Speaker: Ian Hart

Council Comment: None.

Public Comment: None.

Action: Minutes approved for the meeting on September 13, 2021.

Dr. Peggy Sugarman, Deputy Director, Workers’ Compensation Division

Reported on Accomplishments, Initiatives and Challenges, Covid-19, Performance Quick Facts, Financials, and Claim Analytics.

Dr. Peggy Sugarman welcomed the council and introduced the presentation topics and upcoming speakers for the Workers’ Compensation Division first quarter report. She shared the data presented has been further calculated and brought up to date through November 30, 2021 with the assistance from Finance and Technology manager Stanley Ellicott.

Dr. Sugarman will first discuss accomplishments, initiatives, and will mainly concentrate on the serious challenges for the Workers’ Compensation Division. Next, Dr. Sugarman will continue with information on COVID-19 report. Stanley Ellicott will discuss performance quick facts and the financial state of the Workers’ Compensation Division. Lastly, Julian Robinson, Claims Manager, will share claim analytics.

Dr. Sugarman began the presentation by sharing accomplishments and initiatives that improve outcomes for injured workers.

• Our initiatives for FY21-22 include two critical contracting activities:
  • The Managed Care Services contract is pending routing for final signature. Our transition to Allied Managed Care is scheduled for 2/1/2022.
  • Our Third-Party Claims Administration RFP development is underway in partnership with SFMTA.

Additional initiatives for FY21-22 include:

• Promotional Exams for succession planning in process
• Strategic Planning sessions, with initial plans to heavily concentrate on reducing Total Temporary Disability duration, including using our recently-acquired ODG Guidelines and examining departmental efforts to provide temporary transitional work assignments
• The Medical Provider Network committee meeting with two physicians in the network to discuss concerns
• Working with HSS to help support employees in mental health crisis by using Employee Assistance Program (EAP) to bridge needed support until a WC psychologist appointment can be arranged
• Working with specified departments on projected budget shortfalls for F/Y 22
• Getting temporary staffing to help support increase in claim filings

Challenges for FY21-22 include temporary disability incidence and duration are forecasted to remain high throughout FY2021-2022.

• TD Rate Increases – 13.5% increase adopted for CY2022 injury year, will result in an aggregate $1.85M benefit cost increase. Permanent Total Disability, Life Pension and Death Benefits are also all impacted by the increase in State Average Weekly Wage (SAWW) and in TD.
• Medical Legal Fee schedule enacted 4/1/2021 was projected to increase these costs by 30-35%. Newest industry information reports increase of up to 50%. Estimated annualized cost increase of $325k.
• Copy Service Fee schedule to be enacted in early 2022 will increase base document retrieval fee from $180 to $225 (a 25% increase). Estimated annualized cost increase of $148k.
• The current labor market has made it increasingly challenging to hire and retain claims staff. 24% of WCD staff will be eligible for retirement within the next five years. We have challenges in coverage due to planned and unplanned absences, combined with increased claim volume and complexity. We are working to add temporary positions to address workload challenges in the short term while we examine workload staffing models.

Next, Peggy Sugarman presented a depiction of temporary disability expenditure increases. Our spending stayed relatively stable until the pandemic in March 2020. In the last two months, the increases were vast. Therefore, we are increasing attention within departments to lower these expenditures. Now that COVID-19 issues are becoming more manageable, Dr. Wilson will focus on increasing oversight on claims where injured workers are off work for too long.

The statewide average weekly wage increase is usually modest. This year, temporary disability rates are going up to $1,570 a week for maximum rate. Most of our employees are entitled to the maximum rate because of our wages.

Our next slide, claims incurred per 100 full-time employees, usually comes later in the presentation but we wanted to highlight increases in claim filings and injury rates. This slide is current through November 30th, 2021. The citywide average is particularly affected by Fire, Sheriff, and Police, as well as Recreation and Parks. These are the departments in which employees remained at work as essential employees.

The increase in claims within the Fire Department is alarming with an injury rate of about 38 claims per every 100 full time employees. The next highest increase in claims is within the Sherriff’s Department, while the Police Department has remained stable. Recreation and Parks Department has seen quite a big increase. All these numbers have led to higher citywide averages. So, even though the Department of Public Health looks like it is tracking at the same rate as the citywide average, this number has increased which you will see further in the presentation.

