STATEMENT OF
RONALD E. COWLES
DEPUTY ASSISTANT SECRETARY OF HUMAN RESOURCES MANAGEMENT
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES

March 25, 1999

Mr. Chairman and Members of the Subcommittee: I am pleased to appear before the Committee this morning to discuss the Department of Veterans Affairs’ (VA) Workers’ Compensation Program. I wish to begin my testimony this morning by expressing the Department's commitment to reducing workers’ compensation costs and promoting the health and wellness of VA employees. We believe that establishment of appropriate workplace safety and injury prevention programs, employee safety education programs, quality employee health services, and management of employee injuries and claims are all important components of the spectrum of workers’ compensation and occupational health and safety programs which VA provides.

Background on Federal Workers’ Compensation

The Federal workers’ compensation program was established by the Federal Employees Compensation Act of 1916, as amended, or "FECA," and is administered by the U.S. Department of Labor (DOL), Office of Workers' Compensation Programs. This program provides employees who sustain a work-related injury or disease with medical care, wage loss replacement, rehabilitation assistance, and death benefits.

FECA protects Federal workers from economic hardship due to work injury and illness through a non-adversarial system in which disputes are resolved through informal conferences or formal reconsideration at the district office level, administrative hearing at the national level, or review by the independent Employees' Compensation Appeals Board whose decision is final. Thus, employers avoid high legal costs and time-consuming litigation.

The cost of workers' compensation is paid initially by DOL, then charged back to employing agencies and is paid two years in arrears as a non-negotiable budget item. The exception to this chargeback process is the initial 45-day period after a traumatic injury, called "Continuation of Pay" or "COP." During the COP period, the employing agency may pay the salary of the injured employee while DOL adjudicates the claim. This period allows DOL time to review the claim without an interruption of an employee's salary.

VA Workers' Compensation Issues

In CBY 1982, VA workers' compensation costs were $55.53 million. These costs rose steadily over the years, reaching $145.47 million in CBY 1994 - an increase of nearly 162 percent over 1982.

The Veterans Health Administration (VHA) comprises a major portion of VA's workforce. During the same time period, dramatic changes were occurring in the health care industry and within VHA. Health care was undergoing drastic restructuring including staff downsizing, changes in professional staffing composition, rapidly evolving technologies, and new infectious disease risks. These factors resulted in higher illness and injury rates in the health care industry overall, and in VHA in particular.

In CBY 1994, VA began coordinated efforts to reduce employee injuries and illnesses and to identify and control workers' compensation costs. As a result, workers' compensation costs fell in CBY 1995. This was the first time in the history of VA workers' compensation program that costs were reduced from the previous year. Despite increases in medical care costs, VA's workers' compensation annual costs are still less than they were in CBY 1994.

VA Activity to Reduce Workers' Compensation Costs

Since CBY 1994, VA has implemented a number of programs, management tools, and practices that have contributed to the reduction of workers' compensation costs. One key element of VA’s program has been the development of VA's Workers' Compensation Management Information System, or "WC-MIS." The WC-MIS was developed in cooperation with DOL to provide current information to workers' compensation case managers, to provide statistical analysis of injury and illness trends, and to provide a communication link between VA case managers and VA's headquarters Workers' Compensation Program Manager. The WC-MIS automatically combines information from VA's personnel data system and DOL's workers' compensation case file to create a record that allows case managers to verify VA employment and to ensure that medical bills are related to the nature of the injury.

Information from DOL is transmitted electronically to WC-MIS each week. The database furnishes VA information on the adjudication status of a claim; the availability of injured employees for rehabilitation; information on the attending physician; the type of treatment provided; and the date and amounts of medical, compensation, and scheduled award payments. Facility case managers also use the system to generate reports that identify injury and illness trends to assist in the development of prevention programs. Regional and national program offices also use the WC-MIS to develop reports that provide managers and administrators analyses necessary to guide future program direction and establish program accountability by assigning the workers' compensation costs to the lowest practical organizational level.

VA has also developed a training program to provide case managers with skills necessary to manage claims aggressively while remaining within the scope of the workers' compensation laws and regulations. VA's Workers' Compensation Program Manager receives support from VHA's Employee Education Center to conduct several training programs each year. These programs provide guidance on workers' compensation regulations, case management techniques, return to work strategies, and training on use of the WC-MIS. In addition to the overall VA training program, individual VA Administration programs are also in place. For example, the Veterans Benefits Administration (VBA) administers its own Workers’ Compensation training program, which includes awareness training during new employee orientation, training for new supervisors, a three-part program via satellite for all VBA employees, and a course designed for Human Resources staff members, which provides Workers’ Compensation claims processing and costing guidance. In addition, the VA Designated Agency Safety and Health Official issued an information letter to managers and supervisors highlighting the "Best Practices" for workers' compensation cost control. Increased knowledge and participation in the case management arena has also improved the relationship between local and regional case managers and the DOL Regional Claims Examiners and has created additional operational and communication advances.

In support of DOL requests to improve the timeliness of workers' compensation claims submissions, DOL and VA established a partnership to develop an electronic transfer of injury and illness claim information to DOL. When completed, this will enhance the transmission of accurate and timely submission of claims to DOL and provide a more accurate database from which to develop trend analyses. DOL established this data transmission system as the prototype for all other Federal agencies.

