If injuries are down, why are costs up?

A perplexing paradox exists in the world of workers' compensation insurance. Thanks to safety professionals and the efforts of employers, employees have much safer workplaces, greatly reduced risks for injuries and far better education in how to avoid injuries in the workplace of today than they did a decade ago. According to the annual "Issues Report" of the National Council on Compensation Insurance (NCCI), from 1990 to 2004, there was a 45% decrease in work-related injuries.

Fewer injuries would cause a reasonable person to assume that the total cost of work-related injuries have also gone down. But, therein lies the paradox. In spite of the number of employee injuries plummeting over the period described, NCCI reports that the total costs for work related injuries over that same period have more than doubled.

Employers must look for alternative solutions if they want to achieve this second goal. Fortunately, many of the factors that are driving up injury costs in the face of decreased injury claims can be found in areas where employers can make a difference ... if they know about them. It is critical for employers to understand what factors are driving up work-related injury costs, even as injuries themselves are on the decline, as well as how to drive them back down.

The employer should look at the three most important people involved with returning an employee to work after an injury - the physician, the employer and the employee - to see why costs have increased and to realize where action can be taken to reduce costs.

There is a natural tendency to blame medical cost inflation as the primary culprit for this inverted trend of fewer injuries-higher costs. While medical inflation is partly to blame, the role it plays is a minor one; there are far greater influences driving up injury costs.

Physicians have been asked by the insurance industry over the past decade to do more for less. Asking them to accept reduced fees, while at the same time asking them to increase their assistance with disability management, was probably not a good idea and may have been the first falling domino that started the chain reaction to greater injury costs. Anyone who has been to their physician has seen the consequences.

Except in the most extreme cases, physicians are stretched thin and are forced to spend less time with each patient per visit. Much like non-medical businesses tried to reduce injuries to help cut Workers' Compensation costs, the spike in malpractice premiums likely has made physicians much more cautious in deeming employees "healthy" or "work ready."

The result has been more office visits and an extended convalescence. This has a multitude of negative effects on the employer's business. Loss of productivity and the cost of overtime to make up for the loss of the employee are the two most obvious. But, extended recovery has the potential to have a far greater impact.

As we know, the employee's state of mind has a lot to do with his or her recovery. If, before being released to full duty, an employee goes to the doctor 10 times for a single injury instead of three, that employee may begin to think, "There must be something seriously wrong with me." This thinking delays the return to work and claims spiral out of control.

Employers need to be aware of this chain of events. Once they are, they find that it is not that difficult to fix. Physicians can provide employees with the best possible care without dragging on the process. The employer just needs to work with the physician to help him or her understand the business.

Cooperation begins with the employer reaching out to the physician and the two becoming "partners" in the care of not just injured employees, but in the entire medical concern of the business. For example, the employer can pledge to help increase the physician's patient volume by utilizing the physician's services not only for examining injured employees, but also for such things as pre-employment drug testing and physical examinations.

The longer an employee stays out of work, the greater the likelihood that the claim will evolve to a severe level. It is therefore critical to get the employee back to work, even at a reduced capacity, and to educate the supervisor of the injured employee in the value of supporting and accommodating restrictions. In most cases, if the doctor and the employer are taking steps in a positive direction aimed at returning the employee to work as soon as possible, the injured employee will follow their lead as numerous studies have shown employees generally want to return to work as soon as possible. If employees are not following that lead, it may be a sign that the employer needs to reevaluate his or her hiring policies.

Up to this point, there has been no mention of claims adjusters or attorneys, and for good reason. When things go bad, these are the people that usually catch most of the blame for high claim costs, but this should only happen if the employer and physician fail to work together and make poor decisions. When the partnership fails, the adjuster's job is almost impossible, the intervention of an attorney is usually warranted and claim costs rise.

Their intervention, however, can be minimized. When the employer and the doctor work together and make good decisions regarding the injured employee and are willing to accommodate the injured employee as necessary and fitting, the claims adjuster's job is easy and there is not much need for an attorney. The result - their shares of the final price tag are greatly reduced.

The following article was written by Adam Gress, an undergraduate M.E. student at the University of Louisville. Adam is a recipient of a WMMA scholarship and recently completed a summer internship with WMMA member company Dubois Equipment. Several other WMMA members have benefited from the scholarship program by hosting interns this summer. If you are interested in utilizing this unique program, contact Molly Pappas at mpappas@fernley.com.

Each machine or line designed and built at Dubois is custom built to meet the specific needs of the customer. The machines vary in conveyor length, width and line speed. Customer needs and the size and shape of the parts to be run on the line determine these properties. Therefore, one of the major tasks I performed over the summer was customizing machines to meet the requirements of the customer. This requires using AutoCAD drawings from similar machines and modifying them to create a new machine with those specifications. This also involves updating many components of the machine, such as bearings, conveyor drives and components of the machines that have been redesigned or changed.

Some of my other responsibilities included fixing problems encountered on existing machines. For example, Dubois was contacted by a company to design a line of machines, which would perform some machining operations on a family of aluminum extrusion parts used for cubicles. I was responsible for coming up with concepts for each machine (six total). This involved choosing components such as automatic drills, milling spindle heads, drive motors, saws, presses, punch dies, etc. Each component had to be sized properly, and analyzed to choose the most cost effective option. This required talking to vendors, requesting quotes, and analyzing the horsepower, load and torque requirements to accomplish the machining task of each machine. The components were then modeled and a concept was created in AutoCAD, along with a quote for each machine. A report was prepared to outline the details of each machine, and a presentation was made to the contacts at the company. The company then took the bid and compared it with other bids, but at the end of the co-op term, no decision had been made to order any machines.

Another major project of this term was to analyze a low cost and less durable roll coater produced by a foreign competitor. I was responsible for documenting all of the components of the machine, taking pictures, and some basic measurements. Dubois wanted to find ways to incorporate some of the concepts into its machines, along with possibly developing a line of less expensive equipment to satisfy a market that doesn't require the high quality of a typical Dubois line. A report was prepared to outline the details of the machine, and suggestions were made as to how to incorporate some new ideas into the Dubois machines.

This co-op involved a great deal of problem solving; in fact every project was essentially a problem that had to be solved. Whether, modifying a machine, or designing a new part to replace a faulty one, problem-solving skills are very important. Teamwork was quite simply an integral part of every day on the job. There was a great need to be able to respond to change as the direction of a design had a tendency to change several times while in progress.

Overall, this summer co-op provided me with a good grasp on the many aspects involved in running an engineering business. As this is a small company, I was basically immersed me in many of the aspects of the business. There was experience in everything from design to cost management. Many of my skills were strengthened and many new skills were learned while I was at Dubois.

WMMA will hold its annual Public Policy Fly-In on February 14, 2007 in Washington, D.C.

The Fly-In will be preceded by two days of WMMA Board and Committee meetings on February 12th & 13th. Make your voice heard on Capitol Hill as you lobby for the positive future of U.S. manufacturing. Mark your calendar today to attend one of WMMA's most influential events!