Office of Workers' Compensation Programs: Further Actions Are	 
Needed to Improve Claims Review (09-MAY-02, GAO-02-725T).	 
                                                                 
The Department of Labor's Office of Workers' Compensation	 
Programs (OWCP) paid $2.1 billion in medical and death benefits  
and received 174,000 new injury claims during fiscal year 2000.  
GAO found that (1) one in four appealed claims' decisions are	 
reversed or remanded to OWCP district offices for additional	 
consideration and a new decision because of questions about or	 
problems with the initial claims decision; (2) OWCP set a goal of
informing 96 percent of claimants within 110 days of the date of 
the hearing; (3) nearly all doctors used by OWCP to provide	 
opinions on injuries claimed were board certified and state	 
licensed and were specialists in areas consistent with the	 
injuries they evaluated; and (4) OWCP has used mailed surveys,	 
telephone surveys, and focus groups to measure customer 	 
satisfaction. The Labor inspector general is monitoring fraud	 
within OWCP's workers compensation program and using the claims  
examiners as one source to identify potentially fraudulent	 
claims. This testimony is based on a May report (GAO-02-637).	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-725T					        
    ACCNO:   A03284						        
  TITLE:     Office of Workers' Compensation Programs: Further Actions
Are Needed to Improve Claims Review				 
     DATE:   05/09/2002 
  SUBJECT:   Claims processing					 
	     Claims settlement					 
	     Compensation claims				 
	     Customer service					 
	     Physicians 					 
	     Surveys						 
	     Workers compensation				 

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GAO-02-725T
     
A

Test i mony Before the Subcommittee on Government Efficiency, Financial
Management and Intergovernmental Relations, Committee on Government Reform
House of Representatives

For Release on Delivery At 10: 00 a. m. EDT

OFFICE OF WORKERS? Thursday,

May 9, 2002 COMPENSATION

PROGRAMS Further Actions Are Needed to Improve Claims Review

Statement of George H. Stalcup, Director Strategic Issues

GAO- 02- 725T

Mr. Chairman and Members of the Subcommittee: I appreciate the opportunity
to testify today on issues regarding the Department of Labor?s Office of
Workers? Compensation Programs (OWCP). During fiscal year 2000, OWCP paid
compensation totaling about $2.1 billion in medical and death benefits and
received approximately 174,000 new injury claims. Issues related to OWCP
have been, for a number of years, a particular focus of this subcommittee. I
am here today in response to your request that the we examine selected
issues associated with OWCP?s claims? adjudication process, which has been
the subject of

previous hearings before your subcommittee. We believe the report we are
issuing to you today and our testimony will provide a further understanding
of the federal government?s employee compensation program.

As you requested, we looked at selected aspects of OWCP?s process for
adjudicating claims appeals. In summary, we found the following:

 Approximately one in four appealed claims? decisions are reversed or
remanded to OWCP district offices for additional consideration and a new
decision because of questions about or problems with the initial claims
decision.

 In response to the Federal Employees Compensation Act?s (FECA) requirement
on the timing for informing claimants of hearing decisions, OWCP has
established a goal of informing 96 percent of claimants within 110 days of
the date of the hearing. Our sample showed that it provides notification to
92 percent of claimants within this period.

 Nearly all physicians used by OWCP to provide opinions on injuries claimed
were board certified and state licensed, and were specialists in areas that
appeared to be consistent with the injuries they evaluate.

 OWCP has used mailed surveys and more recently telephone surveys and focus
groups, to measure customer satisfaction. Those efforts have shown mixed
results. Finally, the Labor inspector general is primarily responsible for
monitoring potential fraud within OWCP?s workers compensation program and
uses the claims examiners as one source in identifying potentially
fraudulent claims.

