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HomeMy WebLinkAboutAudit Reports - Public - City of Glendale Workers' Compensation Process Review - 6/6/2022 This report is intended for the internal use of the City of Glendale, and may not be provided to, used, or relied upon by any third parties. FINAL REPORT City of Glendale WORKERS’ COMPENSATION PROCESS REVIEW June 6, 2022 Moss Adams LLP 999 Third Avenue, Suite 2800 Seattle, WA 98104 (206) 302-6500 City of Glendale Workers’ Compensation Process Review Report FOR INTERNAL USE OF CITY OF GLENDALE ONLY Table of Contents Executive Summary 1 A. Objective 1 B. Conclusions 1 C. Commendations 3 Detailed Report 4 A. Introduction 4 B. Background 4 C. Objective 5 D. Scope and Methodology 5 Observations and Recommendations 7 A. Processes 7 B. Compliance 14 Appendix A: Process Map 17 Appendix B: Sample Employee Communication Template 23 City of Glendale Workers’ Compensation Process Review Report | 1 FOR INTERNAL USE OF CITY OF GLENDALE ONLY EXECUTIVE SUMMARY Moss Adams LLP was contracted by the City of Glendale (the City) to perform a Process Review for its Workers’ Compensation program within the Risk Management Division (the Division). Based on the priorities and perception of need within the Division, three specific areas were selected for review: 1) claims processing; 2) supplemental pay; and 3) regulatory reporting. Moss Adams conducted process walk-throughs for each area and completed testing to validate the completeness and accuracy of Workers’ Compensation claim files and supplemental pay calculations. The Process Review was conducted between December 2021 and May 2022. This engagement was performed in accordance with Standards for Consulting Services established by the American Institute of Certified Public Accountants. Accordingly, we provide no opinion, attestation, or other form of assurance with respect to our work or the information upon which our work is based. This engagement was also performed consistent with the guidance issued by the Institute of Internal Auditor (IIA)’s International Professional Practices Framework (IPPF). This report was developed based on information gained from our interviews and analysis of workload in comparison to staffing levels. The procedures we performed do not constitute an examination in accordance with generally accepted auditing standards or attestation standards. Our objective for this engagement was: • To evaluate the efficiency and effectiveness of the following processes in complying with regulatory requirements: ○ Claims processing ○ Recordkeeping ○ Regulatory agency reporting ○ Leave and supplemental compensation administration The following observations describe opportunities for improvement in the City’s Workers’ Compensation program and our corresponding recommendations to support efficient, effective processes in accordance with regulatory compliance. We have categorized the results into two sections: Work Processes and Compliance. City of Glendale Workers’ Compensation Process Review Report | 2 FOR INTERNAL USE OF CITY OF GLENDALE ONLY WORK PROCESSES Claims Administration 1. Observation The Division recently implemented a risk management system, Origami, that has additional capabilities to streamline the claim administration process and regulatory reporting. Recommendation The Division should continue to explore opportunities to leverage the Origami system to reduce the need for manual entry, automate calculations, and facilitate the review of awarded benefits. Supplemental Pay 2. Observation Administering supplemental pay is a time-consuming and resource-intensive manual process prone to error due to reliance on manual calculations. Recommendation A. In the short term, the templates used by the Division to calculate supplemental pay should be simplified to reduce manual entry and calculations to the extent possible. B. In the long term, the Division should explore opportunities to automate the supplemental pay calculation within the Origami system. C. Implement standardized communication materials to the employee to support worker understandability of workers’ compensation statutory and supplemental pay rates. D. Implement regular supplemental pay audits to serve as an additional internal control for accuracy. Operational Continuity 3. Observation The Division relies on one employee to manage the review of the workers’ compensation, calculation of supplemental pay awards, coordination with the payroll department, and communication to workers. Recommendation A. Document current policies and procedures to facilitate task performance by other employees. B. Cross-train other Division employees on these processes to proactively address staffing and capacity issues. Internal Communication and Ticketing 4. Observation The Division’s use of email to communicate and view incoming information leads to a significant number of email messages that can be difficult to prioritize. Recommendation Given the cyclical and back-and-forth nature of addressing benefit claims, the Division should consider adjusting system notification settings to prioritize the receipt of vital claim information to reduce the clutter in their inboxes. City of Glendale Workers’ Compensation Process Review Report | 3 FOR INTERNAL USE OF CITY OF GLENDALE ONLY COMPLIANCE Claim Processing Timelines 5. Observation Within our sample, there were instances where the Industrial Commission of Arizona (ICA) was not notified of the claim within the 10-day statutory requirement starting from the date of employer knowledge. Although there may be reasonable explanations for the delay, no documentation was included in the file. Recommendation The Division should work with CorVel to develop processes and policies to ensure that all exceptions relating to claim processing timelines are documented within the respective claim file. Although the focus of this internal audit was to identify opportunities for improvement, it is important to note the areas of commendable operations. The Division should be commended for the following accomplishments: • Team Experience: The Division has a small, dedicated team that has significant experience in the oversight and administration of workers’ benefit payments. • System Implementation: The Division recently implemented a new system, Origami, and has been taking advantage of system capabilities to automate processes and mitigate potential errors. • Clear Roles and Responsibilities: The Division has clear segregation of roles and responsibilities, as well as a good working relationship with its third-party administrator, CorVel Corporation, which manages the City’s workers’ compensation claims. • Self-Insured Status: