COMPACT

CONTENTS
2 Group recommends efficiency, effectiveness changes

for workers' compensation professionals

November 2007
Minnesota Department of Labor and Industry

TABLES
7 Workers' compensation system cost per $100 of payroll, 1997-2006 8 Percentage of paid indemnity claims with a VR plan filed, injury-years 1997-2005 9 VR services costs, adjusted for wage growth, injury-years 1998-2005 Time from injury to start of VR services, injury-years 1998-2005 Return-to-work status, injury-years 1998-2005 Ratio of return-to-work wage to preinjury wage for participants returning to work, plan-closure-year 2005 10 Family farm coverage

3 DLI Workers' Compensation Division reorganizes 4 Minnesota OSHA responds to I-35W bridgecollapse site 6 Research and Statistics: new director, new name 6 Data-driven workers' compensation update 7 Department training guide now available online 7 Workers' compensation cost drops slightly in 2006 8 Vocational rehabilitation results show system stability 10 Workers' compensation coverage for farms D-1 Court decisions: July through September 2007

Group recommends efficiency, effectiveness changes

MNOSHA responds to I-35W bridge-collapse site

Court decisions: July through September 2007

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4

Decisions

Summaries of

D-1

Group recommends efficiency, effectiveness changes
By Patricia Todd, Assistant Commissioner, Workers' Compensation Division, and Shawn Peterson, Director, Policy Development, Research and Statistics

An “operational group” was established during the past summer to provide recommendations to a policy group about how to improve the efficiency and effectiveness with which hospital services are billed and reimbursed in workers’ compensation. The operational group had six representatives from hospitals – Allina Hospitals and Clinics, Fairview Health Services, Mayo Clinic, Minnesota Hospital Association, Regions Hospital and St. Cloud Hospital – and six representatives from insurers – Berkley Risk, SFM (two), The St. Paul Companies, Western National Mutual Insurance and Xcel Energy Inc. The operational group agreed the three main operational issues are the length of time and administrative resources required to get paid, inconsistency in the processing of claims and the unpredictability of payments received. The discussion about the three issues included the following. 1. Current challenges in the workers' compensation billing and payment system, including submission of paper records and bills; the complexity of hospital charge masters; line item reductions by payers without causation, prevailing charges and bundling of charges; and the protracted time and administrative expense between billing and actual payment. 2. Possible alternatives to the current system, including use of a DRG payment system and other payment methodologies, such as hospital payment-to-charge ratios; while a DRG system would resolve some issues, it would be an exceedingly complex alternative due to the federal changes underway and the necessity for all insurance companies to have required software capability. 3. Any solution should: be compliant with the 2007 electronic transaction legislative requirements; eliminate the detailed line-item review by payers; minimize transfer of hospital records while providing payers with necessary information; result in timely and appropriate payment; not increase system costs; and be predictable, consistent and simple. The operational group supports comprehensive changes that include both payment reform and administrative simplification. The group believes implementing a system within workers’ compensation that is as consistent as possible with other payment systems will decrease costs and increase the efficiency and effectiveness of the workers’ compensation system. These recommendations have been forwarded to a policy group that will focus on payment methodology and the potential to move away from “usual and customary.” The Workers’ Compensation Advisory Council (WCAC) will consider these recommendations when developing its bill for the coming legislative session. For more about WCAC visit www.doli.state.mn.us/wcac.html.
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• COMPACT • November 2007

DLI Workers' Compensation Division reorganizes
By Patricia Todd, Assistant Commissioner, Workers' Compensation Division

The Vocational Rehabilitation unit (VRU) within the Department of Labor and Industry's Workers' Compensation Division has been made part of the division's Claims Services and Investigations unit, creating three major work units within the division.
Benefit Management and Resolution (BMR)

Benefit Management and Resolution seeks early intervention and resolution of disputes using assistance, education and alternative dispute-resolution. It informs and advises all parties involved in the workers' compensation system of their rights and responsibilities under the Workers' Compensation Act, and provides technical assistance to all parties involved in the workers' compensation system. BMR develops and implements workers' compensation medical policy, including certified managed care, fee schedules and treatment parameters. It also develops vocational rehabilitation policies and resolves complaints concerning qualified rehabilitation consultants (QRCs). As needed, BMR issues orders and penalties to assure compliance.
Claims Services and Investigations (CSI)

Claims Services and Investigations administers the workers' compensation claims of injured employees who worked for employers that did not carry workers' compensation insurance or were bankrupt. The unit also administers the asbestosis program and the supplementary benefit and secondinjury reimbursement programs. CSI provides vocational rehabilitation services to employees when there is a dispute about workers' compensation liability. In addition, CSI enforces the requirement that all employers have workers’ compensation insurance.
Information Processing Center (IPC)

Information Processing Center creates, maintains and manages the availability of more than 1.6 million workers' compensation claim files. Since 1995, these files have been scanned and stored electronically. IPC inputs critical information for research and tracking purposes, ensures prompt and full compliance with all benefit and filing provisions of workers' compensation law through audits of claim files, and certifies QRCs. IPC provides copies of claim files for external customers with proper authorization and provides free mandatory state posters upon request. IPC also sends information to injured employees about their rights within the workers' compensation system.

