Claims Management by the Victorian WorkCover Authority
1.1 Introduction
1.1.1 Background
The WorkCover scheme encompasses injury prevention and offers
rehabilitation and compensation for workers suffering work-related
injuries and illnesses. It is supported by a compulsory insurance
system that covers employers for the cost of providing benefits to
injured workers. These benefits cover both economic and
non-economic losses and may continue
for life.
Each Australian jurisdiction has its own particular compensation
scheme. Victoria has a no-fault scheme where compensation and
assistance is provided regardless of whether the employer or worker
was at fault. It also allows injured workers to pursue common law
damages if the injury is serious, and where the employer was at
fault.
The scheme and Victorian WorkCover Authority (VWA) are primarily
governed by the Accident Compensation Act 1985 (the AC
Act) and the Accident Compensation (WorkCover Insurance) Act
1993 (the ACWI Act). The AC Act provides compensation to
injured workers for injuries or diseases that are work related. The
ACWI Act requires employers to pay compensation under the AC Act,
and to hold WorkCover insurance against that liability.
VWA regulates Victoria’s workplace occupational health and
safety (OH&S) and return to work (RTW) requirements, and
underwrites the scheme. VWA administers the scheme through six
authorised private service providers, known as agents, who provide
services to employers and injured workers consistent with the
legislation and the standards and procedures set by VWA.
Agents determine and collect premiums from employers, and manage
claims on behalf of VWA. For this agents are paid a service fee, an
annual performance fee based on their success in achieving scheme
objectives, and a lump sum fee based on their management of
liabilities.
Healthcare professionals including doctors, occupational
rehabilitation (OR) providers and allied health professionals
manage workers’ injuries, assist in identifying required services
and in rehabilitation and RTW.
The AC Act requires employers to keep a register of injuries, to
notify VWA of claims within prescribed timeframes, to maintain an
offer of suitable employment for the first 12 months after an
injured worker starts weekly payments, and to support injured
workers’ RTW.
The AC Act also requires an injured worker to take part in
suitable rehabilitation and RTW programs and services. If the
worker fails to do so, their benefit may be reduced or
terminated.
1.1.2 Approach to claims management
In 2002 VWA introduced a new claims management model as part of
a wider reform program to improve its performance in core business
areas. The new model aimed to improve RTW outcomes, achieve
cost-effective claims management, and to enhance the overall
effectiveness of case, injury and medical management. Under the
model, claims are triaged and segmented according to risk, where
low-risk claims are handled quickly and high-risk claims are
actively managed.
VWA requires each agent to establish multidisciplinary teams
(MDTs) comprising a case manager, technical manager and injury
management advisor to case manage high-risk claims.
The case manager leads the team, acts as the primary contact for
employers/workers, and manages the claim. The technical manager
provides expert legal and technical advice to the case manager. The
injury management advisor is responsible for developing and
promoting injury management strategies that focus on early recovery
and durable RTW.
The MDT must work as a unit, combining their skills to actively
manage high-risk claims and to maximise RTW outcomes and minimise
liabilities.
1.1.3 Audit objective and scope
The objective of this audit was to assess the effectiveness and
efficiency of claims management by VWA. The audit assessed
whether:
- the management of claims is maximising
both outcomes for injured workers and the financial sustainability
of the scheme
- agents are managing high-risk claims in
accordance with VWA’s claims management model
- VWA’s arrangements for monitoring and
improving the performance of claims management are
effective.
The audit examined the policies, procedures and activities of
VWA and its six agents, with a particular emphasis on the
arrangements for managing high risk claims. It did not examine
self-insurers.
A representative sample of 150 high-risk claims across all
agents was examined.
1.2 Overall conclusion
VWA’s management of high-risk claims is maximising the financial
sustainability of the scheme. Since 2002 claims management
initiatives have contributed to a significant reduction in
projected liabilities of $2.9 billion, and the scheme has remained
in a sound financial position over the last five years.
There is scope, however, to improve agents’ case management
practices in order to better maximise outcomes for injured workers.
To achieve this, VWA will need to reduce industry turnover,
strengthen the capability of its claims staff, and adopt a stronger
focus on monitoring and improving the effectiveness of case
management.
