COMPACTfor workers' compensation professionals

November 2007
Minnesota Department of Labor and Industry

CONTENTS TABLES
2 Group recommends efficiency, effectiveness 7 Workers' compensation system cost per
changes $100 of payroll, 1997-2006

3 DLI Workers' Compensation Division reorganizes 8 Percentage of paid indemnity claims

4 Minnesota OSHA responds to I-35W bridge-
collapse site
9 VR services costs, adjusted for wage
6 Research and Statistics: new director, new
name
6 Data-driven workers' compensation update
7 Department training guide now available online
with a VR plan filed, injury-years
1997-2005
growth, injury-years 1998-2005
Time from injury to start of VR services,
injury-years 1998-2005
Return-to-work status, injury-years
1998-2005

7 Workers' compensation cost drops slightly Ratio of return-to-work wage to pre-

in 2006 injury wage for participants returning to
work, plan-closure-year 2005
8 Vocational rehabilitation results show system
10 Family farm coverage
stability

10 Workers' compensation coverage for farms

D-1 Court decisions: July through September 2007

MNOSHA Court decisions:

Group
responds July through September 2007
recommends
efficiency, to I-35W
effectiveness bridge-collapse
changes site
Summaries of
2 4 Decisions D-1
 Group recommends efficiency, effectiveness changes
By Patricia Todd, Assistant Commissioner, Workers' Compensation Division,
and Shawn Peterson, Director, Policy Development, Research and Statistics

An “operational group” was established during the past summer to provide recommendations to a
policy group about how to improve the efficiency and effectiveness with which hospital services are
billed and reimbursed in workers’ compensation. The operational group had six representatives from
hospitals – Allina Hospitals and Clinics, Fairview Health Services, Mayo Clinic, Minnesota Hospital
Association, Regions Hospital and St. Cloud Hospital – and six representatives from insurers –
Berkley Risk, SFM (two), The St. Paul Companies, Western National Mutual Insurance and Xcel
Energy Inc.

The operational group agreed the three main operational issues are
the length of time and administrative resources required to get
paid, inconsistency in the processing of claims and the
unpredictability of payments received. The discussion about the
three issues included the following.

1. Current challenges in the workers' compensation billing and

payment system, including submission of paper records and
bills; the complexity of hospital charge masters; line item
reductions by payers without causation, prevailing charges
and bundling of charges; and the protracted time and
administrative expense between billing and actual payment.

2. Possible alternatives to the current system, including use of a

DRG payment system and other payment methodologies,
such as hospital payment-to-charge ratios; while a DRG
system would resolve some issues, it would be an exceedingly complex alternative due to the
federal changes underway and the necessity for all insurance companies to have required
software capability.

3. Any solution should: be compliant with the 2007 electronic transaction legislative
requirements; eliminate the detailed line-item review by payers; minimize transfer of hospital
records while providing payers with necessary information; result in timely and appropriate
payment; not increase system costs; and be predictable, consistent and simple.

The operational group supports comprehensive changes that include both payment reform and
administrative simplification. The group believes implementing a system within workers’
compensation that is as consistent as possible with other payment systems will decrease costs and
increase the efficiency and effectiveness of the workers’ compensation system.

These recommendations have been forwarded to a policy group that will focus on payment
methodology and the potential to move away from “usual and customary.” The Workers’
Compensation Advisory Council (WCAC) will consider these recommendations when developing its
bill for the coming legislative session. For more about WCAC visit www.doli.state.mn.us/wcac.html.

2 • COMPACT • November 2007

 DLI Workers' Compensation Division reorganizes
By Patricia Todd, Assistant Commissioner, Workers' Compensation Division

The Vocational Rehabilitation unit (VRU) within the Department of Labor and
Industry's Workers' Compensation Division has been made part of the division's
Claims Services and Investigations unit, creating three major work units within
the division.

Benefit Management and Resolution (BMR)

Benefit Management and Resolution seeks early intervention and resolution of
disputes using assistance, education and alternative dispute-resolution. It informs
and advises all parties involved in the workers' compensation system of their
rights and responsibilities under the Workers' Compensation Act,
and provides technical assistance to all parties involved in the
workers' compensation system. BMR develops and
implements workers' compensation medical policy,
including certified managed care, fee schedules and
treatment parameters. It also develops vocational
rehabilitation policies and resolves complaints
concerning qualified rehabilitation consultants
(QRCs). As needed, BMR issues orders and
penalties to assure compliance.