In addressing the objectives, we reviewed a statistical sample of more than
1, 200 of the estimated 8,100 appealed claims for which a decision was
rendered by the Branch of Hearings and Review (BHR) or the Employees

Compensation Appeals Board (ECAB) during the period from May 1, 2000,
through April 30, 2001. How the Claims

As you know, FECA 1 authorizes federal civilian employees compensation
Process Works

for lost wages and medical expenses for treatment of injuries sustained or
for diseases contracted during the performance of duty. A worker?s
compensation claim is initially submitted through the employee?s agency to

an OWCP district office and is evaluated by a claims examiner. The examiner
must first determine whether the claimant has met each of the following five
criteria for obtaining benefits:

 The claim must have been submitted in a timely manner. An original claim
for compensation for disability or death must be filed within 3 years of the
occurrence of the injury or death.  The claimant must have been an active
federal employee at the time of

injury.  The injury, illness, or death had to have occurred in a claimed
accident.  The injury, illness, or death must have occurred in the
performance of

duty.  The claimant must be able to prove that the medical condition for
which compensation or medical benefits is claimed is causally related to the
claimed injury, illness, or death. Because medical evidence is an important
component in determining whether an accident described in a claim caused the
claimed injury and if the claimed injury caused the claimed disability,
workers? compensation claims are typically accompanied by medical evidence
from the claimant?s treating physician. Considerable weight is typically
given to the treating

physician?s assessment and diagnosis. However, should the OWCP claims
examiner conclude that a better understanding of the medical condition is
needed to clarify the nature of the condition or extent of disability, the
examiner may obtain a second medical assessment of the claimant?s condition.
In such instances, a second- opinion physician, who is selected 1 5 USC
8101, et seq.

by a medical consulting firm contracted by an OWCP district office, reviews
the case, examines the claimant, and provides a report to OWCP. If the
second- opinion physician?s reported determination conflicts with the
claimant physician?s opinion regarding the injury, the claims examiner
determines if the conflicting opinions are of ?equal value.? 2 If the claims
examiner considers the two conflicting opinions to be of equal value, OWCP
appoints a third or ?referee physician? to evaluate the claim and render an
independent medical opinion.

Claims may be approved in full or part, or denied. When all or part of a
claim is denied the claimant has three avenues of recourse for appeal: (1)
an oral hearing or a review of the written record by the Branch of Hearings
and Review (BHR), (2) reconsideration of the claim decision by a different
claims examiner within the district office, or (3) a review of the claim by
the Employees Compensation Appeals Board (ECAB). While OWCP regulations do
not require claimants to exercise these three methods of appeal in any
particular order, certain restrictions apply that, in effect, encourage
claimants to file appeals in a specific sequence- first going to the BHR,
then requesting another review at the OWCP district office, and finally
involving the ECAB. 2 OWCP?s procedures manual state that to determine if
the medical evidence is of equal

value, each physician?s opinion is to be considered against the following
factors: (1) whether the physician involved in the case is a specialist in
the appropriate field relevant to the claimant?s injury or illness, (2)
whether the physicians? opinions are based upon a complete and accurate
medical and factual history, (3) the nature and extent of findings on
examination of the claimant, (4) whether the physicians? opinions are
rationalized, and (5) whether the physicians? opinions are stated
unequivocally and without speculation.

Evaluation Problems, From May 1, 2000, to April 30, 2001, decisions were
rendered by BHR or

Case File ECAB on approximately 8,100 appealed claims. We found that BHR and

ECAB affirmed an estimated 67 percent of these initial decisions as being
Mismanagement, and

correct and properly handled by the district office, but reversed or New
Evidence Are

remanded an estimated 31 percent of the decisions 3 -- 25 percent because of
Reasons Appealed questions or problems with OWCP?s review of medical and
nonmedical information or management of claims files, and the remaining 6
percent

Claims Decisions Are because of additional evidence being submitted by the
claimant after the

Reversed or Remanded initial decision.

