Candidate for the Worst Claim-Handling Ever

Friday, September 21, 2012 | 0

A leading candidate for the worst claim-handling ever turned up in a workers' compensation claim file audit. A third-party administrator (TPA) was handling claims for a statewide government self-insurance pool. And yes, all of the following mistakes were on one file!

Coverage
 
The TPA adjuster, upon receiving the claim, went to verify coverage. The coverage had expired 12 days before the claim was reported. The date of loss was five days after the coverage expired. The adjuster wrote in the file notes that he would confirm coverage before making any payments. However, before the adjuster had done so, the TPA switched adjusters, and the coverage question was forgotten.
 
Mistake 1: Handling the claim before coverage was verified.

The lack of coverage wasn't addressed again until the pool's executive director contacted the adjuster over a year later. By then, over $65,000 had been paid on medical and indemnity by the TPA from the pool's trust fund. There was no coverage, but the pool was in an estoppel situation, so the TPA continued to cover the claim.
 
Mistake 2: The second adjuster not reading the first adjuster's file notes.
 
Contacts
 
Best Practices for a TPA include making contact with the employer, the employee and the medical provider within 24 hours. The TPA had overloaded its workers' comp adjusters with over 200 files each. The government pool's contract did not contain any provision for the maximum number of claims to be assigned to an adjuster. The second adjuster on the file never even saw the claim during the first three months it was assigned.
 
Mistake 3: Not reviewing the file when it was assigned.
 
Mistake 4: Timely contacts with the involved parties were not made.
 
Self-Insured Mistake: Not having a contract stipulation on how many files could be assigned to one adjuster.
 
Investigation
 
Since the second adjuster never contacted the insured, the claimant or the medical provider, there was no investigation of the claim. The Employer's First Report of Injury reflected that “the employee (a painter) hurt her lower back when she tried to move a five-gallon bucket of paint.”
 
Mistake 5: No investigation of the claim.
 
Medical Handling
 
File note entries read, “Received medical bill” or “Paid medical bill” with the name of the medical provider and the bill amount. One medical report summarized in the file notes stated, “employee continues to work with her low back pain and wrist pain.”   Three months into the claim, a medical report stated “will need to do bilateral CTS (carpal tunnel syndrome) surgery.”
 
Mistake 6: Not comparing medical reports with the reported injury on the claim.
 
The employee was an obese woman with diabetes – two factors that can bring on CTS without an injury. Even though the claim was reported as a back injury, at no time did the adjuster question the carpal tunnel syndrome treatment.
 
Mistake 7: Failure to separate a covered injury from other medical conditions of the employee.
 
Mistake 8: Lack of medical knowledge that CTS is not always injury-related.
 
Mistake 9: Failure to get a medical termination based on whether the CTS was work-related. If it was, it should have been handled as a separate claim.
 
Indemnity Handling
 
The first contact with the employee occurred over four months into the claim when the employee called the adjuster inquiring about when she would be paid for her temporary total disability, as she was off work due to the right wrist carpal tunnel syndrome surgery (the left wrist would be done a couple months later). The adjuster did not follow up on the temporary total disability question and got another phone call from the employee. The first contact with the employer occurred almost five months into the claim when the adjuster asked the employer for a wage statement.
 
Mistake 10: No ongoing contacts with the employee and the employer.
 
Mistake 11: Not obtaining the wage statement from the employer when it was first noted the employee was going to need CTS surgery.
 
The adjuster put the temporary total disability (TTD) checks on autopilot and forgot about them. After about six months, the employee returned to work. As the adjuster had not been in contact with the employee or the employer, the temporary total disability checks just kept on going out. The adjuster did not know the employee was back to work until receiving medical reports stating that the employee was at maximum medical improvement on her wrists and had been given a 15% impairment rating for both wrists combined. The employee received an extra eight weeks of temporary total disability after she was back at work. The adjuster stated in the claim file notes that the overpayment of temporary total disability would be taken out of the permanent partial disability (PPD) settlement. However, it never was recovered.
 
Mistake 12: Not making any effort to get the employee back to work earlier or to return to work on light duty.
 
Mistake 13: Putting temporary total disability checks on long-term automatic issue.
 
Remember the low back pain?
 
The employee had only been back to work for two months when the adjuster contacted her about the overpayment of temporary total disability and settlement of the permanent partial disability claim. The employee advised the adjuster that her back still hurt and she needed to go to the doctor. The doctor ordered an MRI of the low back. The employee had a herniated disc at L4-L5 and a partially herniated disc at L5-S1. The doctor scheduled surgery for the employee.
 
Mistake 14: Not having inquired about the lack of medical treatment on the low back for almost a year.
 