Claims Services and Investigations (CSI)

Claims Services and Investigations administers the workers' compensation
claims of injured employees who worked for employers that did not carry
workers' compensation insurance or were bankrupt. The unit also
administers the asbestosis program and the supplementary benefit and second-
injury reimbursement programs. CSI provides vocational rehabilitation services
to employees when there is a dispute about workers' compensation liability. In
addition, CSI enforces the requirement that all employers have workers’
compensation insurance.

Information Processing Center (IPC)

Information Processing Center creates, maintains and manages the availability of
more than 1.6 million workers' compensation claim files. Since 1995, these files
have been scanned and stored electronically. IPC inputs critical information for
research and tracking purposes, ensures prompt and full compliance with all
benefit and filing provisions of workers' compensation law through audits of
claim files, and certifies QRCs. IPC provides copies of claim files for external
customers with proper authorization and provides free mandatory state posters
upon request. IPC also sends information to injured employees about their rights
within the workers' compensation system.

3 • COMPACT • November 2007

MINNESOTA OSHA
responds to I-35W bridge-collapse site
By James Krueger, MNOSHA Metro Safety Director

The I-35W bridge in Minneapolis

collapsed Aug. 1, killing 13 people.
The eight-lane, 1,907-foot span was
a vital link over the Mississippi
River and one of the most heavily
used bridges in Minnesota,
with roughly 140,000 vehicles
– including 5,700 commercial
vehicles – passing over it each day.

On Aug. 2, officials from the

Minnesota Department of Labor
and Industry's Occupational Safety
and Health Division (MNOSHA)
Above: Minnesota OSHA Compliance, Workplace Safety Consultation and other
Minnesota Department of Labor and Industry representatives plan the agency's
and Workplace Safety Consultation
safety and health response for the I-35W bridge-collapse site in early August. (WSC), in conjunction with
the U.S. Department of Labor's
Below: Safety and health officials take a look at the collapsed bridge, Aug. 2.
Occupational Safety and Health
Administration (OSHA), responded
to the disaster to provide assistance
during the recovery stage. As work
progressed from the recovery
stage to removal, the Minnesota
Department of Transportation
(Mn/DOT) maintained primary
responsibility for the project.

During the removal phase, Mn/

DOT’s goals were to restore river
navigation and prepare for the
construction of the new bridge.
Because of factors such as weather,
barge traffic and federal funding,
the work had to be completed in
a timely, but judicious, fashion
without further loss of life or
serious injury. Mn/DOT contracted
with Carl Bolander & Sons Co.,
MNOSHA/I-35W bridge, continues ...
MNOSHA/I-35W bridge, continued ...
St. Paul, Minn., for the demolition and removal
of the collapsed bridge. To assure worker safety,
MNOSHA partnered with WSC, Mn/DOT and
Bolander.

The primary purpose of this partnership was not

Above: Minnesota OSHA staff members review safety and
health plans while in the group's on-site trailer at the I-35W
bridge-collapse scene.
Below: Members of the swiftly formed safety and health
partnership between Minnesota OSHA Compliance, MNOSHA
Workplace Safety Consultation, the Minnesota Department of
Transportation and Carl Bolander & Sons Co. review aerial
photos of the bridge-collapse scene.
only to prevent further fatalities, but to have zero
worker injuries and illnesses for the duration of
the I-35W bridge removal project. The partners
worked together to create a site safety plan to
anticipate potential hazards and strategically
manage operations on the site. The primary
hazards were related to the type of work being
performed, the stability of the structure and
environmental conditions – including the weather
and location of the site. The work plan identified
roles and responsibilities, specified necessary
training, established hazard identification
methods and defined how program review
would be conducted. Updates to the plan were
communicated to all parties, with Mn/DOT’s
safety staff taking on the lead role.

Each partner agreed to have at least one

representative attend daily project safety
meetings. Safety issues, such as new hazards, any
trends in behavior, corrective actions taken and
any incidents that had been noted within the past
24 hours, were discussed during the meetings. To
assist with this process:

• an on-site safety project plan was completed

prior to the start of work each day with
sufficient detail to notify and protect
employees prior to their job assignments; and

• a safety assessment sheet was used to

identify potential hazards and track trends.

All workers attended mandatory employee

orientation training prior to their initial job
assignments. This was to provide them with an understanding of the complexity of the site and
acquaint them with the site safety program, including the site plan, additional necessary training and
personal protective equipment (PPE) requirements.

Since the removal process began, the primary contractors logged more than 25,000 hours without a
lost-time injury. The removal project was completed in mid-October.
 Research and Statistics: new director, new name
Shawn Peterson joined the Department of Labor and Industry (DLI) team
in August as the director of the newly renamed Policy Development,
Research and Statistics unit.