Dr. Sugarman next presented COVID-19 data which has been accumulated through the ServiceNow Reporting Tool. This tool allows us to study and reduce both exposures and close contacts in the workplace. There have been 53,966 cases reported in all of San Francisco, including employees and residents. As of November 29th, 2021, there have been 2,385 employees who have reported positive COVID-19 cases. Of those, we have 838 Workers’ Compensation claims, of which 607 were accepted. About 231 claims were denied due to negative test results, or because these employees contracted COVID-19 away from work, usually at home from a family member.

COVID-19 is considered presumptively related to work for certain categories of public workers. For the rest of the workers, they don’t need a presumption to have an accepted claim. Therefore, if someone did get COVID-19 from a close contact in the workplace, we would accept that claim.

We have paid full disability pay, known as 4850, to those in public safety, in the amount of $3.8 million. Regular temporary disability for non-public safety workers were not much of an expense, in the amount of $148,634. Medical care was responsible for almost a million in COVID related costs, all totaling $5.4 million.

Of the 2,385 employee positive reports, the most common employee job classifications with reported COVID-19 were those of transit operators, followed by registered nurses, firefighters, patient care assistants, and police officers.

Next, Dr. Sugarman presented a graph showing contact tracing investigation counts. This graph mirrors timeline reports from the media and health care organizations since the beginning of the pandemic. The first surge was last summer, the second surge during the end-of-year, and we have trended down off our third surge which was in this past summer.

Dr. Sugarman continued with a breakdown of Workers’ Compensation COVID-19 claims as of December 6, 2021. Of the 838 COVID-19 Workers’ Compensation Claims filed:

• 11 claims - medical expense >$10,000
• 56 claims - medical expense >$2,000
• 23 claims – total expense >$50,000, of which 69.5% of expenditures attributed to 4850 salary continuation benefits
• Closed claims: Average per-claim expense was $8,215 for accepted claims as of case closure. Average per-claim medical expense is $1,161. Figures include 4850 disability payment vouchers which are expenses incurred by departmental payroll, not DHR-WCD
• There have been 6 deaths among active employees

Our hearts go out to the family of those individuals.

Dr. Sugarman discussed how we emphasize safety and prevention of COVID-19 by vaccination. We are proud of our results that, since November 22nd, 2021, city employees are 95.9% fully vaccinated. About 0.5% are partially vaccinated. We are closing in on getting a fully vaccinated staff.

Dr. Sugarman summarized we are not used to seeing this amount of red ink. She reassured the council that Workers’ Compensation is doing everything we can to understand these numbers better, and to assist in reducing costs where we can.

Peggy Sugarman introduced Stanley Ellicott, our Finance and Systems Manager and thanked him for the excellent effort keeping Workers’ Compensation updated on expenditures and tracking, as well as for all the analysis the finance team has completed. This work renders us able to create programs to address issues.

Stanley Ellicott began his presentation by sharing performance quick facts for FY22, quarter one. He presented four key metrics which are tracked each quarter against the general benchmark performance within the program. The first factor is fiscal health, which measures how well we budgeted overall. Workers’ Compensation Division is seeing some financial pressure on our budget this fiscal year. We overspent our quarterly budget by about 15%. A breakdown of this will be shown by department, and by functional expenditure area.

Our claim volume, which is the number of new claims in a period, has been on the rise, totaling 622 indemnity claims and 204 medical claims in the first quarter. This is about 200 more indemnity claims than we would typically see in a benchmark quarter. The mix of claims have moved towards indemnity and away from medical, so our claim mix has become more complex throughout the fiscal year, resulting in higher expenditures.

The good news is in claim cost. We track the average cost of a claim that was closed in the period. For CCSF in quarter one, we saw $12,915.00, slightly less than our average of $14,096.00, demonstrating a slight decline within indemnity claim expenditures.