The Division has been successful in maintaining the City’s status as a self- insured entity through the Industrial Commission of Arizona (ICA). We would like to thank Division staff and management for their willingness to participate in this project. City of Glendale Workers’ Compensation Process Review Report | 4 FOR INTERNAL USE OF CITY OF GLENDALE ONLY DETAILED REPORT Moss Adams LLP was contracted by the City of Glendale (the City) to perform a Process Review for its Workers’ Compensation Program within the Risk Management Division (Risk Management, the Division) of the Human Resources Department. Based on the priorities and perception of need within the Division, Moss Adams identified three specific areas for review: 1) claims processing; 2) supplemental pay; and 3) regulatory reporting. Moss Adams conducted process walk-throughs for each area and completed testing to validate the completeness and accuracy of Workers’ Compensation claim files and supplemental pay calculations. The Process Review was conducted between December 2021 and May 2022. The Division operates the City’s self-insurance program, which encompasses workers’ compensation claims processing and supplemental pay administration. Overall, Risk Management’s budget in FY 2021 was approximately $4.5 million with three FTE. At the time of this report, the City has successfully maintained self-insured status by the Industrial Commission of Arizona (ICA), the State agency that administers and enforces State laws relating to workforce protections, including workers’ compensation. The table below shows the number of workers’ compensation claims received and the payments incurred over the last three fiscal years. Fiscal Year Total Number of Claims Gross Amounts Incurred 2021-22 (to date) 235 $2,893,382 2020-2021 267 $1,986,111 2019-20 161 $4,366,685 To remain self-insured and continue to administer the workers’ compensation program, the City must comply with regulations from the State of Arizona, the ICA, and municipal code. These regulatory bodies require the Division to engage with a third party for claims processing; to relinquish 80% of a claimant’s pre-injury earnings as benefit payments, constituted by a combination of workers’ compensation and supplementary pay payments; and ensure that claim correspondence, form filing, and documentation retention occur in a timely and complete manner. The City outsources the claims intake and administration processes to a third-party administrator (TPA), CorVel Corporation (CorVel). CorVel is responsible for conducting investigations and making compensability determinations. For each claim case, key claim information is communicated between the City and TPA through a nightly data feed. After a claim is accepted, the TPA calculates an employee’s average monthly wage (AMW) that serves as the basis for the workers’ compensation benefit payment applicable to a pay period. Both the AMW and pay period workers’ compensation benefit payment calculated by CorVel are reviewed by the Division, then used to calculate the supplemental pay benefit required to deliver the claimant’s entitled pay period amount. Once City of Glendale Workers’ Compensation Process Review Report | 5 FOR INTERNAL USE OF CITY OF GLENDALE ONLY determined, the City and their TPA coordinate to administer payments and monitor the case until final settlement or closure. Throughout our engagement with the City, we assessed the compliance of the TPA’s administrative responsibilities and identified currently employed procedures that are manually driven and have the potential to be improved to mitigate error, increase human resourcing efficiency, and proactively address staffing concerns. Our objective for this engagement was: • To evaluate the efficiency and effectiveness of the following processes in complying with regulatory requirements: ○ Claims processing ○ Recordkeeping ○ Regulatory agency reporting ○ Leave and compensation administration To obtain an understanding of existing processes and regulatory requirements, we performed the following procedures: 1. Process Walk-throughs: We conducted process walk-throughs with the Risk Manager, Workers’ Compensation Program Manager, and Risk Management Specialist. In addition, we confirmed our understanding of processes and regulatory requirements throughout these work sessions. 2. Document Review: We reviewed multiple documents, including but not limited to: ○ Organizational charts ○ Department budgets ○ Applicable internal policies and procedures ○ State law ○ Municipal code ○ HR policy ○ ICA regulations and forms ○ TPA contract ○ Forms and templates 3. Detailed Analysis: We developed process maps and identified opportunities for improvement within existing processes. For a complete process map of key workers’ compensation functions, please see Appendix A. Additionally, we conducted testing related to the City’s workers’ compensation payments and supplemental pay payments, and the TPA’s recordkeeping files to assess the accuracy and completeness of the payment calculations and compliance with key statutory requirements, respectively. We examined calculation support and claim file documentation to verify the integrity of each area. A detailed methodology and analysis are included in each observation and assessment below. City of Glendale Workers’ Compensation Process Review Report | 6 FOR INTERNAL USE OF CITY OF GLENDALE ONLY a. Workers’ Compensation Statutory Pay: We reviewed the TPA’s calculation of the workers’ compensation benefit and the City’s recalculation of workers’ compensation for three selected cases to verify accuracy with State law. b. Supplemental Pay: We reviewed the City’s calculation of the respective supplemental pay for six selected cases to ensure accuracy with ARS 38-961 and HR Policy. We verified that the supplemental pay was correctly calculated as the remaining amount to yield the targeted monthly payment amount. c. TPA Closed Cases: We reviewed the claim files of 20 selected closed cases to verify that all relevant forms, notifications, and documentation were retained in CorVel’s CareMC system for recordkeeping. 