1.3 Key findings
1.3.1 Claims management and injured workers’
outcomes
The claims management model introduced in 2002 is a sound
framework for managing high-risk claims. Although the practice of
case management is now established within agents, issues with the
model’s implementation have adversely affected the achievement of
some of its objectives. While the model has stopped the
deterioration in RTW and successfully reduced the cost and duration
of claims, it has not substantially improved RTW outcomes, or the
effectiveness of agents’ case management practices.
Victoria’s return to work performance
The RTW rate in Victoria has improved marginally since the
claims management model was introduced in 2002.
The ‘durable’ RTW rate measures the proportion of workers paid
10 or more days compensation and who RTW within seven to eight
months after their claim. The rate is derived from an annual
national survey of injured workers across Australia and New Zealand
which includes about 600 Victorian workers. Victoria’s durable RTW
rate has been relatively stable since 2005 at around 76 per cent
(on average), with a marginal improvement of around 1 per cent
since 2002. Victoria’s durable RTW rate has been consistent with
the national average since 2005.
VWA’s own annual survey of around 2 500 Victorian injured
workers determines the ‘sustainable’ RTW rate. It measures the
percentage of injured workers off work for more than 10 days and
who RTW and stay working 14–19 months after injury. It shows a
similar level of performance to the durable RTW rate in 2006 and
2007 (i.e., around 76 per cent). However, in 2008 the survey
reported a rate of 78.4 per cent, a statistically significant but
not substantial improvement in real terms.
Case management practices
Agents’ case management practices, on average, were considered
generally adequate, however, there is substantial scope for
improving agents’ performance. Adequate practice was observed in
62.8 per cent of cases, good practice in 21 per cent, and
inadequate practice in 16.5 per cent of cases.
Agents did not systematically consider psychosocial barriers to
RTW such as attitudes toward recovery, stress, anxiety, workplace
issues, substance abuse, and family matters, when assessing the
injured worker’s status, needs and risks to recovery. In most cases
assessments were narrowly focused on the physical injury and its
impact. As a result, their assessments did not provide assurance
that the case management strategies addressed all injured workers’
issues or optimised effective rehabilitation and RTW.
VWA has started a pilot project to improve agents’ initial
screening and triage practices and to better guide agents on
psychosocial factors. It has developed a triage tool incorporating
a small number of psychosocial questions which it has used since
February 2009. VWA will monitor use of the tool, and integrate it
into its new ‘Novus’ workflow system over the next 12 months. While
this is a positive step, VWA needs to periodically review the tool
and agent practices
for effectiveness.
In addition to the triage tool, VWA has developed a number of
claims management initiatives in consultation with agents designed
to improve RTW outcomes for injured workers. These include:
- new processes for more effective
purchasing of OR services, including better monitoring and
reporting on effectiveness of services via the use of incentives
linked to clearly defined RTW outcomes
- initiatives to support long term injured
workers’ access to vocational training opportunities and RTW
services
- the trialling of mediation services for
injured workers where interpersonal conflict is the key barrier to
RTW
- RTW support and guidance to small
employers delivered in the workplace to improve their knowledge and
capacity to manage RTW
- access to a panel of Medical Advisors who
can assist the MDT undertake clinical reviews and medical
practitioner contact where appropriate and as requested by the case
manager.
In most cases agents approved and delivered planned services to
injured workers in a timely manner. While there was no evidence of
over-servicing among the cases we examined, in terms of the
intensity and mix of services, VWA has acknowledged that this does
occur which it mitigates with clinical peer reviews of common
treatments.
In most cases agents promptly reviewed the injured worker’s case
at pre-determined points that were usually no more than eight weeks
apart. However, they did not systematically assess how effective
services were for injured workers during these reviews. This is
important for evaluating the injured worker’s progress,
avoiding
over-servicing, informing future resource allocation decisions,
and for ensuring the scheme funds are spent wisely. The AC Act
requires VWA and its agents to determine if a worker is entitled to
receive compensation, and if the amount of compensation being
sought is reasonable before making payments.
Similarly, agents did not systematically document changes in
circumstances and decisions following review points. This can lead
to loss of critical corporate knowledge if staff changes occur, and
can impede the agent’s capacity to keep track of the history of the
claim.