Our last metric is duration, the average days open of claims closed in the period. For first quarter, we are performing very well as our benchmark average opened claim was 218 days. This quarter the average duration of an open claim was 159 days. This is a very important metric and one that we are very proud of because the longer a claim is open, the more complex and expensive it becomes, and the larger the impact on the employee. Keeping this number as low as possible is a key goal of the division.

Stanley Ellicott next presented financials, specifically, department expenditure trends. Slide 20 shows a breakout for indemnity expenditures, which are the lost time benefits that we pay. We also have the 4850 salary continuation benefits, which are recorded by Workers’ Compensation as reported to the state as part of our obligation as a self-insured entity. However, we do not pay these benefits, we only track them.

We have vocational rehabilitation job retraining programs and other state mandated benefits. Also, we have medical expenditures, which are miscellaneous claims management costs. Finally, we benefit from recovery, which is typically subrogation or when we can obtain third-party liability for a claim and pursue another insurance carrier for reimbursement.

For FY22, significant indemnity cost increases are projected. We have five months of actual expenditures in our FY22 projections. We have also modified our analysis to incorporate plan changes. As Peggy Sugarman noted earlier, there is a large increase in the temporary disability rate that will impact new injuries on or after January 1, 2022. We are expecting about a 20% cost increase in expenditures for temporary disability, and 10% for permanent disability, and the combined indemnity increase is about 15%.

For 4850 salary continuation benefits, there is not as big an increase. Noting the large jump in FY19-20 and FY20-21, this trend has leveled off. We are not anticipating double digit growth again in FY22.

Medical expenditures tend to be 45% of our total benefit costs. We are estimating a 14.5% increase year-over-year in cost for medical services. We do have a larger number of claims this fiscal year, and more medical treating for those who delayed treatment during shelter in place. We also managed some catastrophic illness cases where hospital bills could be up to $500,000 for a single event. We are continuing to monitor this and manage our medical program within the Medical Provider Network (MPN). Overall, we are anticipating about 11.5% increase in benefit expenditures, or $103 million dollars this fiscal year.

Peggy Sugarman added that all employers are required to pay an assessment through the State Department of Industrial Relations to fund their operations. Last year our assessment was $3.9 million. This year the assessment bill is $5.6 million. This is another cost increase in addition to what has been presented by Stanley Ellicott.

Next, we have the top ten department expenditure trends based on overall budget, overall size, and typical injury volume per fiscal year. We present the subtotal for our top ten as well as all city departments. This data incorporates claim benefit expense as well as overhead costs that are assigned to our departments through our cost allocation model. Overall, we are forecasting budget deficits of $8.9 million in the aggregate. Most pressure lies within public health which projects a deficit of $3.9 million. The fire department shows a deficit of $2.49 million. The sheriff’s office deficit is $1.4 million, and Recreation and Parks shows a projected deficit of $1.16 million.

Citywide overall, we are seeing about a $7.7 million-dollar projected deficit against the revised budget we have for the fiscal year. This is a $12.5 million dollar year-over-year change. Driving these cost increases are the benefit expenditures described earlier: increase in temporary disability benefits, duration, the length of time the employee is receiving the benefit, as well as number of claims that have temporary disability benefits that are being paid. We were very successful in controlling overhead costs this last fiscal year at just under 2% actual cost increase.

Stan Ellicott paused to ask for questions before moving on.

We are working with the departments that have projected deficits to provide them with advance notice, reporting, and additional information so they can prepare and start looking for sources or other opportunities to supplement their budget by the end of the fiscal year. We are working with the Mayor’s budget office, not only on these items but for next fiscal year. Some departments budgets will need to be increased and we appreciate the support and collaboration of the Mayor’s office. We are also looking at strategic initiatives citywide to help control disability cost increases.

Next, Claims Manager Julian Robinson was introduced to discuss claim analytics in more detail. He presented claim filing frequency measured as a citywide rolling average, comparing the past four years against the current fiscal year. This year, total citywide claims are up by 25% in new claim filings. This is driving a lot of the costs, driving our initiatives for this year, and driving increased staffing needs. Indemnity claims include lost time claims and claims where we evaluate compensability. Indemnity claims increased by 47% citywide. Our largest categories of increase were Fire, Police, and Sheriff. Recent COVID-19 claims are included as well as psychiatric claims, injury claims, and normal orthopedic claims due to the nature of the work of these departments.