About one- fourth of the We found that about one in four appealed claims
decisions during our

appealed claims decisions period of review were reversed or remanded because
of questions about or

were reversed or remanded problems associated with the initial decision by
the OWCP district office.

due to OWCP evaluation These included problems with (1) the initial
evaluation of medical evidence problems or claims file

(e. g., physicians? examinations, diagnoses, or x- rays) or nonmedical
evidence (e. g., coworker testimonies) or (2) management of the claim file
mismanagement

(e. g., failure to forward a claim file to ECAB in a timely manner).
Problems in evaluating medical evidence frequently involved, for example, an
OWCP district office failing to properly identify medical conflicts between
the conclusions of the claimant?s physician and OWCP?s second- opinion
physician, and therefore not appointing a referee physician as required by
FECA. OWCP has interpreted the FECA requirement for referee physicians to
apply only when the opinions of the claimant?s and second- opinion
physicians are of equal value, that is, when both physicians have rendered
comparably supported findings and opinions.

Some remands and reversals resulted from OWCP failing to administer claims
files in accordance with FECA or OWCP guidance for claims management. The
guidance includes (1) a description of the information that is to be
maintained in the claim file and transmitted by OWCP to the requestor (i.
e., BHR or ECAB) and (2) requires claims files to be transmitted within 60
days after a request is received. Failure to meet this 60- day requirement
was one of the more common deficiencies in claims file management. For
example, ECAB initially requested a claim file for one

3 The remaining 2 percent of the decision summaries we examined did not
include information regarding what decision was reached on the claimant?s
appeal or the rationale for the decision.

injured worker from OWCP on April 29, 2000. On December 19, 2000 (almost 8
months later), ECAB notified OWCP that the claim file had not been
transferred and that if the file was not received within 30 days, ECAB would
issue orders remanding the claim decision to the relevant district office
for ?reconstruction and proper assemblage of the record.? As of March 12,
2001- more than 10 months after the initial ECAB request -the claim file had
still not been transferred and the decision was remanded back to the
district office. We estimate that 4 percent of appealed decision were
reversed or remanded by BHR or ECAB because of claim file

management problems. For claims that were initially denied at a district
office and then decisions were reversed by BHR or ECAB due to problems
identified with the initial evaluation of evidence or mismanagement of
claims files, there are delays in claimants receiving benefits to which they
were entitled. According to

OWCP, the average amount of time that elapsed from the date an appeal was
filed with BHR or ECAB until a decision was rendered was 7 months and 18
months, respectively, in fiscal year 2000. Thus, when an initial claims
decision is reversed upon appeal, while claimants are provided benefits
retroactively to the date of the initial decision, claimants may be forced
to go without benefits for what can be extended periods and may have to
incur additional expenses during the appeals process, such as
representatives? fees, that are not reimbursable.

New Evidence Submitted We also found that 6 percent of appealed claims
decisions were reversed or After OWCP Rendered

remanded because of new evidence being submitted by the claimant after
Decision Also Result in

the initial decisions were made. OWCP regulations allow claimants to
Reversals and Remands

submit new evidence to support their claims at any time up until 30 days- or
more with an extension- after the BHR hearing or review of the record
occurs. 4 Additional evidence could include medical reports from different
physicians or new testimonial evidence from coworkers that in some
significant way were expected to modify the circumstances concerning the
injury or its treatment and make the previous decision by OWCP now
inappropriate. Upon appeal of the earlier district office decision, the BHR
representative determines whether any new evidence is sufficient to remand
the decision back to the district office for further review, or to reverse
the initial decision.

4 Most reversals and remands resulting from claimants submitting new
evidence were made by BHR.

OWCP Has Taken Some OWCP officials told us that several actions are taken to
monitor remands

Actions to Identify and and reversals. For example, ECAB decisions are
reviewed and advisories

Address the Causes of are prepared to call claims examiners? attention to
select ECAB decisions

Reversals and Remands which represent a pattern of district office error or
are otherwise

instructive. Where more notable problems are identified through ECAB
reviews, OWCP informed us that a bulletin describing correct procedures may
be issued or training might be provided. While OWCP similarly monitors
reasons for BHR reversing and remanding claims decisions, this information
is not as routinely disseminated to claims examiners as is done for
information on ECAB decisions.