4. Industry Standards Research: Based on the functional areas included in this process review, we conducted research to understand industry best practices and guidance for self-insured workers’ compensation programs in the State of Arizona. Standards commonly referenced throughout the report are governed by the ICA and the Arizona Revised Statutes (ARS). City of Glendale Workers’ Compensation Process Review Report | 7 FOR INTERNAL USE OF CITY OF GLENDALE ONLY OBSERVATIONS AND RECOMMENDATIONS To gain a comprehensive understanding of the workers’ compensation program, we mapped all relevant processes, forms, and timelines for claim management as set forth by state law, ICA regulations, and HR Policy. For a complete process map, please see Appendix A. 1. Observation The Division recently implemented a risk management system, Origami, that has additional capabilities to streamline the claim administration process and regulatory reporting. Recommendation The Division should continue to explore opportunities to leverage the Origami system to reduce the need for manual entry, automate calculations, and facilitate the review of awarded benefits. Current State The City’s Risk Management Division works closely with their engaged TPA, CorVel Corporation, which manages all claims intake, processing, documentation and reporting, and the monitoring of open claims until closure. When the Division is informed that an employee has been injured, Division personnel complete an employer’s report of injury (ICA Form 101) in CorVel’s CareMC system to open a claim case. CorVel then obtains the necessary claimant data from the Division through the Division’s nightly uploads to the TPA portal for claim processing. CorVel is responsible for obtaining legal counsel for anticipated denial issuances and obtaining approval by Division personnel to issue a denial. Additionally, the Division requires the TPA to alert them of cases that involve the following: • The claimant is represented by legal counsel • Reserve changes for anticipated claim need is greater than $25,000 • Subrogation potential exists, and the claim adjuster expects a need for either CorVel or the Division to pursue subrogation • A request for hearing is received • A notice of deposition or hearing is received • The case involves court decisions • The issuance of a 20-day letter or a notice of claim status issuing a denial or suspension of benefits to the employee • Assignment of nurse case managers for catastrophic cases • Telephonic case manager assignment • The employee is released to modified or full duty • The absence of detailed work restriction from the treating physician • The need for surveillance services City of Glendale Workers’ Compensation Process Review Report | 8 FOR INTERNAL USE OF CITY OF GLENDALE ONLY CorVel will carry out the necessary ICA form filings, documentation, and recordkeeping as applicable for every claim in accordance with regulation. The Division’s role in oversight for the claim administration process includes reviewing the TPA’s work on a per pay period basis, calculating the applicable supplemental payment benefits for each claim, and coordinating the remittance of a claim’s total benefit payment (see Observation 2 for a detailed examination of this workflow). We noted the Division’s demonstrated efforts in improving their oversight, supplemental pay, and payroll coordination procedures through the recent implementation of a new risk management system, Origami Risk (Origami). Origami allows the Division to streamline its processes. Some of the improvements over the last year include: • Ability to create, complete, and send out reports such as the employer’s Form 101 in a consolidated space. • Significant improvements related to regulatory reporting, which can be done directly through the system and substantially reduced the time required to process reporting. • Employee self-service for some City departments, including field operations, community services, water, facilities, and transportation. The utilization of the Origami system by the Division is a milestone for the management of the risk management process cycle and bears ample opportunity for further integration and process streamlining. Recommendations The Division should continue their efforts in implementing Origami and rolling it out to the rest of the City’s departments by the end of fiscal year 2021-22 as planned. Leveraging Origami as an integrated system and a key component of the claim administration processes will significantly limit, if not eliminate entirely, the need for manual work as part of the workers’ compensation oversight and coordination with payroll for remittance of workers’ compensation and supplemental pay benefits. Exploring all opportunities pertaining to Origami and its ability to automate and communicate to other internal systems will lead to a more resource-efficient, error-and-liability-proof claim administration process. Management Response Management Agreement – Agree. Owner – Risk Management Division Target Completion Date – Department training June 30, 2022. Development and integration of additional workers’ compensation programs into Origami for completion by June 30, 2023. Action Plan: Risk Management is on track to complete the on-line incident reporting training for all departments as planned. Risk Management has identified the following manual processes for development and implementation into Origami during the upcoming FY including supplemental pay, and continued enhancement of OSHA reporting. City of Glendale Workers’ Compensation Process Review Report | 9 FOR INTERNAL USE OF CITY OF GLENDALE ONLY 2. Observation Administering supplemental pay is a time-consuming and resource- intensive manual process prone to error due to reliance on manual calculations. Recommendations A. In the short term, simplify the templates used by the Division to calculate supplemental pay to reduce manual entry and calculations to the extent possible. B. In the long term, the Division should explore opportunities to automate the supplemental pay calculation within the Origami system and integrate Origami with Tyler Munis, the City’s financial system. C. Implement standardized communication materials to the employee to support worker understandability of workers’ compensation statutory and supplemental pay rates. D. Implement regular supplemental pay audits to serve as an additional internal control for accuracy. Current State The City supplements workers’ compensation benefit payments for eligible injured workers with supplemental pay benefits to ensure that the injured worker receives 80% of their base pay earnings at the time of injury for all applicable pay periods (“the target compensation” or “the required amount”), as required by state law and HR Policy. Therefore, there are two forms of compensation eligible employees receive when they are on workers’ compensation leave: 1. Workers’ Compensation Statutory Pay: State law requires employers to compensate employees 66.67% of their average monthly wage. 2. Supplemental Pay: State law and the City’s HR Policy requires the City to pay the difference between the Workers’ Compensation Statutory Pay and 80% of the employee’s base salary. On a per pay period basis, the TPA