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• COMPACT • November 2007

MINNESOTA OSHA
By James Krueger, MNOSHA Metro Safety Director

responds to I-35W bridge-collapse site
The I-35W bridge in Minneapolis collapsed Aug. 1, killing 13 people. The eight-lane, 1,907-foot span was a vital link over the Mississippi River and one of the most heavily used bridges in Minnesota, with roughly 140,000 vehicles – including 5,700 commercial vehicles – passing over it each day. On Aug. 2, officials from the Minnesota Department of Labor and Industry's Occupational Safety and Health Division (MNOSHA) and Workplace Safety Consultation (WSC), in conjunction with the U.S. Department of Labor's Occupational Safety and Health Administration (OSHA), responded to the disaster to provide assistance during the recovery stage. As work progressed from the recovery stage to removal, the Minnesota Department of Transportation (Mn/DOT) maintained primary responsibility for the project. During the removal phase, Mn/ DOT’s goals were to restore river navigation and prepare for the construction of the new bridge. Because of factors such as weather, barge traffic and federal funding, the work had to be completed in a timely, but judicious, fashion without further loss of life or serious injury. Mn/DOT contracted with Carl Bolander & Sons Co.,
MNOSHA/I-35W bridge, continues ...

Above: Minnesota OSHA Compliance, Workplace Safety Consultation and other Minnesota Department of Labor and Industry representatives plan the agency's safety and health response for the I-35W bridge-collapse site in early August. Below: Safety and health officials take a look at the collapsed bridge, Aug. 2.

MNOSHA/I-35W bridge, continued ...

St. Paul, Minn., for the demolition and removal of the collapsed bridge. To assure worker safety, MNOSHA partnered with WSC, Mn/DOT and Bolander. The primary purpose of this partnership was not only to prevent further fatalities, but to have zero worker injuries and illnesses for the duration of the I-35W bridge removal project. The partners worked together to create a site safety plan to anticipate potential hazards and strategically manage operations on the site. The primary hazards were related to the type of work being performed, the stability of the structure and environmental conditions – including the weather and location of the site. The work plan identified roles and responsibilities, specified necessary training, established hazard identification methods and defined how program review would be conducted. Updates to the plan were communicated to all parties, with Mn/DOT’s safety staff taking on the lead role. Each partner agreed to have at least one representative attend daily project safety meetings. Safety issues, such as new hazards, any trends in behavior, corrective actions taken and any incidents that had been noted within the past 24 hours, were discussed during the meetings. To assist with this process: • an on-site safety project plan was completed prior to the start of work each day with sufficient detail to notify and protect employees prior to their job assignments; and • a safety assessment sheet was used to identify potential hazards and track trends. All workers attended mandatory employee orientation training prior to their initial job assignments. This was to provide them with an understanding of the complexity of the site and acquaint them with the site safety program, including the site plan, additional necessary training and personal protective equipment (PPE) requirements. Since the removal process began, the primary contractors logged more than 25,000 hours without a lost-time injury. The removal project was completed in mid-October.

Above: Minnesota OSHA staff members review safety and health plans while in the group's on-site trailer at the I-35W bridge-collapse scene. Below: Members of the swiftly formed safety and health partnership between Minnesota OSHA Compliance, MNOSHA Workplace Safety Consultation, the Minnesota Department of Transportation and Carl Bolander & Sons Co. review aerial photos of the bridge-collapse scene.

Research and Statistics:

new director, new name

Shawn Peterson joined the Department of Labor and Industry (DLI) team in August as the director of the newly renamed Policy Development, Research and Statistics unit. Peterson served for 13 years at the Minnesota House of Representatives, most recently as director of legislative services and as a policy advisor to then-Speaker Steve Sviggum (now DLI's commissioner). Peterson hopes to use his legislative experience to help the DLI team accomplish its policy goals at the Capitol.
Shawn Peterson

He said the function and name change of the unit were brought about to give an additional focus to the unit and to create a place for policy development and ideas to be evaluated using information and statistics.

“It really makes a great deal of sense to have your policy and research together," Peterson said. “You need to know the research data for a particular issue if you want to make a policy change that will have a positive impact on the system. It is great to hear ideas from agency staff members who are in the trenches every day dealing with the variety of issues the department is charged to oversee. Keep the good ideas coming!”