The adjuster, finally paying attention, refused to approve the surgery until an independent medical evaluation (IME) could be completed. The IME confirmed the need for the surgery. After the surgery, the employee was off work for another seven months before the doctor placed her at maximum medical improvement with a 25% rating.   
 
Mistake 15: Not making any effort to get the employee back to work earlier or to return to work on light duty.
 
Negotiations
 
The adjuster contacted the employee with an offer to settle both of her permanent partial disability ratings based on her being 40% disabled. The employee argued that she should be considered 100% disabled as she was not able to go back to her job as a painter. The adjuster refused to consider the claimant as having permanent total disability (PTD). A week later, the adjuster received a letter of representation from the employee’s new attorney, who claimed the employee was PTD. The attorney requested an administrative law judge (ALJ) hearing. The ALJ reviewed all the medical records and agreed with the adjuster’s defense attorney. The employee's attorney appealed. The Workers' Comp Board (WCB) agreed with the defense attorney. The adjuster paid the 40% PPD rating.
 
Worsening of Condition
 
A year later, the employee's attorney contacted the claims office, but the second adjuster was no longer with the TPA. A third adjuster on the claim learned that the attorney filed a request for the WCB to consider a “worsening of condition.” 
 
Index Search
 
The new (third) adjuster looks over the file and realized that an ISO Index had never been filed on the claim. Once the index was filed, it was discovered that the employee had a prior back injury claim eight years before this claim. The employee was represented by the same attorney for both claims. The prior insurance company already classified the employee as 10% PPD for a non-operated herniated disc. The prior medical reports showed that the employee's earlier claim was for an L4-L5 herniated disc – the same injury the claimant had surgery for in this claim.
 
Mistake 16: Failure to index the claimant resulted in the TPA pool paying for a claim that should have never been paid.
 
Exacerbation v. New Claim
 
It was now obvious that the present injury was not a new claim, but the exacerbation of an old claim. If the index had been done when the claim first was received, it could have been referred back to the prior insurance carrier. The defense attorney requested that the ALJ transfer the claim back to the original insurance company. This is after the TPA had already paid the employee a 40% award (15% wrist and 25% back) on top of the 10% award the employee had received for the earlier claim.
 
The ALJ stated that as the TPA had already accepted the injury as a new claim, it would not change it now. The WCB appeal was denied, so the current insurer was stuck paying for the claim, although it was an exacerbation of a pre-existing injury.
 
Back to the Medical
 
The employee's disk fusion surgery had failed. The treating doctor recommended another surgery. The third adjuster was too inexperienced to be handling this type of claim.
 
Self-Insured Mistake: Not having a stipulation in the contract requiring experienced adjusters to handle claims – especially high dollar ones.
 
The adjuster asked her supervisor what to do. The supervisor said to get another IME. The IME stated that the fusion had partially failed, but absolutely did not recommend another surgery. 
 
Sympathy
 
The attorney gave the third adjuster a sad tale of how much pain the employee was in, that the employee's marriage was falling apart due to her pain and she was desperate to have the surgery. The attorney played on the adjuster's sympathy until the adjuster agreed to the surgery.
 
Mistake 17: Allowing emotions instead of medical facts to make the determination on how to proceed on a claim.
 
The adjuster should have denied the additional surgery and forced the employee's attorney to have the ALJ or even the WCB make the determination.
 
Permanent Total Disability Granted
 
Following the second surgery, the employee’s attorney filed a petition for PTD. The treating physician had given the employee a total 75% PPD rating based on the bilateral CTS surgeries and the two back surgeries. The defense attorney arranged another IME and got a similar rating of 65% total. The ALJ looked at the total medical history and the employee's 65% or 75% permanent partial disability rating following her two wrist surgeries and her two back surgeries. The ALJ gave the employee a PTD finding. The defense attorney appealed to the WCB. The WCB agreed with the ALJ, and the third adjuster paid the employee another 50% rating. 

Summary
 
The failure to do the simple things in the claim file handling resulted in the self-insured pool paying out over a half million dollars in medical, indemnity and legal expenses. Verification of coverage would have stopped this claim before any dollars were spent. A proper investigation at the start of the claim, including an index of the employee, would have shown that the low back claim was an exacerbation of a prior injury and would have eliminated that portion of the claim. The review of the medical reports would have resulted in a denial of the CTS or at least had it treated as a separate claim. Non-compliance with Best Practices changed what should have been zero dollars paid into a PTD claim.

Rebecca Shafer is an attorney and risk consultant specializing in workers' compensation cost containment. This column was reprinted with her permission from Amaxx Risk Solution's Work Comp Roundup blog, at  http://www.ReduceYourWorkersComp.com.