provides the Division with a report detailing all currently open claims and their respective average monthly wage (AMW), daily rate for Temporary Total Disability (TTD) and Temporary Partial Disability (TPD), and statutory amount due based on the number of days the employee was on workers’ compensation leave. The Division uses this report to verify the TPA’s workers’ compensation benefit calculation and compute the remaining portion of the target compensation to be covered by supplemental pay benefits. Once the target is achieved through workers’ compensation and supplemental pay payments, the respective amounts coded to each pay type (workers’ compensation and supplemental pay) for each worker are transmitted to the payroll department for processing. The table below shows the number and amount of supplemental pay paid over the last three fiscal years. City of Glendale Workers’ Compensation Process Review Report | 10 FOR INTERNAL USE OF CITY OF GLENDALE ONLY Fiscal Year # of Payments Total Workers’ Compensation Statutory Benefits Paid Total Supplemental Benefits Paid 2021-22 (to date) 277 $247,896 $152,855 2020-21 235 $267,875 $117,304 2019-20 242 $247,837 $101,854 In order to calculate the appropriate amount of supplemental payment to issue, the City first reviews the TPA’s report showing the determined AMW, daily rate, and workers’ compensation payment for each applicable claim in the pay period. The Division’s HR Program Manager reviews this report, manually pulling information from it and inputting the information into the City’s supplemental pay worksheet created for each claim. These worksheets are templates that utilize ICA-provided calculation factors and serve as a measure for ensuring that the TPA determination of the workers’ compensation benefit is 66.67% of the injured worker’s AMW, as required by state law. After the HR Program Manager verifies the accuracy of the workers’ compensation determinations, they calculate the target compensation for the pay period (80% of pre-injury earnings) and subtract the workers’ compensation amount to yield the necessary supplemental pay amount. According to staff, the calculation of the supplemental pay amounts for all eligible employees for a single pay period generally requires approximately three days (24 working hours) for Division personnel to calculate and process, due to reliance on manual determinations and calculations. However, the amount of time required to perform with work can vary significantly depending on the complexity of cases. For every claim, the Division must assess many different factors that may impact the calculation: • Employee Eligibility: The following guidelines determine whether an employee is eligible to receive supplemental pay, and if they do, which kind of supplemental pay they will receive: ○ If the employee is a temporary employee or contracted employee, they are not entitled to any supplemental pay. ○ If the employee is an employee under public safety (police or fire departments), they are entitled to receive supplemental pay regardless of their length of service. ○ If the employee is not an employee under public safety, they must have attained a full year of employment at the time of injury to receive supplemental pay. ○ Employees no longer actively working for the City are not eligible for supplemental pay. • Retroactive Payroll Accrual Hour Replenishment: In some cases, due to timing of claims and the iterative nature of investigation, temporary claim denials may be issued and later rescinded to have a claim acceptance issued instead. When this occurs, the employee on leave must use their payroll accrual benefit hours (sick-leave or paid time off) if they desire payment for the pay period during which they are off work. When a previously denied case is subsequently accepted, the Division reviews the affected historical pay periods and the current pay period in which the claim is accepted and communicates through the payroll transmittal form all pay code changes that must be made to accurately reflect the claim acceptance. The result of this change is often a replenishment of an injured worker’s applied leaves for the historical pay period and payroll City of Glendale Workers’ Compensation Process Review Report | 11 FOR INTERNAL USE OF CITY OF GLENDALE ONLY adjustments in the current period to reflect the proper compensation in light of the new retroactive claim approval (caused by the 80% cap of regular earnings while off-work). • Injury Duration: Workers’ compensation benefits are contingent on the duration of the time the employee is off work. The City evaluates each case according to the following guidelines: ○ Workers’ compensation benefits may only be awarded for off-work days occurring after the 7th day following the date of injury. ○ Off-work days between the 8th day off work and the 14th day off are eligible for compensation benefits, starting from the 8th day for compensability calculations. If the off-work days extend beyond 14 days after the date of injury, compensation benefits calculation may pay back to the first day of being off work until the day released to full duty by the treating physician. Once the required 80% of earnings is achieved through the aggregate workers’ compensation and supplemental payment amounts for each claim within a pay period, the HR Program Manager creates and delivers a payroll transmittal form detailing these breakdowns to the payroll department. The payroll team enters the pay data and processes benefit payments and adjusts leave balances, if necessary. Alongside this communication with the payroll department, the HR Program Manager contacts the injured worker to communicate the benefit payment and its basis and manages all employee questions and concerns. Occasionally, the more complicated claims require more time to accomplish satisfactory communication with an employee. Overall, we noted the Division strives to conduct best practices in efforts to ensure accuracy, such as reviewing the TPA’s work, which is commendable. However, there are many opportunities for improvement through leveraging systematic capabilities to reduce the number of manual inputs; streamlining the communication, review, manipulation and transmittal of information; and implementing internal control procedures to reinforce the accuracy and completeness of the benefit remittance process. Recommendations Our recommendations address the current state of the Division’s supplemental pay process with a two-pronged approach focusing on both short-term improvements and long-term goals. A. In the short term, the templates used by the Division to calculate supplemental pay should be simplified to the largest extent