Data-driven workers' compensation update
By Cindy Valentine, Chief Information Officer

The following Data-driven Workers' Compensation Project activities are planned for completion during fiscal-year 2008. 1. Incorporation of a workers' compensation identification number that is individual-specific, similar to a Social Security number. Activity for this item is planned to start in December. 2. Development of a secure Web site for submitting documents electronically. A prototype has been developed and the Department of Labor and Industry's Workers' Compensation Division is looking at internal processes to determine where best to implement it. It is anticipated forms will start to be received via a secure Web site in December. 3. Consolidation and generation of correspondence within Informix. The Workers' Compensation Division has reviewed all the correspondences it generates. The consolidation of this correspondence within the division's computer system is anticipated in March. 4. Obtaining relevant vocational rehabilitation information electronically instead of on forms; incorporation of the Vocational Rehabilitation unit's external Access system within Informix. The initial scope of this project is being evaluated at this time.
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• COMPACT • November 2007

Department training guide now available online
By Jim Vogel, Information Processing Center

The Minnesota Department of Labor and Industry (DLI) has been providing basic adjuster training to claim adjusters for more than 10 years, both at its office in St. Paul and at locations outside the state. A Basic Adjusters’ Training Guide, developed for use during those training classes, is now available on the DLI Web site at www.doli.state.mn.us/wc_batg.html, for viewing and printing. While the training classes are designed for adjusters with less than one year experience handling Minnesota workers’ compensation claims, the guide may be a useful resource for all parties, presenting an overview of Minnesota workers’ compensation statutes and rules. It provides highlights and nonbinding examples of how the referenced rule or statute may be applied. The information in this guidebook is designed to: • illustrate how to calculate benefits; • describe when benefits are payable; • explain how and when to file the required forms; and • provide general information about workers' compensation benefits.

Workers' compensation cost drops slightly in 2006
By David Berry Policy Development, Research and Statistics

Workers' compensation system cost
per $100 of payroll, 1997-2006 [1]
$2.00 $1.50 $1.00 $ .50 $ .00

After rising to a gentle peak in 2004 and 2005, Minnesota's workers' compensation costs dropped slightly in 2006. The overall cost of the system came to $1.66 per $100 of payroll in 2006. This is a slight decrease from $1.71 and $1.72 in 2004 and 2005 (both figures revised). The 2006 figure is 27 percent above the low-point of $1.31 in 2000, but 36 percent less than the peak of $2.60 in 1993. These figures reflect premiums paid by insured employers plus an estimate of costs for selfinsured employers.

'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 Cost per $100 of payroll $1.61 1.31 1.58 1.67 1.71 1.72 1.66

1997 2000 2002 2003 2004 [2] 2005 [2] 2006 [2]

1. Data from the National Association of Insurance Commissioners, Minnesota Workers' Compensation Insurers Association, Inc., Minnesota Assigned Risk Plan, Minnesota Workers' Compensation Reinsurance Association, Minnesota Department of Labor and Industry, and Minnesota Department of Employment and Economic Development. Includes insured and self-insured employers. 2. Subject to revision.

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• COMPACT • November 2007

Vocational rehabilitation results show system stability
By Brian Zaidman and David Berry, Policy Development, Research and Statistics

Vocational rehabilitation (VR) services are provided to injured workers who need help in returning to work because of their injuries and whose employers are unable to offer them suitable employment. Measures of vocational rehabilitation service utilization, costs and outcomes are included in the Department of Labor and Industry's (DLI) annual Minnesota Workers’ Compensation System Report. This article presents some highlights from the vocational rehabilitation chapter in the soon-to-be-released 2005 report, which will be available on the DLI Web site at www.doli.state.mn.us/pubwkcp.html. Unlike previous reports about Minnesota’s vocational rehabilitation outcomes, which reported statistics relating to year of plan closure, most of the statistics now relate to year of injury. These estimates are developed numbers based on analysis of the historical changes in the values of the measures. For example, using the most recent data for the average cost of vocational rehabilitation services for workers injured in 2005 and the pattern of growth in average vocational rehabilitation costs for workers injured in previous years, it is possible to estimate the average cost for all vocational rehabilitation services provided to all workers injured in 2005. All the figures are based on data provided by forms filed with the Department of Labor and Industry (DLI). Continuing annual data analysis will further refine these injury year estimates.
Major findings
Figure 1
Percentage of paid indemnity claims with a VR plan filed, injury-years 1997-2005
25%

Percentage with plan filed

• Participation in vocational rehabilitation rose from 15 percent of paid indemnity claimants in 1997 to 22 percent for 2003, but fell back to 20 percent in 2005. A projected 5,370 workers injured in 2005 will receive VR services. (Figure 1)

20% 15%

10% • As expected, workers with more time on 5% temporary total disability benefits (TTD) were more likely to receive vocational rehabilitation 0% '97 '98 '99 '00 '01 '02 '03 '04 '05 services. For workers injured between 2001 and 2004, 64 percent of the injured workers with three to six months of TTD benefits received vocational rehabilitation services, compared to 92 percent vocational rehabilitation use among workers with more than 12 months of TTD benefits.

