Bold blue wins big: data technology, risk management information systems and collaboration with its carrier weighed heavily in IBM Corp.’s bold initiative to control costs and convince employees to take ownership of the worker’s comp process – worker’s comp
In 1995, IBM was two years into a massive restructuring project and decided it was time to get a grip on its spiraling workers’ compensation costs. Even though its payroll was shrinking, workers’ comp costs had increased sharply for a number of years. Eight years later, IBM has made tremendous strides. IBM’s frequency rate has decreased steadily from 1.96 in 1994 to 0.99 in 2001–a 50 percent decrease. IBM’s loss rate also has shown a significant reduction from $276 per employee in 1994 to $117 per employee in 2001–a 57 percent decrease.
How did Big Blue do it?
“I would say that the key to the good results IBM got is that they were committed to file safety and well-being of their employees,” says John Miller, a Liberty Mutual customer service manager who handles the IBM account.
And that took a combination of teamwork, commitment and perseverance, says Betty Norton, senior health services manager in the Global Well-Being Services unit at IBM.
“Healthcare costs were recognized as being out of control. Everyone was looking at reducing medical costs. That prompted our organization to start looking at what we could do about it,” Norton explains.
In 1993, IBM launched a massive restructuring that included layoffs of tens of thousands of people throughout the company–the first layoffs in the company’s history. By 1995, IBM was still in cost-cutting mode.
At a time of aggressive cost control throughout the company, the change in the company’s workers’ compensation insurance practices provided an opportunity to deliver some big cost savings.
Prior to 1995, IBM was not closely involved in its workers’ compensation claims, Norton says. That was something that had been left up to the company’s workers’ compensation insurance carrier Liberty Mutual.
“In 1995, our group decided to pull together a best practices team and see if there was a better way to approach the problem,” Norton says.
IBM used the opportunity to begin working with an insurance broker for the first time to provide workers’ comp consulting expertise and brokerage support.
IBM also created a multidisciplinary team called the Workers’ Compensation Best Practices Team. That team consisted of representatives from IBM’s Global Well-being Services (GWBS) staff, including nurses and safety professionals. It also brought in IBM’s risk and insurance management group, Liberty Mutual and IBM’s insurance broker, Marsh.
The team had its work cut out for it.
Employees and managers throughout many areas of the company were not aware of the rise in workers’ compensation costs, and there were significant communications and awareness gaps about the importance of early reporting and what to do once a workers’ comp claim occurred.
Data transmission was slow, which contributed to IBM having a very high average lag time between the date the claim was reported to the insurer and the accident date. Half the cases were reported after 10 days, which was several times longer than the industry average. As a consequence, claim rates had steadily increased over the prior four years.
Although the IBM medical staff had sophisticated case management skills, their efforts were concentrated on non work-related cases. This resulted in inefficiencies in claims management activities and delayed return-to-work opportunities for workers’ compensation cases.
Data quality was poor and losses could not be tracked in a timely fashion nor linked to specific IBM divisions.
Once IBM recognized it had a problem, it went after it in a number of ways.
The initial organizational component of the plan called for IBM to take ownership of the workers” compensation process. IBM’ GWBS staff, headed by Martin-Jose Sepulveda, became the “process owner,” responsible for the establishment and implementation of cost control and case management procedures and protocols throughout IBM. IBM nurse case managers and Liberty Mutual claims adjusters began partnering together to coordinate their efforts to seamlessly provide effective workers’ comp case management to employees.
But the biggest change had to do with IBM’s involvement in the process.
“The big difference is how we work collaboratively with the carrier,” Norton says. “Before, we filed the claim, and they took care of it. We weren’t involved at all. That was the end of it. We never really thought about the claims part of it,” she says.
Now, she says, the IBM team is actively involved in cases, checking to make sure workers are getting the right kind of treatment, she says. And the team is actively involved in education and training as well as analysis of loss data to better understand the risks and where improvements may be needed.
The team has channeled its energies into three key categories: risk assessment, communications and risk reduction.
IBM has implemented a range of risk assessment tools to pinpoint cost savings and identify specific areas for process improvement quickly and efficiently.
The company has rolled out various types of reports to track loss costs by division and line of business and has implemented an electronic claims reporting system known as the electronic data interchange (EDI) between IBM and the insurer.
Information required for the first report of injury is obtained when the employee reports the injury through an 800 number at IBM. At this time, the report is transmitted to Liberty Mutual through file interchange. In addition, the report is sent internally to the appropriate IBM case manager, who integrates all aspects of treatment and resolution of the case with the Liberty Mutual claims adjuster.