Clearly, these actions are providing some information on reasons for remands
and reversals. However, this information is not providing a full picture of
the underlying reasons for remands and reversals occurring at their current
rates and what actions might be taken to address those factors. For example,
OWCP might detect that district offices are failing to appoint referee
physicians when required. OWCP might then notify district offices that such
a problem was occurring. However, with the information currently available,
it would not be able to identify the nature or frequency of specific
underlying reasons, such as (1) how often are inexperienced claims examiners
not sufficiently aware of the requirement for a referee physician when a
conflict of equal value occurs or (2) how often are examiners experiencing
difficulty in determining whether two physicians? opinions are of equal
value? Not knowing the frequency with which reasons for remands and
reversals are occurring, or the specific underlying causes, it would be
difficult for OWCP to identify actions that might be taken to address the
problem.

We believe that OWCP should examine the steps it currently takes to
determine whether more can be done to identify and track remands and
reversals- including improper evaluation of evidence and mismanagement of
claim files- and address their underlying causes. OWCP officials told us
that they have not conducted such an overall

examination of its current process, adding that they instead rely on
adjustments to their current monitoring and communication process (circulars
and bulletins) based on available information.

OWCP Has Established FECA requires that OWCP notify claimants in writing of
hearing decisions

a Hearing Standard "within 30 days after the hearing ends." In interpreting
this provision of the

act, OWCP has allowed time for certain actions to take place, such as That
Allows 110 Days

claimant and employing agency reviews of and comment on hearing For Claimant

transcripts. Accordingly, in setting guidelines, the BHR director told us
that Notification

the hearing record is not closed until two separate but concurrent processes
are completed: (1) printing of the hearing transcript and review of the
transcript by both the employee and the employee?s agency, which can take
from as few as 25 days to as many as 47 calendar days or more

from the hearing date and (2) opportunity for the claimant to submit new
evidence for 30 days following the date of the hearing, and longer if the
claimant needs additional time (regulations allow the OWCP hearing
representatives to use their discretion to grant a claimant a one- time
extension period, which may be for up to several months).

Considering these factors, OWCP has established two goals for the timing of
notifying claimants of final hearing decisions: (1) notifying 70 to 85
percent of the claimants within 85 calendar days and (2) informing 96
percent of claimants within 110 calendar days following the date of the
hearing. Based upon our review of the applicable legislation, we determined
that OWCP has the authority to interpret the FECA requirement for claimant
notification in this manner.

Of an estimated 2,945 appealed claims for which BHR rendered a decision on a
hearing during our review period, notification letters for an estimated 2,
256 (77 percent) were signed by OWCP officials within 85 days of the date of
the hearing and an estimated 2, 716 (92 percent) of the claims were signed
within 110 days of the hearing date. 5 OWCP officials signed an

estimated 158 (5 percent) of the claimants' notification letters from 111 to
180 days after the hearing date and 70 claims (2 percent) from 181 days to
more than 1 year after the hearing date. 6

5 Our analysis reflects only appeals for which necessary dates were
available in the claim decision files. We estimate that the dates we used to
determine the length of time required to provide decision information to a
claimant were available in the decision files for 95 percent of the BHR
appeals with hearings.

6 The percentages of claim decision notifications signed within 110, 111 to
180, and 181 days or more of the hearing date do not total 100 percent due
to rounding.

OWCP?s Physicians OWCP referee physicians in our sample were nearly all
board certified and

Were Board Certified, state licensed. We also found that OWCP?s second
opinion and referee

physicians had specialties that were appropriate for claimant injuries
Licensed, and had

examined. Specialties Consistent with the Injuries Examined

Most of OWCP?s Physicians Although neither FECA nor OWCP?s procedures
manuals require second-

were Board Certified and opinion physicians to be board certified, the
procedures manual provides

Have State Medical Licenses that OWCP should select physicians from a roster
of ?qualified? physicians

and ?specialists in the appropriate branch of medicine.? The manual further
requires that for referee physicians ?the services of all available and
qualified board- certified specialists will be used as far as possible.? The
manual allows for using a noncertified physician in special situations.

