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Workers compensation cost reduction.

For many property managers, workers compensation seems to be escalating both in terms of the number of accidents which occur as well as the dollars associated with the cost of injured workers. Many states have increased their benefit levels to injured workers. Because of this, many insurance companies have had to increase their rates, further driving up the cost.

Property managers, however, can aggressively take on the mission of reducing workers compensation costs. The focus needs to be in two distinct areas. The first area stresses the prevention of injuries, and the second is, the active management of an injured worker.


The old adage that preventing injuries will ultimately reduce your costs is still true. Stressing safe working habits and loss prevention must continue. At each property, it is critical that a manager become personally involved in loss-prevention activities and stress the importance that safety plays at their property.

A formal safety policy should be developed and signed by that property manager and subsequently posted for all to see. Meetings with employees on a periodic basis should stress safety and loss prevention. Newsletters and Payroll stuffers should also be utilized to spread management's view.

Individual managers should receive formal training on loss-prevention issues. This instruction should include how to teach employees safe working habits and procedures to follow in the event of a claim. Each property under management needs to implement training in accident prevention.

Each property should have a safety committee. The committee should have high visibility and be supported by management. At facilities where loss is high, more frequent meetings should be required.

The use of outside firms can often bring new vitality to a safety committee. An invitation to your company's insurance carrier can provide valuable supplemental information.

Lifting programs should be done at least semi-annually due to the general high frequency of back claims and their associated high cost. Back injuries account for 80 percent of workers compensation costs, annually costing employers $93 billion in lost work days, $5 billion in medical expenses, and $12 billion in legal and insurance expenses.

Performance evaluations. Individual safety goals and objectives should be established for each property manager. These goals and objectives should have financial amounts associated with them for inclusion in performance reviews. If individual managers and supervisors see that their compensation contains an element of safety, prevention of injuries will become important.

Further ideas along these lines include development of a cost allocation formula if a property is on a loss-sensitive program or other risk-financing program that rewards good experience.

* Safety-incentive awards. Individual property managers can utilize safety award programs in an effort to motivate employees to work more safely. Awards can be cash and/or gifts, which not only provide an incentive, but also build morale through the utilization of a team concept for one department competing against another or a preset goal.

There are various contests that can be conducted, most based upon the theme of achieving a certain number of days without an accident. Programs should be run for a limited period to keep the objective reasonable. Higher valued incentive awards can be offered at facilities where losses have historically been higher than normal.

* Review loss runs. Each property should receive, on a monthly basis, an up-to-date loss run on all claims that have been reported for the most recent Period and the associated dollar value. These reports should be used to track the origin of claims and an effort should be made to understand the costs of these claims so that energies can be focused on preventing their recurrence.

* Preferred medical providers. Each property should establish a relationship with a local health care provider for injured workers. These facilities should be conversant with workers compensation issues and be willing to work on specific injury situations.

Many jurisdictions allow employees to select their own doctor or hospital for treatment. However, in some instances the employer can provide a listing of facilities to the injured worker for their selection. This list should be comprised of facilities that have previously "qualified" as a health care provider understanding the complex issues surrounding workers compensation.

Each major job activity at a property should be subject to a job hazard analysis. This should contain an identification of the hazards associated with that job and standard procedures to avoid those hazards. Communication to the employees of those hazards is critical.

Injured-worker management

Despite all efforts to prevent accidents, the inevitable job injury will occur. What the property manager does after that injury occurs can make the difference between getting the employee back to work in a short period of time versus watching him or her stay on workers compensation for months.

Too many employers relinquish control once the injury has occurred. If anything, it is time to step up your activity in an effort to get the injured worker back as quickly as possible. Certain programs should be instituted to achieve this end.

* Modified duty programs. A modified duty program allows an injured worker to return to his or her work place in some other capacity. This strategy allows the return of an injured worker to some type of productive work, and it Shows an interest in the worker, which is a long-term benefit for the morale of the organization.

An injured worker's own department or property should be directly charged for the expense associated with that worker's wages to further reinforce the importance of prevention.

A description of the type of activities contemplated for modified-duty jobs as well as the physical requirements should accompany each job description. These job descriptions can then be provided so that doctors can be made aware that alternate employment is available with specific descriptions of the type of activities involved.

* Supervisor involvement. The supervisor of an injured employee must maintain direct responsibility for that worker. The supervisor, if at all possible, should accompany an injured worker to the health care facility. If unable to accompany the worker, follow-up phone calls should be instituted for a status report as well as the diagnosis and return to work schedule.

If the injured worker is unable to return to the full duties that his or her job entailed, the medical care provider should be requested to provide a description of what activities can be done as well as a recommendation based upon modified-duty job descriptions.

Phone calls to the injured worker by the supervisor requesting status updates should also be required. A policy should be adopted that each injured worker will be contacted once a week.

Each individual accident should be investigated to determine what happened. A recommended course to prevent a recurrence is a good idea.

In situations where the property manager suspects a fraudulent claim, the use of an independent medical examiner should be required. While each state jurisdiction is different, the employer has rights in many states, which often are not fully utilized.

Just as many property managers have instituted health insurance cost containment techniques, the primary reason for the significant increase in workers compensation costs is due to the medical-care cost component. The identification and correcting of inappropriate hospital admissions and excessive lengths of stay should be performed by your insurance carrier or third-party administrator. Utilization reviews should include second surgical opinions and discharge planning.

The periodic utilization of an outside claims audit firm can provide assurances that the program is being properly managed. These audits often include an analysis of medical invoices, comparing them against state fee schedules or usual and customary benefit award levels. Billings can be checked for compliance with standard medical rules.

The insurance company or third party administrator should be instructed to send duplicate copies of indemnity checks to each property for tracking purposes. This will allow supervisors to monitor individual claims and also to contact the insurance company if an employee returns to work.


Through the aggressive use of pre-injury and post-injury techniques, property managers can achieve a net reduction in workers compensation costs. Management commitment to reducing costs in this area is absolutely critical. Using outside firms specializing workers compensation adds valuable resources and expertise on a short-term basis. Ultimately, management must take full responsibility for injuries and have a fully developed plan to address this rising area of importance.

Mark P. Charron is a risk management consultant with Deloitte & Touche, and has been in risk management as both corporate risk manager and consultant for over 12 years. He is the insurance column reviewer for JPM.
COPYRIGHT 1991 National Association of Realtors
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Author:Charron, Mark P.
Publication:Journal of Property Management
Date:May 1, 1991
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