possible. Currently, templates are designed to present as much information as possible to provide context to its users. However, for users that are not well-versed in the calculations and requirements, such as an injured worker concerned about their paycheck, the worksheet may present as intimidating and confusing. As part of this engagement, Moss Adams worked with the Division to re-create a worksheet template that further reduces manual entry and calculations, leveraging macros and formulas to automate the TPA report information extraction and pay amount recalculations for standard cases. By leveraging this spreadsheet, the Division can support enhanced accuracy and consistency of the calculation process. B. In the long term, the Division should explore opportunities to automate the supplemental pay calculation within the Origami system, which may reduce time to calculate supplemental pay. Eliminating the manual process of creating a supplemental pay worksheet for every claim file and instead having internal systems that can communicate with one another (such as direct City of Glendale Workers’ Compensation Process Review Report | 12 FOR INTERNAL USE OF CITY OF GLENDALE ONLY communication between Origami and Tyler Munis, the City’s financial system) can further streamline the supplemental pay administration for the Division by reducing manual work associated with the creation of the worksheet, data entry, creation of a payroll transmittal form, and delivering the transmittal form. By reducing reliance on manual processes, there is also a decreased likelihood that errors may occur in the calculation process and time savings are anticipated. C. Implement standardized communication materials for employee communication to support worker understandability of statutory workers’ compensation and supplemental pay rates and calculations. The City can benefit from developing a template for accepted claims that details: a. Date the claim was filed b. Date of the injury that warranted the claim c. General explanation of the 80% earnings threshold d. Brief background on how the TPA is required to determine the average monthly wage (which is limited by the ICA monthly limit) e. Some verbiage on whether the employee does or does not qualify for the City’s supplemental pay benefit and why (based on their employment history and type) f. Frequently asked questions that address common inquiries and provide the best contact for their questions should the employee have any. A canned, succinct communication article for all claims may reduce the time required for communicating to employees by shifting the focus from presenting the process, rationale, and calculations to answering questions that employees might have from reading a brief memo laying out what they need to know. A sample communications template is included in Appendix B. We identified the potential to lessen the workload for the HR Program Manager while positively impacting the review of supplementary payments by implementing a policy to conduct regular audits for supplemental pay cases. By having an internal control of regular audits for the clerical accuracy of the supplemental pay calculations, the Division not only employs the best practices, but also limits its potential future liabilities. Management Response Management Agreement – Agree Owner – Risk Management Division Target Completion Date – Item A completed. Item B Automation of supplemental pay June 30, 2023. Item C auditing completed. Action Plan: • Item A: Risk Management has already implemented using the new supplemental pay calculation template and communication template. • Item B: The development and integration of supplemental pay is already planned to be developed and integrated into Origami during the next fiscal year. City of Glendale Workers’ Compensation Process Review Report | 13 FOR INTERNAL USE OF CITY OF GLENDALE ONLY • Item C. During the implementation into Origami, Risk Management will include standardized communication materials and update FAQs to address common inquiries. Auditing of the supplemental pay has also been implemented and will be conducted on a bi-weekly basis. 3. Observation The Division places heavy reliance on one employee to manage the review of the workers’ compensation, calculation of supplemental pay awards, coordination with the payroll department, and communication to workers. Recommendation A. Document current policies and procedures to facilitate task performance by other employees. B. Cross-train other Division employees on these processes to proactively address staffing and capacity issues. Current State The Workers’ Compensation Program Manager is the lynchpin for the City’s workers’ compensation and supplemental pay processes and manages most of the calculation verification, payroll coordination, and employee communications. If this individual were to be unavailable for any reason, the Division would face capacity issues due to the tight turnarounds between the supplemental pay calculation process and review, the transmittal to the payroll department, and the payroll date. Although the Risk Management Specialist has stepped into the HR Program Manager’s role for short periods of time, the HR Program Manager remains the only person able to fully oversee the process with complicated cases involving prorating weeks or days of work, retroactive adjustments, and partial disability. The Division reports that cross-training efforts are currently underway. Recommendation The Division should continue cross-training Division personnel to remain proficient in the review of the TPA’s AMW and supplemental pay benefit calculations. As processes continue to shift with the implementation and continued development of their systems, keeping current policies and procedures in a documented desk manual will help prevent capacity issues in times where the HR Program Manager is unavailable. Overall, it is imperative that the Division reduce reliance on one employee to conduct critical elements of its operation. Management Response Management Agreement – Agree Owner – Risk Management Division Target Completion Date – June 30, 2023. Action Plan: Cross-training of Risk Management personnel and procedures manual will continue to be developed along with the implementation of the process into Origami. City of Glendale Workers’ Compensation Process Review Report | 14 FOR INTERNAL USE OF CITY OF GLENDALE ONLY 4. Observation The Division’s use of email to communicate and view incoming information leads to a significant number of email messages that can be difficult to prioritize. Recommendation Given the cyclical and back-and-forth nature of addressing benefit claims, the Division should