Next, Julian Robinson presented litigation statistics. Our litigation is a silver lining. Historically, about 40% of open claims are represented by counsel, and 24% are litigated. Our litigated percentage is down to about 35% representation rate, and 19% litigated citywide. This is a downward trend for both. Most of our COVID-19 claims are not litigated, which plays a role in these results. Congratulations to Fire and Police, and to our claims staff and attorneys, for managing claims while avoiding representation.

The next slide shows a litigated vs. non-litigated comparison. Overall, we have fewer litigated claims. However, these litigated claims are costing more. The average cost of a non-litigated claim is about 12% the cost of a claim that is litigated. One reason for increased cost on litigated claims involves the settlement of more claims in 2021 than there were in 2020 due to pandemic related delays, such as exam postponements. Additional reasons for increase cost on litigated claims include claims which tend to be open longer, may have multiple body parts included, utilize more discovery time, may contain hearings, and may consist of possible permanent disability with need for future treatments and/or medication.

Julian Robinson continued with Alternative Dispute Resolution (ADR) litigation statistics. The ADR programs strive to reduce the litigation rate and consequently, save on claim costs. Fiscal years 2018-2021 saw about 34% litigation within claims for the San Francisco Fire Fighters’ Association, and 44% litigation for the San Francisco Police Officers’ Association. Overall, Fire had 26% represented claims, but in the ADR program we had only 3% claims litigated. For police, the numbers dropped from 38% litigated outside the ADR program, to 8% litigated within the ADR program. To help significantly reduce litigation, the ADR program resolves claims at the earliest possible level, before mediation, or resolving at mediation. The State system sometimes asks if they can opt-in claims into our program, which is a big win and benefit overall.

Julian Robinson next returned the meeting back to Ian Hart, who thanked Peggy Sugarman, Stanley Ellicott, and Julian Robinson for their presentation.

Council Comment:

Todd Rydstrom thanked everyone for their excellent reports. Regarding the assessment fee paid the state, does our Alternative Dispute Resolution program mitigate any of these fees?

Public Comment: None.

Andy Mathews, San Francisco Municipal Transportation Agency

Mr. Andrew Mathews greeted the council. He acknowledged that Ify Omokaro, SFMTA Acting Workers’ Compensation Manager is out of state and will join us at the next council meeting. Instead, Danielle Buri and Andrew Mathews will be presenting today, starting with Ms. Buri.

Danielle Buri shared their presentation will include Accomplishments, Initiatives and Challenges, a COVID-19 Report, Performance Quick Facts, Claim Analytics and Financials, like what Workers’ Compensation presented.

Danielle Buri shared that Ify Omokaro joined on the cusp of the last meeting and has since

• Virtually met with the Intercare SFMTA team for introductions and getting to know the program
• Worked with Intercare to re-establish Service Instruction Guidelines to meet the current needs of the SFMTA program
• Prepared and filed complex new annual public self-insurer reports to the Office of Self Insurance Plans on 9/30/21
• Ensured positive COVID tests for SFMTA Employees were updated in the Claims Enterprise System and completed by 11/15/21

Danielle Buri continued with the current challenges including

• State Medical Legal Fee Schedule: Changes are expected to be adopted in 2021 which are likely to have a significant effect on the cost of medical/legal evaluations
• Vaccination Requirements: These may have an impact on claim filing to pursue workers’ compensation benefits. Currently working on procedures for unvaccinated employees who are eligible for modified duty
• Rise in Temporary Disability Benefit Maximum: Effective 1/1/22 this is expected to impact the overall indemnity costs for CY 2022
• Ongoing Review of Assault Claims
• Re-Directing Injured Workers to MPN Clinics instead of emergency rooms (via ambulance)
• Current RTW Process updates for injured employees
• Update on WC Manager position for SFMTA. Interviews to start in about a month.

Danielle Buri continued with the COVID-19 Report.