EDI has been critical in helping IBM reduce the time it takes to report claims and begin providing effective workers’ compensation case management to employees, improve the quality and integrity of data reported to the carrier, and improve the use of state-of the-art technology to develop new analytical tools to measure and track claims.
One enhancement is the “EDI Gateway,” which enables electronic transmission from IBM to the carrier of over 20 key codes that are specifically tailored to IBM’s operations, such as case manager and division.
Prior to the development of the EDI Gateway, these codes had to be inputted manually. This innovation has not only improved data quality and eliminated a slow manual process, it has strengthened IBM’s ability to “drill down” on its data and analyze and track trends across various factors of growing importance to IBM.
To further improve IBM’s ability to analyze large groups of data and obtain even greater benefit from the EDI Gateway, the workers’ compensation team developed consolidated code tables that group such codes as cause, nature of injury, body part and agency, in logical and consistent categories.
This data management technique has allowed the Global Well-being Services staff to analyze and monitor loss costs more effectively and to take corrective action on problem areas more quickly.
IBM has also been able to design and implement new risk assessment tools using Liberty Mutual’s risk information system, RISKTRAC. The use of this database allows online communication and case updates while providing a platform through which key frequency and claim cost metrics are monitored, manipulated and analyzed.
Communication has been another important feature of the program.
The company has worked hard to improve communication with management and employees throughout the rollout process. Activities have included education of employees and management about workers’ compensation and increasing the awareness of workers’ compensation costs and the benefits of prevention and early return-to-work as keys to cost reduction.
Communication has been further enhanced by the use of what is called “the Portal”: a secure, Internet-based location on the Liberty Mutual web site accessible only to specified IBM, Marsh and Liberty Mutual personnel. The team members and other IBM staff use the Portal to share information on a real-time basis. In the area of risk reduction, there are also quarterly claim strategy meetings between the local Liberty Mutual claims handler, IBM nurse case managers and team members where open claims are reviewed and information relating to workers’ comp laws, strategies and ideas are exchanged.
With its new team approach in place, IBM has been in a better position to tackle some of the new challenges it is facing, Norton says. IBM has seen its once-large manufacturing operation decline over the past few years, and that has brought about a change in the kinds of workplace injuries the company encounters. The major focus has shifted more from manufacturing to non-manufacturing,” Norton says.
Now the company has a large mobile workforce made up of people like customer service engineers. That has resulted in a growing number of motor vehicle accidents.
To address some of the problems faced by its mobile workers, IBM launched a driver education program and has since seen a decline in the rate of auto accidents, Norton says. Although it can sometimes be difficult to sell management on the idea that you have to spend money to save money, IBM has shown that it works. Now, after eight years, IBM’s commitment to the best practices team has grown even stronger. “I think if anything it’s gotten stronger–their commitment to the workers’ comp best practices team,” Liberty Mutual’s Miller says.
For other companies considering an overhaul of their workers’ compensation program, Norton has several words of advice. “Be persistent. Be able to prove what you are preaching,” Norton says. “My greatest advice would be: Work together.”
RELATED ARTICLE: Sometimes money does grow on trees.
In most cases, you’ve got to spend money to make money. But that’s easier said than done on a tight budget. Such was the challenge facing the risk management department of Chesapeake, Va.-based Dollar Tree Stores Inc. back in 1998. If the whole premise of your operation is to sell every item for $1 or less, raising prices to pay for your risk efforts just isn’t an option.
Even so, the company has made great strides in recent years, whittling down lost time, cuffing claims reporting lag time from 30 days to 73 percent of claims being reported in one day and reducing overall incident frequency. At the same time, the company’s increased the claim closure rate to more than 80 percent within the first year of the claim. That’s why Dollar Tree earns an honorable mention for one of the best workers’ comp programs of 2003. It’s a good example of what can happen when companies start thinking outside the box. Dollar Tree’s risk management department got creative and found ways to capitalize on the company’s internal and external partnerships. For example, the company’s graphics department created a massive safety and workers’ comp awareness blitz for managers and associates, including attention-getting fraud and early-reporting posters, phone stickers with the company’s toll-free claims reporting number and articles for various in-house newsletter.
According to Dollar Tree’s director of risk management, Nancy Norman, that’s just one of many ways the company capitalizes on its internal resources as well as the resources of its TPA, Specialty Risk Services of Hartford, Conn. Dollar Tree has used its company’s weekly bulletin to stores to send out claims reporting instructions and publishes claims reporting and fraud awareness information in its quarterly newsletter. In addition, the company arranged a personnel data feed with its TPA to make claims reporting hassle-free for associates. Claimants calling in to the TPA’s hotline now only have to give their names and the system fills in the rest.
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