consider adjusting system notification settings to prioritize the receipt of vital claim information to reduce the clutter in their inboxes. Current State We noted from our process walk-throughs and discussions that Division employees use the email system for internal communication about day-to-day operations and notifications for specific claim information from Origami and/or CareMC. As a result, they are inundated with hundreds of emails throughout the work week, some of which are duplicative emails (due to emails being sent to employees individually and as constituents of other pre-defined groups) and non-essential notices (e.g., system alert notifications). The accumulation of these lower priority emails agglomerating with more important emails may be distracting and leaves vulnerabilities to unintended backlogging of critical information for day-to-day operations and claim management. Recommendation The City can benefit immediately from reviewing and updating system settings to reduce the number of repeat notifications and emails that they are receiving and ensuring that key notifications are accessible and organized. Overall, simplifying the City’s approach to internally communicating claim information and streamlining information receipt will facilitate smoother workflow and reduce the time spent on manually filtering and organizing email inboxes. Management Response Management Agreement – Agree Owner – Risk Management Division Target Completion Date – Completed. Action Plan: Risk Management has updated their email system to identify high priority claims communications. All communication involving workers’ compensation claims, including supplemental pay, is also now being captured within Origami on a per claim basis. To assess the compliance of the workers’ compensation program with State law, ICA regulations, and municipal code, we reviewed the documentation retained for our sampled claim cases to verify that timeliness and completeness standards are being met. City of Glendale Workers’ Compensation Process Review Report | 15 FOR INTERNAL USE OF CITY OF GLENDALE ONLY 5. Observation Within our sample, there were instances where the ICA was not notified of the claim within the 10-day statutory requirement starting from the date of employer knowledge. Although there may be reasonable explanations for the delay, no documentation was included in the file. Recommendation The Division should work with CorVel to develop processes and policies to ensure that all exceptions relating to claim processing timelines are documented within the respective claim file. Current State The City’s TPA, CorVel Corporation, is responsible for ensuring that the required filings and issuances for each claim are carried out in the timeframes set by statutory regulation. Case claim adjusters take detailed narrative notes to track case progression and retain case-relevant paperwork and documentation within the CareMC system, whose dates can be used to facilitate a timeliness check. The following ICA and/or statutory regulation set deadlines for documents to be issued: • ICA R20-5-105 and ARS 23-908(g): When an employer is advised by a worker or any other means that an on-the-job (OTJ) injury or illness has occurred, the employer is required to report the incident to the ICA within 10 days of being made aware by submitting a Form 101 – Employer’s Report of Injury. • ICA R20-5-112: As part of an injured worker’s recourse, they may seek or be advised to seek medical treatment. The treating physician is required to complete and file an initial report of injury, Form 102 – Worker’s and Physician’s Report of Injury, within 8 days of providing treatment as applicable. • ARS 23-1062.01: Determination on whether the City will pay a medical bill for an accepted claim in part or in full must be made within 30 days of receiving the bill if after the date of acceptance or within 30 days of claim acceptance if the receipt is before claim acceptance. • ARS 23-1061(m): Failure of a self-insurer to issue a Form 104 – Claim Status Notification notice of claim status denying a claim within 21 days after the date that they are notified by the ICA of a claim or petition to reopen a prior claim result in immediate compensation as if the claim were accepted. • ARS 23-1061(f): The self-insuring employer shall notify the employee and the ICA of the average monthly wage of the claimant and its calculation basis. Form 108 – Recommended Average Monthly Wage Calculation is issued for this notification and is expected to be provided to the ICA and employee within 30 days of the initial installment of compensation. Within 30 days of the receipt of the Form 108, the ICA must provide their approval of the TPA calculation via Form 109 or a rejection of the TPA calculation through a Form 109 and their overriding Form 108 for the claim. • ARS 23-1062: The first installment of compensation must be paid after 7 days of the date of injury, but no later than 21 days after ICA notification is provided. We assessed the TPA’s reporting compliance by sampling 20 claim files for closed cases occurring between July 1, 2019, and December 31, 2021, and reviewed them in the CareMC system, noting relevant dates which we used to calculate the lead times between required claim filings or issuances. City of Glendale Workers’ Compensation Process Review Report | 16 FOR INTERNAL USE OF CITY OF GLENDALE ONLY Through our testing, we found that the TPA is generally timely and compliant with the timeframes set forth by the governing bodies. However, there were instances in which regulatory ICA R20-5-105 and ARS 23-908(g) were not fulfilled timely. Within our sample, 4 of 20 samples tested did not have their Form 101 issued to the ICA within the 10-day statutory requirement starting from the date of employer knowledge. In these cases, we noted that the employer’s date of knowledge (DOK) of the incident was beyond the 10-day window from the filing date with the ICA. Upon further investigation, we found that these cases were related to COVID-19 illness, which was a novel occurrence at the time. The City could not have anticipated, and therefore did not have instated, policies and procedures to address the processing of COVID-related claims. Per our discussion with management, the City decided to treat all COVID-related cases as compensable after some time of deliberation, which explains the lag time between the initial dates of knowledge and the following administrative steps for claims processing. Although these rationales are valid and explain the delay, we found no documentation to capture them, and the TPA was unable to provide an explanation upon inquiry due to the lack of