As VA's Workers' Compensation Program and the WC-MIS have matured, many facility and regional managers have grown to understand the value of case management efforts and begun to provide additional administrative and financial support to local, regional, and national program managers. Those facility and regional managers that participated in this program realized considerable reductions in their workers' compensation costs and provided more efficient service to veterans.

These efforts appear to be paying dividends. Existing cases on which payments were made have fallen each year as follows:

To further these goals, the Under Secretary for Health, Kenneth W. Kizer, M.D., M.P.H., established the Occupational and Environmental Health Strategic Healthcare Group, implemented a unique accident and injury tracking system, measured manager's performance in occupational health and safety, promoted education and research related to occupational health and safety, and made employee health and satisfaction a core value for VHA.

The Occupational and Environmental Health Strategic Healthcare Group has supported these programs through the development of the Automated Safety Incident Surveillance and Tracking System, or "ASISTS." The ASISTS database, which resides on the VISTA computer system at every VHA facility, provides VHA staff the ability to enter a computerized accident report at the time of occurrence. This enhances accurate recording of major and minor occupational injuries and allows the Strategic Healthcare Group to analyze causation factors. The system also uses e-mail to inform all members of the accident and safety management team that an incident has occurred and allows effective case management to begin early. Through this new system, VHA hopes to identify the causes of common occupational injuries and illnesses, develop prevention strategies and improve employee wellness.

In addition to providing information that can be crucial to injury prevention, in the future the ASISTS database will be linked to the WC-MIS. The connection will facilitate timely submission of claims by transmitting them electronically through the WC-MIS to DOL. We estimate that the ASISTS/WC-MIS linkage will be completed by the end of FY 1999.

In FY 1997, VHA implemented a unique and extremely effective system to focus on occupational safety and health programs and to reduce workers' compensation costs by establishing occupational safety and health performance as a measure for VHA’s top managers. The "Lost Time Case Rate" or "LTCR," was selected as one of these performance measures for VHA managers and supervisors. This demonstration of management expectation at the highest organizational level established the accountability that prompted managers and supervisors to take greater initiative to improve employee safety and health and workers' compensation management. The WC-MIS provides LTCR analyses for this important initiative. Since 1995, the VHA LTCR per 100 employees has steadily fallen as follows:

In 1997, VHA’s LTCR fell below the overall healthcare industry LTCR of 3.70. Further, VHA’s LTCR trend is on a consistent downward trend, while the healthcare industry LTCR trend is beginning to rise.

VHA and the National Cemetery Administration have sought to improve field manager accountability by decentralizing payment responsibility to facility and regional units. Establishing this link between organizational performance and financial incentives has contributed significantly to cost reductions and increased management attention to employee mishap prevention and workers' compensation program management.

In February 1999, VA and the Occupational Safety and Health Administration (OSHA) announced a program evaluation partnership agreement that aims to enhance our occupational safety and health programs by proactively working together toward improved hazard identification and mishap prevention. The partnership is comprised of VA management, VA employee representatives, and OSHA. We believe this partnership will have substantial positive impact on both VA and OSHA safety and health program management and oversight.

Although progress in reducing costs continued through CBY 1997, the overall high cost of workers' compensation remained an issue over which VA management sought to exercise greater control. Accordingly, the Office of the Assistant Secretary for Financial Management, the Veterans Health Administration, and the National Cemetery Administration requested that the VA Inspector General (IG) review the Workers' Compensation Program to identify additional opportunities to reduce costs. The audit was published as Report No. 8D2-G01-067, on July 1, 1998.

Projected Improvements

VA has begun implementing the audit's recommendations. Actions to date include: participating in IG pilot projects to identify fraud and abuse; developing a protocol for a one-time Department-wide review of all open and active cases; and increasing training opportunities for workers' compensation management through the sponsorship of and participation in a national conference on Federal workers' compensation management.

Conclusion

Mr. Chairman, although we have made considerable progress in enhancing employee safety and health programs and improving the management of workers' compensation cases, we recognize that VA can do more. Ideally, the foremost way to reduce workers' compensation costs is to prevent injuries and illnesses. In that regard, we are working to enhance our hazard identification and mishap prevention efforts by pursuing our partnership agreement with OSHA; aggressively targeting special program areas such as blood-borne pathogen exposure and workplace violence; promoting research into injury and illness causation; and seeking more effective methods to provide employee safety and health education opportunities.

In the workers' compensation arena, our intention is to increase the availability, accessibility, and utility of the WC-MIS to case managers and supervisors; complete efforts to link VHA’s ASISTS program with the WC-MIS; continue our partnership with the IG to identify fraud and abuse; encourage the participation and alliance with employee representatives; and improve our efforts to train managers, supervisors, case managers, and employees in best practices for VA’s Workers’ Compensation Program.

We clearly understand that improving the effectiveness of employee safety and health programs and the management of the workers' compensation program will improve our ability to serve our nation's veterans. We thank the Committee for your interest and support of these efforts. This concludes my opening statement and I would be pleased to answer any questions you or the members of the Committee may have.