COUNTY FAILS TO CUT WORKERS' COMP FRAUD SOARING COSTS MAY CLIMB TO $2 BILLION.

Byline: Troy Anderson Staff Writer

Los Angeles County government has made little progress in its efforts to rein in soaring workers' compensation claims despite repeated promises and efforts to reform the system's runaway costs, a report issued Monday says.

The county's Citizens Economy Efficiency Commission recommended 46 steps to control payments to disabled workers - a total estimated to reach $2 billion over the next several years.

In the report titled ``Addressing Workers' Compensation Fraud in Los Angeles County,'' the commission estimates the cost of workers' compensation fraud at $7 million to $61 million a year in county government and recommends that county officials focus on reducing fraud and abuse.

``Over the past several years, the cost of workers' compensation has become increasingly burdensome for the county,'' the commission chairman, Robert Philibosian, said. ``After a review of the situation, it became clear that one major area in which the county can have a direct impact is in the management of fraud and abuse within the system.

``The county needs a clearly defined policy and plan to address workers' compensation fraud. The county needs to implement specific safety and risk-management actions to prevent injuries. And the county needs to communicate with all county employees, not just managers, the necessity of preventing accidents, preventing fraud and detecting fraud.''

Since the 1997-98 budget period, the county's workers' compensation costs have nearly quadrupled - from $114 million to an estimated $414 million this fiscal year. The costs totaled $325 million in fiscal 2003-04.

Jon Coupal, president of the Howard Jarvis Taxpayers Association, said the report demonstrates the need to act aggressively to control workers' compensation costs.

``This continues to show a blatant disregard for the interests of the taxpayers,'' he said. ``They have known about this for a long time.

``They need to either get a new workers' compensation czar or find another way to address the problem.''

Rocky Armfield, the county's newly hired director of risk management, said legislative action in 2003 and this year is expected ultimately to reduce the county's workers' compensation costs by $50 million annually as the reforms are phased in over three years.

While the county's workers' compensation costs have soared, the Metropolitan Transportation Authority watched its costs drop from $51 million last year to $48 million this year.

To help rein in its costs, the MTA beefed up its fraud-detection unit and retained DuPont Safety Resources in 2001 to train managers, supervisors and staffers on how to create a safer environment.

``Metro continues to aggressively pursue fraudulent claims, return injured workers back to work faster, and ... improve employee behavior and the work environment with respect to safety,'' MTA Board Chairman Frank Roberts said.

But Armfield said the MTA is much smaller than county government and does not have to deal with public-safety agencies - the county Sheriff's Department and county Fire Department - which generate the majority of the workers' compensation claims.

``The work they perform is dangerous,'' Armfield said. ``They are dealing with felons on a daily basis, as well as fighting hostile fires.''

In fact, the 2002-03 grand jury found that public-safety officers contribute disproportionately to rising workers' compensation costs and that some Sheriff's Department personnel and firefighters pursue workers' compensation cases shortly before they retire in order to obtain more lucrative, service-connected disability pensions.

``It would appear, based upon the contentions in these reports, that the problem is being compounded by the creation of a culture of entitlement,'' the report's authors wrote.

David Holmquist, director of risk management for the Los Angeles Unified School District, said workers' compensation costs for that agency rose from $108 million in 2002-03 to $116 million the past fiscal year.

But in that same period, the number of open claims dropped from 9,700 to 7,789, and the number of lost workdays fell from 200,000 to 105,973.

``My expectations are that our costs are going to be reduced,'' Holmquist said. ``We are taking as much advantage as we can with the recent changes in the laws to benefit the district and taxpayers. We have set up a fraud task force and have three of our own school police detectives assigned to help us with workers' compensation fraud investigations.''

As of late 2002, county government's 91,588 employees had 20,970 open workers' compensation claims with 1,957 employees off work as a result of industrial injuries and 913 off work as a result of nonindustrial injuries, the report's authors wrote.

Although the levels of fraud and abuse in the system are difficult to establish, industry estimates range from 1 percent to 30 percent of claims paid. In 2002-03, county workers opened 12,213 new claims.

Troy Anderson, [phone]

troy.anderson(at)dailynews.com

HOW TO CONTROL COSTS

The county's Citizens Economy Efficiency Commission recommended 46 steps that officials should take to control workers' compensation costs, including the following:

--Clearly articulate a policy to reduce costs, including an aggressive campaign to investigate and prosecute fraudulent claims.

--Direct Risk Management Director Rocky Armfield to develop a performance-based anti-fraud strategy.

--Direct Armfield to develop a workers' compensation database that measures the extent of fraud and abuse in the system.

--Direct Auditor-Controller Tyler McCauley to issue annual workers' compensation report tracking costs and the amounts spent, as a percentage of employee salaries and benefits, compared with such spending by other government agencies.

--Direct Chief Administrative Officer David Janssen to develop a process that will allow county government to participate in the creation of a workers' compensation physician network to addressing soaring medical costs.

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HOW TO CONTROL COSTS (see text)