do know the rules and who can conduct a risk assessment for the entire medical group practice can help alleviate some of the burden. A risk assessment professional can conduct training and streamline documentation. If an OSHA compliance officer shows up at your office, your practice is protected with industry-specific guidelines.

Properly use and store needles, and document all needle sticks. OSHA encourages use of the newer self-sheathing needles to reduce the risk of sticks. If a medical facility uses two different types of needles, employees must be certain what procedures to use.

Conduct annual training on bloodborne pathogens. It’s not enough to conduct training once. The law states it must be done every year. The OSHA Bloodborne Pathogen Standard also requires employees to use universal precautions and appropriate personal protective equipment, and label or color-code items such as sharps disposal boxes, contaminated laundry and certain specimens.

Develop a hazard communication plan. If there’s an exposure, all employees should know how to react. They also need to know how to safely use medical materials and equipment. Employees should know where to find the material safety data sheets to look something up quickly.

Set up a safety committee. The committee facilitates communication about risks and accident prevention. Even in a small group practice, it’s essential, and sometimes required by a state law. Communicating is one of the first steps in risk management. Usually accidents occur because there is a lack of communication. If someone handles sharps containers that are improperly loaded and gets stuck – there’s a claim

Milan P. Yager is Executive Vice President of the National Association of Professional Employer Organizations.

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