documentation. Recommendation The Division should work with CorVel to develop processes and policies to ensure all notifications are completed within the timeframes set forth in State law, and that exceptions are documented fully and accurately. Having comprehensive documentation will help the Division avoid potential confusion and can be helpful in advising the prevention of future exceptions and granting visibility to TPA performance and adherence to compliance. Management Response Management Agreement – Agree Owner – Risk Management Division Target Completion Date – Completed Action Plan: ARS 23-908(G) requires the City to notify the ICA within 10 days of receiving a notice of an accident from an employee. Risk Management clarified with chief counsel at the ICA that such report isn’t required until there is a “loss”. A “loss” meaning medical treatment. This applies to incidents where there is no treatment or only first aid was rendered. When the employer has knowledge that an employee seeks treatment, the requirement to notify the ICA is triggered and the 10-day reporting time-period begins. We worked with CorVel who implemented into their process to document the exceptions for not sending the notice within the 10-day period. City of Glendale Workers’ Compensation Process Review Report | 17 FOR INTERNAL USE OF CITY OF GLENDALE ONLY APPENDIX A: PROCESS MAP The following process maps demonstrate the key steps in the workers’ compensation processes, from an injury occurring to the closure of a claim. ELEMENTS KEY: START PROCESS STEP DECISION NODE PRE-DEFINED SUB- PROCESS OFF PAGE CONNECTOR TERMINATION DOCUMENT ALTERNATIVE PROCESS STEP CONNECTOR NODE City of Glendale Workers’ Compensation Process Review Report | 18 FOR INTERNAL USE OF CITY OF GLENDALE ONLY Employee suffers OTJ injury or illness, or is diagnosed with a disease during employment. Can the employee call the 24/7 Nurse Triage? Employee reports directly to the insurance carrier (the City). Employee calls the 24/7 Nurse Triage within 24 hours of the incident. Supervisor for the employee calls the 24/7 Nurse Triage within 24 hours of the incident. • COG Incident/ Accident Report • Incomplete Form 101 Does the employee require medical attention? The City enters the claim coded as a First Aid or Report Only case into CorVel’s CareMC system. NO Form 101 is sent to the TPA for retention, without the City completing it. Is it an emergency? NO Employee is directed to Banner Occupational Health Clinic. YES Employee is taken to a hospital or urgent care clinic. The City completes the Form 101 to create the CareMC claim file. TPA codes the claim file accordingly and assigns a claim adjuster for the case. TPA issues the completed Form 101 to the ICA. Does employee see Banner Occupational Health? 1A 1B NO YES YES NO 2 0| REPORTING THE INCIDENT AND CLAIM INITIATION City of Glendale Workers’ Compensation Process Review Report | 19 FOR INTERNAL USE OF CITY OF GLENDALE ONLY 1| MEDICAL TREATMENT AND DOCUMENTATION 1A 1B Banner Occupational Health physician documents the injury and files the ICA Form 102 within 8 days of administering care • Work status • ICA Form 102 Employee is required to ensure a Form 102 is completed by their non- City physician and filed within 8 days of treatment. Employee attends their one mandatory Banner Occupational Health visit to ensure proper reporting and documentation of injuries and work status. • Work status • ICA Form 102 Employee provides supervisor and Risk Management Division copies of work status and other medical evaluation documents. Physician fails to complete and file a Form 102 or employee decides to file a Form 407 with the ICA instead. ICA Form 407 Physician identified need for modified duty status? Does employee accept the modified duty? Employee is released to full duty after final treatment and physician discharge from care. Employee signs declination form and uses their payroll benefit accruals. Risk Management works with the employee’s supervisor to ensure that they are placed in accordance with the work restrictions prescribed by their physician upon the employee’s return to work. Employee continues seeking medical attention as necessary. Work status (one per session with physician) Claim closes. NO YES NO YES Risk Management continues to monitor work status throughout the life of the claim. City of Glendale Workers’ Compensation Process Review Report | 20 FOR INTERNAL USE OF CITY OF GLENDALE ONLY 2 The Commission notifies the TPA of a petition to reopen a closed claim or of new claim TPA conducts investigations and obtains all required documentation, including medical items from physician(s), directly Does the TPA anticipate to deny a claim? YESTPA consults with the City and its legal counsel. TPA issues all required ICA notices in accordance with ICA rules and applicable statues within 21 days of notice, conducting interviews as necessary. ICA Form 104 (claim acceptance or denial) Claim accepted? Claim is denied. Employee can appeal within 90 days of denial. ICA schedules a hearing with an administrative law judge (“ALJ”). NO NO TPA immediately reports to the Division in the event of specific cases as detailed by City policy. TPA processes payments for bills within 30 days of claim acceptance, or within 30 days of bill receipt if after the acceptance date via the City-funded account. 3 YES Claim is preemptively denied due to delays or extensive investigations preventing a fair assessment within the 21 days from ICA notification. TPA discusses with the City regarding the timeline of the investigation(s) that will continue until a compensability decision is achieved. Claim accepted?NO TPA rescinds the initial denial issued due to delays. YES TPA continues with investigations until it achieves compensability decision for the claim case. TPA fails to issue an acceptance or denial claim status within the 21 days from the ICA notification and the claim is automatically accepted. TPA compensates the employee immediately, working with the doctor ’s office to handle reimbursements for the employee’s co-pay to the doctor and any group health, as applicable.. Claim Denied? 2| TPA CLAIM PROCESSING AND BILLING City of Glendale Workers’ Compensation Process Review Report | 21 FOR INTERNAL USE OF CITY OF GLENDALE ONLY 3 Was the claim denied? Was the employee in an off-work status for more than 7 days? No compensation is due nor paid. No compensation is due nor paid. City may determine otherwise on a case-by- case basis. After 7 consecutive days off work, the employee is entitled to statutory workers' compensation benefits (code 713) Is the employee’s off-work period longer than 14 days after the date of injury? Worker’s comp benefits will be paid beginning on the 8th day off work until the 14th day off work (determined by the treat physician). Worker’s comp benefits will be paid back to the first day of being off-work until released from treating physician. Is the employee still working for the City? TPA pays workers' compensation benefits (code 713) but no supplemental pay benefits directly to the former employee. 