• The average cost of VR services per participant was $6,500 among workers injured in 2005, essentially unchanged from 2004 and 23 percent higher than in 1998, after adjusting for average wage growth. The total cost of VR services for workers injured in 2005, $35 million, was about 2.2 percent of workers’ compensation system cost. (Figure 2, next page) • The average time from injury to the start of VR services was 7.1 months for workers injured in 2005. This was a decrease of 17 percent from injury-year 1998. For injury-year 2005, half of the COMPACT • November 2007 Results continues ...

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Results continued ...
Figure 2
VR services costs, adjusted for wage growth, injury-years 1998-2005
$8,000

Figure 3
Time from injury to start of VR services, injury-years 1998-2005
10

$6,000

8

$4,000

Months
'98 '99 '00 '01 Median cost '02 '03 '04 '05

6

4

$2,000

2
$0

0 '98 '99 '00 '01 '02 '03 '04 '05

Average cost

Cost per indemnity claim

Average months

Median months

injured workers receiving vocational rehabilitation started receiving services within four months of injury. (Figure 3) • Average VR service duration changed very little for workers injured during the 2002 to 2005 period. The average VR service duration among workers injured in 2005 is estimated to be 12.6 months; the median service duration is estimated at 8.2 months. • The percentage of VR participants with a job at plan closure decreased from 72 percent for workers injured in 1998 to 64 percent for workers injured in 2005. This was primarily attributable to a decrease in the percentage of workers finding work with a different employer. (Figure 4) • The average VR participant returning to work received a wage about the same as their pre-injury wage, but this varied widely among individuals. About one quarter of the injured workers returning to work following VR had weekly wages less than 80 percent the level of their pre-injury wages. (Figure 5)
Figure 4
Return-to-work status, injury-years 1998-2005
80%

Figure 5
Ratio of return-to-work wage to pre-injury wage for participants returning to work, plan-closure-year 2005

Percentage of plan closures

60%

More than 105%: 20%
40%

Less than 80%: 24%

20%

0% '98 '99 '00 '01 '02 '03 '04 '05

80-95%: 11%

Total with job Job with different employer

Job with same employer Without job

96-105%: 45%

Workers’ compensation coverage for farms
By Brian Zaidman, Research Analyst Policy Development, Research and Statistics

Farm operations are considered either family farms or employers for the purpose of workers’ com pen sa tion coverage. The chart below may be used in determining whether workers’ compensation coverage is mandatory for a farm operation where other coverage under a farm liability insurance policy as provided in the law is underwritten (see Minnesota Statutes §176.011, subd. 11a). If the farm liability insurance coverage requirements are not met, any farm operation that has $8,000 or more of payroll for the previous calendar-year must provide workers’ compensation insurance for its employees. The value of work performed (roughly payroll) during the previous year is compared to the average annual wage (AAW) for the year in which the policy is written. Farm operations with payrolls equal to or greater than the corresponding AAW are required to provide workers’ compensation coverage for their farm laborers. The AAW figure is received from the Department of Employment and Economic Development and is the number from which the statewide average weekly wage (SAWW) is derived.

Family farm coverage
M.S. § 176.011, subd. 11a (a)(2)
Average annual wage under Services rendered M.S. §176.011 subd. 20 (roughly payroll) year Policy written year

$33,366 $35,311 $36,457 $37,311 $38,441 $40,203 $40,636 $41,996

Jan. 1-Dec. 31, 2000 Jan. 1-Dec. 31, 2001 Jan. 1-Dec. 31, 2002 Jan. 1-Dec. 31, 2003 Jan. 1-Dec. 31, 2004 Jan. 1-Dec. 31, 2005 Jan. 1-Dec. 31, 2006 Jan. 1-Dec. 31, 2007

Jan. 1-Dec. 31, 2001 Jan. 1-Dec. 31, 2002 Jan. 1-Dec. 31, 2003 Jan. 1-Dec. 31, 2004 Jan. 1-Dec. 31, 2005 Jan. 1-Dec. 31, 2006 Jan. 1-Dec. 31, 2007 Jan. 1-Dec. 31, 2008

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• COMPACT • November 2007