Based on our statistical sample, we estimate that at least 94 percent of
OWCP?s contracted second- opinion physicians and at least 99 percent of the
contracted referee physicians were board certified. 7 In making these
determinations, we relied primarily on information from the American Board
of Medical Specialties (ABMS), the umbrella organization for the

approved medical specialty boards in the United States. For the remaining 6
and 1 percent of the second- opinion and referee physicians in our sample,
respectively, information we reviewed was not sufficient to determine
whether they were or were not certified.

Although neither FECA nor OWCP regulations specifically require either
second- opinion or referee physicians to be licensed by the state in which
they practice, OWCP officials stated that OWCP has the expectation that all
physicians will have valid state medical licenses. Based on our sample of
physicians, we estimated that at least 96 percent of the second- opinion

physicians and at least 99 percent of the referee physicians had current 7
We were only able to search for board certification and licensing for- and
consequently only included in our sample- those physicians for whom we could
identify a first and last name and an area of medical specialty from the
appealed claims decisions summaries. Our estimates regarding board
certification and licensing cover about 63 percent of second- opinion and 85
percent of referee physicians.

state medical licenses. For the 4 and 1 percent of the remaining physicians
respectively, we did not have sufficient information to determine their
licensing status. Second- Opinion and

We also estimated that 98 percent of OWCP?s second- opinion and referee
Referee Physicians had

physicians had specialties that appeared to be relevant to the types of
Specialties that were

claimant injuries they evaluated. While there is no specific requirement
Relevant to Injuries

related to physician specialties, OWCP officials told us that a directory is
Evaluated

used to select referee physicians- with appropriate specialties- to examine
the type of injury the claimant incurred. For assistance in reviewing
relevancy of physician specialties, we

contracted with a Public Health Service (PHS) physician. With that
assistance, we were able to review our sample of claimants? injuries and the
board specialties of the physician( s) who evaluated them to determine

if the knowledge possessed by physicians with a specific specialty would
allow them to fully understand the nature and extent of the type of injury
evaluated. 8 Several Methods Are

OWCP uses surveys of randomly selected claimants and focus groups to Used to
Identify

monitor the extent of customer satisfaction with several dimensions of the
claims program, including responsiveness to telephone inquiries. Claims
Customer Concerns

examiners and employing agencies are among the inspector general?s (IG) and
Potential Claimant

primary information sources for identifying potentially fraudulent claims.
Fraud When such potential fraud is detected, the IG will investigate the
circumstances and, if appropriate, prosecute the claimants and others
involved.

8 We were not able to attempt to evaluate the appropriateness of the
physician?s specialty in comparison to the injury for some claims because
the claims decisions summaries did not contain the type of injury or the
physician?s specialty. We estimate that the information needed to evaluate
the appropriateness of the specialty was available in the appealed claims
decision summaries we used for an estimated 61 percent of second- opinion
physicians and 83 percent of referee physicians.

Customer Satisfaction with OWCP obtains information concerning customer
satisfaction with the

the Claims Process handling of claims through surveys of claimants and
conducting focus

groups with employing agencies. Since 1996, OWCP has used a contractor to
conduct customer satisfaction surveys via mail about once each year to
determine claimants? perceptions on several aspects of the implementation of
the workers? compensation program. For example, the surveys ask claimant?s
about their satisfaction with overall service, as well as questions about
selected aspects of the program, such as whether claimants knew their rights
when notified of claims decisions, and whether or not they receive written
responses to claimants? inquiries in a timely manner. 9 Because the
questionnaires we reviewed did not include questions specific to the
appealed claims process, it was not clear whether any respondents