4c Claimant entitled to workers ’ compensation may also qualify for supplemental pay. Is the employee a sworn member of the Fire Department? Is the employee a sworn member of the Police Department? Has the employee attained a full year of employment as a regular status employee at the time of injury? 4a 4b TPA pays workers' compensation benefits (code 713) but no supplemental pay benefits directly to the employee. TPA pays workers' compensation benefits (code 713) and claimant may be entitled to supplemental pay (code 710 for police and code 750 for fire). TPA pays workers' compensation benefits (code 713) and claimant may be entitled to supplemental pay (code 710). Yes No No Yes No Yes Yes No Yes No Yes No NoYes Is the employee temporarily or permanently disabled? NEITHER TEMPORARY DISABILITY PERMENANT DISABILITY Claimant is entitled to workers ’ compensation and permanent partial or total disability benefit pay. Claimant is entitled to workers ’ compensation and temporary partial or total disability benefit pay (supplemental pay code 710 or 750). 3| SUPPLEMENTAL PAY QUALIFICATION City of Glendale Workers’ Compensation Process Review Report | 22 FOR INTERNAL USE OF CITY OF GLENDALE ONLY 4c 4a 4b Information and determinations about the claim eligible for workers’ compensation and permanent disability is included in the TPA report to the City. TPA acquires all support for the permanent disability case and calculates the applicable partial disability (PPD) or total disability (PTD), which is paid out from the City-funded account Information such as determinations and any loss time owed for a claim eligible for workers’ compensation and temporary disability is included in the TPA report to the City RM Division personnel calculates the weekly compensation target (code 710) by calculating the claimant’s annual base salary divided by 52 to calculate a weekly rate. RM Division personnel verifies that the weekly CorVel 713 and RM 710 or 750 weekly amount to yield the targeted 80% of the weekly amount for workers’ compensation benefits to be paid. (Supplemental pay in either 710 or 750 and statutory pay in 713 shall net to the 80% target). RM takes the workers’ compensation 66 2/3rd benefit AMW calculation from CorVel’s report (including the WC daily rate, and dependent stipend) and codes this benefit into their payroll transmittal form as the Statutory Code 713 WC time period benefit to be paid after verifying CorVel’s calculation. RM calculates the weekly Code 713 rate using the 713 daily rate extrapolated from CorVel’s information multiplied by 7 days. TPA notifies the employee and the ICA of the average bi-weekly wage calculation and basis of calculation within 30 days of the first workers’ compensation installment payment by issuing a NCS and Form 108. Risk Management creates a transmittal form to coordinate payments with the payroll department. Employee can review determination calculations. All leave time used is replenished into the employee account The ICA notifies the employee and the City of their independent determination and calculation basis, and provides the relevant documentation through a Form 109. ICA determination is different than the TPA determination and overrides the ICA calculations, causeing a retroactive impact on the claim’s first payable. TPA manages all reporting to the ICA and Center for Medicare and Medicaid Services as the responsible reporting entity (RRE) for the City. TPA continues to monitor the case under City oversight until closure or final settlement, or throughout a timeframe recommended by a medical professional in cases of supportive care. Pay period benefits are paid to all employees with open cases. Risk Management indicates on the form how much workers’ compensation (code 713) and supplemental pay (code 710 or 750) to remit to a case with temporary disability. Risk Management team indicates on the form how much workers ’ compensation (code 713) to remit to a case with permanent disability. Risk Management team notes on the payroll transmittal form any adjustments for the current pay period as a result of retroactive adjustments that impact prior pay period or payroll hour accruals. Risk Management provides the payroll department with the transmittal form. CorVel issues checks for permanent disability compensation payments every month. 4| DIVISION REVIEW OF TPA DETERMINATION AND BENEFIT PAYMENT COORDINATION City of Glendale Workers’ Compensation Process Review Report | 23 FOR INTERNAL USE OF CITY OF GLENDALE ONLY APPENDIX B: SAMPLE EMPLOYEE COMMUNICATION TEMPLATE Month ##, Year Employee Name Employee Address Dear Employee Name, The City of Glendale, Arizona has accepted your claim (claimID##) filed for the injury or sickness you had sustained on Month ##, Year. You have been sent this letter to help you to understand your benefits. For the pay period starting on Month ##, Year and ending on Month ##, Year, you can expect to receive $(total benefits for pay period). Arizona State Law mandates that injured workers with valid workers’ compensation claims are entitled to receive 66.67% of their pre-injury compensation (based on their average monthly wage over the last 12 months) in benefits during periods of being off work, depending on their case and eligibility. In addition, the City of Glendale has opted to provide supplemental pay that brings the total amount received for eligible employees up to 80% of their base wage when they are out on workers’ compensation leave. To be eligible, employees must be full-time, permanent, and have worked at the City for at least one year. All public safety employees (Police and Fire Departments) are automatically eligible for supplemental pay per their bargaining agreement. [Add one of the following two statements, as applicable:] As your base salary at the time of injury was $(base salary) and you did not qualify for supplemental pay, you can expect to receive $(66.67% of AMW). OR As your base salary at the time of injury was $(base salary) and you qualified for supplemental pay, you can expect to receive $(80% of base salary). Additionally, any sick leave or vacation hours used for off-work days within periods that are covered by this claim will be credited back to you. If you have any further questions, please contact the Risk Management Division.