Information supplied by VWA indicates that the number of matters
referred to the Accident Compensation Conciliation Service (ACCS)
across all agents has declined by around 27 per cent since 2005.
Agents generally reviewed adverse decisions about eligibility when
requested by injured workers. However, where the worker did not
request a review and referred the matter directly to the ACCS,
there was little documented evidence of the agent’s internal
review. Although in most of the cases audit examined the files
indicated there had been reviews as required, the details and
outcomes were not recorded.
VWA acknowledges that there is an opportunity to improve the
quality of agents’ decisions. To address this, the VWA has
established an internal team to enhance agents’ performance in this
area and will introduce an incentive in the agent remuneration
model in 2009–10 to further focus agents on improving the quality
and timeliness of eligibility decisions.
Audit identified other weaknesses such as the vagueness of RTW
goals within most case management strategies developed by agents,
including the absence of timeframes for their achievement. There
was also little alignment between these goals and the identified
barriers to RTW, including strategies and actions for addressing
them.
In 78 per cent of cases examined, injured workers returned to
work at a level appropriate to their extent of incapacity. However,
given the weaknesses identified in practice we were unable to
assess the cost-effectiveness and efficiency of the outcome in each
case, nor the extent to which it was due to the actions of the
agent. As a result, it is not possible to distinguish whether the
outcome was ‘optimum’ in the circumstances, or whether it was
simply due to the natural recovery of the injured worker.
Agents need to improve the quality of goal setting and clearly
link RTW goals to soundly developed strategies and actions. This
will allow evaluations of the adequacy of outcomes, and facilitate
continuous improvement and the achievement of good practice.
Agent capability
Effective case management under VWA’s claims management model
depends on the capacity and capability of MDTs. However, there are
significant annual staff turnover rates across both agents and MDT
positions (around 29 per cent overall in 2007–08). This lack of
stability and continuity within MDTs is reflected in the experience
and qualifications of case managers. Thirty two per cent of case
managers do not have the minimum two years of claims management
experience. This points to a substantial skills shortage that needs
to be addressed.
In an effort to address capability shortfalls, VWA and agents
have developed nationally accredited qualifications in workers
compensation and injury management as well as the Industry
Capability Program, which aims to increase the uptake of accredited
training and build technical and leadership capability in staff. In
2006 VWA, the Transport Accident Commission (TAC), and the personal
injury and workers compensation industry of Australia and New
Zealand set up an independent Personal Injury Education Foundation
(PIEF) that also offers a number of postgraduate and certification
programs in injury management.
While these are positive developments, they are unlikely to have
a significant effect on skills shortages in the short to medium
term. The high staff turnover suggests that VWA should review and
identify the industry roles, specialisations and career paths that
would best attract and retain qualified staff. VWA advised that
there are early signs to suggest that turnover may be reducing due
to the changing economic conditions.
Although VWA has developed a number of accredited
industry-specific qualifications, there is presently no mandatory
qualification for case management, which is needed to support good
practice.
1.3.2 Claims management and the financial
sustainability of the scheme
The financial performance of the WorkCover scheme has improved
significantly since the current claims management model was
introduced in 2002. Consecutive reductions in long-term claim costs
over the past five years linked to claims management initiatives
have directly contributed to maintaining a fully funded scheme.
The scheme was in a strong financial position in 2007–08, with a
record level of performance from insurance operations (PFIO) of
$958 million. PFIO measures profit before tax, and excludes the
impacts of factors beyond VWA’s control, such as investment markets
and interest rate movements.
The scheme’s funding ratio is an indicator of its financial
sustainability. It is a measure of the extent to which VWA’s assets
cover long-term claims costs. Since 2004–05 it has stayed above the
Department of Treasury and Finance’s benchmark range of
90–110 per cent, indicating that the scheme has been fully
funded over this period. During this time, VWA has also reduced its
premium rates each year, reflecting the improvements in long-term
claim costs, reduced injuries and reduced durations.
Claims management can support the scheme’s sustainability with
initiatives that control specific claim costs affecting its funding
position. The financial success of these initiatives is
demonstrated when the scheme’s external actuary calculates a
reduction in projected long-term claim costs.