based their responses on experiences encountered when appealing claims. In
the 2000 survey, customers indicated a 52 percent satisfaction rate with the
overall workers compensation program, and a 47 percent dissatisfaction rate.
10 The level of claimant satisfaction indicated in their responses for
selected aspects of the program have been largely mixed (i. e., more
positive responses for some questions and more negative responses for other
questions). For example, survey responses in fiscal year 1998 showed that 34
percent of the respondents were satisfied with the timeliness of responses
to their written questions to OWCP concerning claims, while 63 percent were
not, and 35 percent were satisfied with the

promptness of benefit payments, while 26 percent were not. Based on these
and previous survey results, OWCP created a committee to address several
customer satisfaction issues, including determining if the timeliness of
written responses could be improved. 11 In fiscal year 2001, OWCP took two
additional steps to measure customer

satisfaction. First, OWCP used another contractor to conduct a telephone
survey of 1, 400 claimants focused on the quality of customer service 9 The
claimants were selected on a random sample basis and the surveys were
conducted in 1996, 1997, 1998, and 2000.

10 The remaining 1 percent did not provide information on overall
satisfaction level. 11 Prior GAO testimony, U. S. General Accounting Office,
Office of Workers? Compensation Programs: Goals and Monitoring Are Needed to
Further Improve Customer Communications, GAO- 01- 72T, (Washington D. C.:
Oct. 3, 2000) addresses deficiencies in

the goals OWCP set for customer satisfaction and the evaluative data
collected for measuring progress in improving customer satisfaction.

provided by the district offices. As of March 25, 2002, a contractor was
still evaluating the results of this survey. Second, OWCP held focus group
meetings with employing agency officials in the Washington, D. C., and
Cleveland, Ohio, district offices jurisdictions. An OWCP official stated
that this effort provided an open forum for federal agencies to express
concerns with all aspects of OWCP service. In the Washington D. C., focus
group, employing agency officials expressed their belief that some of the
claims approved by OWCP did not have merit, while in the Cleveland, Ohio
focus group, employing agencies expressed frustration about not being
informed of OWCP claims decisions. The DOL IG Monitors

The Department of Labor?s IG- using information from claims examiners
Potential Claimant Fraud

and other sources- monitors, investigates, and prosecutes fraudulent claims
made by federal workers. The IG?s office provides guidance to claims
examiners for identifying and reporting claimant fraud, including
descriptions of situations or ?red flags? that could indicate potentially

fraudulent claims. Red flags include such items as excessive prescription
drug requests and indications of unreported income. DOL?s Audits and
Investigations Manual requires claims examiners and other employees to
report all allegations of wrongdoing or criminal violations- including the
submission of false claims by employees- to the IG?s office. Once a
potentially fraudulent claim is identified, the IG will review

information submitted by the claimant, coworkers, physicians, and others. If
appropriate, based on this review, the IG will also conduct additional
investigations. According to the Office of the Inspector General,
approximately 600,000 workers? compensation claims were filed with district
offices from fiscal years 1998 through 2001. During this time, the IG opened
513 investigations of claims that involved potential fraud. Of these, 212
led to indictments and 183 resulted in convictions against claimants and/ or
physicians. 12 In summary, based on our sample, one out of four initial
claims decisions

were either reversed or remanded upon appeal because of questions about or
problems with either OWCP?s evaluation of medical and nonmedical evidence or
improper management of claims files.

12 A number of the cases involved more than one claimant or physician.

While OWCP monitors and disseminates some information on BHR and ECAB
remands and reversals, we believe that OWCP should examine the steps it is
now taking to determine whether more can be done to identify and track
specific reasons for remands and reversal and in so doing better address
underlying causes. OWCP comments and our related responses are detailed in
our report.

Mr. Chairman, this concludes my prepared remarks. I would be pleased to
answer any questions you or other subcommittee members may have.

(450127)

GAO United States General Accounting Office

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