• 152 COVID-19 Workers’ Compensation Claims filed as of 9/30/21
  • 114 Reported claims only
  • 37 Indemnity claims reported, of which two claims are litigated
    • 16 Accepted Claims
    • 21 Denied claims: Negative test or not occupational in nature
  • Average paid per indemnity claim = $4,062
  • Average Incurred per indemnity claim = $12, 091
  • As of 9/30/21 only 11 claims remained open

Claim counts will increase due to recording Service Now employee positive reports on a report-only claim basis to comply with CAL/OSHA reporting standards; will affect other aggregate claim count statistics for the year. This was completed as of 11/15/21.

Looking at performance for the first quarter of FY22, we calculated benchmark by viewing the anticipated payment each quarter by percentage. Not having the previous history of the budget, we found that quarter over quarter, or 25% of the budget, this quarter we are at about 17% of the budget. This will change over time with updated projections. Claim volume shows 143 indemnity claims, those that are more expensive, and six medical only cases. The benchmark is a five-year comparison of 138 indemnity claims and 16 medical claims per quarter.

Viewing the average claim cost of closed cases in the period, indemnity is at $11,848 against the five-year benchmark of $11,139. Danielle Buri said she chose a five-year benchmark because COVID-19 had resulted in a shutdown within SFMTA for a period. So, a five-year comparison made more sense, otherwise the numbers looked too low. Medical only claims cost $617 for the quarter compared to $465 average quarter in the five-year period. Although tracking better than the benchmark of 443, Ms. Buri said duration of 362 days open of claims closed in the quarter could be improved by bringing up Medical Only claims.

Mr. Andrew Mathews began his slide presentation by reporting on claim filing frequency. Slide 38 shows cases coming in the door for the last five years and this quarter. Total indemnity claims are up and medical claims are down. We would like to see indemnity go down, and, eventually medical go up because they are the less expensive of the claims. Not surprising are indemnity claims going up this year. This is because last year a portion of SFMTA was shut down, which delayed claims closures, but is now fully staffed.

Next, Andrew Mathews presented data of Agency Injury Rate per 100 Full Time Employees. Data shows a downward trend over the past year or so. The final column shows we are at 2.6 claims per 100 employees in the quarter. Last year was 8.09 which is consistent with the 8-10 range over the last year, so we expect this data to rise as we return to full staffing.

Our claim cause distribution is not a surprise. Primarily the claims received are from the transportation division. They are out in the public on the buses and trains, having accidents and assaults which increases the claims when compared to other departments.

The next slide features data for open claims stratification on claims paid over $100,000. Most of the claims are within the $100,000 to $250,000 range. As claims get older, we see serious injuries over one million dollars. Most claims are under $100,000 which is not represented on this graph.

Slide 42 is a pie graph which shows the highest paid out and highest claim reserves come from the transportation department.

Next, Andrew Mathews presented Litigated vs. Non-Litigated data. If the claim is litigated it will be more expensive. Further, if the claim is older, the more likely it will become litigated. Within the claims that came in around 2017 and 2018, there is a higher percentage of litigation or pending action at the Workers’ Compensation Board, which is where all claims resolve. We are trending down the closer we get to this fiscal year. This initial quarter we are at 3%. Our goal is less litigation to reduce costs over time.

Mr. Mathews next presented fiscal year projections. The Fiscal Year 21 budget is $22 million. Ify Omokaro is looking at this number to ensure its’ accuracy. For Fiscal Year 22, SFMTA budget is at $29 million for the year. The projection is $27 million, based upon the first quarter. With this trend we could end up with a surplus if all goes well.

Overall, Costs by Expenditure Category shows decreases in temporary disability quarter-to-date. Permanent disability, medical, and expenses are also down. We plan to focus on temporary disability this year. We also have a lot of employees back to work, resulting in an increase of indemnity claims. We will monitor these numbers throughout the next three quarters.

Danielle Buri added that she looked at the indemnity information through November, and projections are up less than 2%. The projection is a little less on target. After quarter one of the calendar year, and third quarter of the fiscal year, we will see the impact in increases of temporary disability benefits.

Council Comment: None.

Public Comment: None.

Council Comment: Todd Rydstrom suggested he would like to see progress reports for racial and gender equity, as they become available.

Council Comment: None.