In recent years, VWA has linked its claims management
initiatives to the significant reductions in long-term claims costs
it has reported. Since 2003–04, annual reductions in projected
claims liabilities total around $1.9 billion. This is based on
annually revised estimates of the total future projected claims
costs relative to the previous year only. When compared to
projected liabilities originally estimated in 2002, the cumulative
improvement in outstanding claims liabilities equates to $2.9
billion when calculated on a ‘back-to-base’ method.
The major sources of improvements in projected claims
liabilities since 2003–04 have been the weekly compensation (51 per
cent), medical and like (23 per cent), and the impairment/maims
benefit (24 per cent) groups. Improvements in weekly and medical
benefits liabilities are directly linked to claims management
practices.
Reductions in the number and duration of long-term claims have
driven the improvement in weekly liabilities since 2003–04
(approximately $980 million). This has been achieved through the
active management of high-risk claims under VWA’s claims management
model, the use of incentives for agents and closer monitoring of
their performance in achieving target claims duration levels, and
in actively reviewing workers’ eligibility for weekly
compensation.
The improvement in medical liabilities is mainly due to VWA
initiatives directed at slowing the growth of treatment costs for
long-term claims, supported by incentives for agents. This has
resulted in successive annual reductions in projected medical
liabilities totalling $434 million since 2003–04.
VWA faces a rapidly changing and uncertain economic landscape.
Deteriorating economic conditions impacting on investment returns,
will present significant challenges to VWA in maintaining a fully
funded scheme.
1.3.3 Monitoring and improving claims management
performance
Existing performance monitoring is dynamic enabling VWA to
measure and improve aspects of claims management. It uses
incentives linked to agents’ remuneration, comprehensive
performance monitoring and reporting including targeted operational
‘health checks’, and reviews of agents’ internal controls.
VWA uses a comprehensive range of monthly, quarterly, six
monthly and annual performance reports to monitor trends, identify
emerging issues, and to drive improvement initiatives in
consultation with agents.
There is evidence that its current system has improved customer
service levels and agents’ management of liabilities, and that this
has directly contributed to strengthening the financial
sustainability of the scheme.
However, there is a need to strengthen the current arrangements
as:
- VWA does not have a structured framework
for systematically evaluating and reporting on the overall
effectiveness of agents’ case management, and achievement of good
practice
- agents are not remunerated on the basis of
their performance against quality measures linked directly to good
practice in case management.
The results of our audit of agents’ case management practices
indicate that VWA needs to develop such arrangements.
1.4 Recommendations
Case management practice
VWA, in consultation with agents, should improve the quality of
case management practice by:
- enhancing strategies to better engage
treating health practitioners in the case management
process
- establishing methods of obtaining
assurance that sufficient medical input has been obtained by agents
to assess each claim
- reviewing stakeholder communication so
that there is a thorough and systematic assessment of all barriers
to an injured worker’s return to work (RTW)
- continuously reviewing assessment and risk
identification processes to identify best practice, and use a
framework to identify all risks and barriers to rehabilitation and
RTW
- strengthening existing case planning so
that:
- case management action plan (CMAP) goals
are specific, measurable, achievable, relevant and timed (i.e.
SMART); they distinguish between short, medium and long-term
objectives, and are clearly linked to strategies that address risks
and barriers to RTW
- CMAPs enable meaningful monitoring and
assessment of the claim’s progress, and the effectiveness and
efficiency of strategies and actions
- obtaining assurance that agents
systematically evaluate injured workers’ services during reviews,
and that CMAPs are then accurately updated
- reviewing and strengthening quality
assurance to give a reasonable level of assurance that adverse
decisions are transparent and sound and well documented.
(Recommendation 4.2)
Agent capability
The VWA should enhance agent capability by:
- reviewing and identifying the industry
roles, specialisations and career paths that would best improve the
industry profile and attract and retain qualified staff
- introducing a mandatory standard training
framework and/or qualification for good practice case management
for all multidisciplinary team (MDT) personnel.
(Recommendation 4.1)
Performance monitoring arrangements
The VWA, in consultation with agents, should:
- develop a structured framework for
systematically evaluating and reporting on the overall
effectiveness of agents’ case management, and achievement of good
practice
- introduce measures in the Annual
Performance Adjustment (APA) that directly reward and/or penalise
agents on the basis of their performance against quality measures
linked directly to good practice in case management.
(Recommendation 6.1)