Peterson served for 13 years at the Minnesota House of Representatives,

most recently as director of legislative services and as a policy advisor to
then-Speaker Steve Sviggum (now DLI's commissioner). Peterson hopes
to use his legislative experience to help the DLI team accomplish its
policy goals at the Capitol.

Shawn Peterson He said the function and name change of the unit were brought about to
give an additional focus to the unit and to create a place for policy
development and ideas to be evaluated using information and statistics.

“It really makes a great deal of sense to have your policy and research together," Peterson said. “You
need to know the research data for a particular issue if you want to make a policy change that will
have a positive impact on the system. It is great to hear ideas from agency staff members who are in
the trenches every day dealing with the variety of issues the department is charged to oversee. Keep
the good ideas coming!”

Data-driven workers' compensation update

By Cindy Valentine, Chief Information Officer
The following Data-driven Workers' Compensation Project
activities are planned for completion during fiscal-year 2008.

1. Incorporation of a workers' compensation identification

number that is individual-specific, similar to a Social
Security number. Activity for this item is planned to
start in December.

2. Development of a secure Web site for submitting

documents electronically. A prototype has been
developed and the Department of Labor and Industry's
Workers' Compensation Division is looking at internal processes to determine where best to
implement it. It is anticipated forms will start to be received via a secure Web site in December.

3. Consolidation and generation of correspondence within Informix. The Workers' Compensation

Division has reviewed all the correspondences it generates. The consolidation of this
correspondence within the division's computer system is anticipated in March.

4. Obtaining relevant vocational rehabilitation information electronically instead of on forms;

incorporation of the Vocational Rehabilitation unit's external Access system within Informix. The
initial scope of this project is being evaluated at this time.
6 • COMPACT • November 2007
 Department training guide now available online
By Jim Vogel, Information Processing Center

The Minnesota Department of Labor and Industry (DLI) has been providing basic adjuster training to
claim adjusters for more than 10 years, both at its office in St. Paul and at locations outside the state.
A Basic Adjusters’ Training Guide, developed for use during those training classes, is now available
on the DLI Web site at www.doli.state.mn.us/wc_batg.html, for viewing
and printing.

While the training classes are designed for adjusters with less than one year
experience handling Minnesota workers’ compensation claims, the guide
may be a useful resource for all parties, presenting an overview of Minnesota
workers’ compensation statutes and rules. It provides highlights and
nonbinding examples of how the referenced rule or statute may be applied.

The information in this guidebook is designed to:

• illustrate how to calculate benefits;
• describe when benefits are payable;
• explain how and when to file the required forms; and
• provide general information about workers' compensation benefits.

Workers' compensation Workers' compensation system cost

per $100 of payroll, 1997-2006 [1]
cost drops slightly in 2006
$2.00
By David Berry
Policy Development, Research and Statistics $1.50

After rising to a gentle peak in 2004 and 2005, $1.00

Minnesota's workers' compensation costs dropped

$ .50
slightly in 2006.
$ .00
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06
The overall cost of the system came to $1.66 per
$100 of payroll in 2006. This is a slight decrease Cost per $100
of payroll
from $1.71 and $1.72 in 2004 and 2005 (both 1997 $1.61
2000 1.31
figures revised). The 2006 figure is 27 percent 2002 1.58
above the low-point of $1.31 in 2000, but 36 2003 1.67
2004 [2] 1.71
percent less than the peak of $2.60 in 1993. 2005 [2] 1.72
2006 [2] 1.66
1. Data from the National Association of Insurance
These figures reflect premiums paid by insured Commissioners, Minnesota Workers' Compensation
employers plus an estimate of costs for self- Insurers Association, Inc., Minnesota Assigned Risk Plan,
Minnesota Workers' Compensation Reinsurance
insured employers. Association, Minnesota Department of Labor and Industry,
and Minnesota Department of Employment and Economic
Development. Includes insured and self-insured employers.
2. Subject to revision.

7 • COMPACT • November 2007

 Vocational rehabilitation results show system stability
By Brian Zaidman and David Berry, Policy Development, Research and Statistics

Vocational rehabilitation (VR) services are provided

to injured workers who need help in returning to work
because of their injuries and whose employers are unable
to offer them suitable employment. Measures of vocational
rehabilitation service utilization, costs and outcomes are
included in the Department of Labor and Industry's (DLI)
annual Minnesota Workers’ Compensation System Report.
This article presents some highlights from the vocational
rehabilitation chapter in the soon-to-be-released 2005
report, which will be available on the DLI Web site at
www.doli.state.mn.us/pubwkcp.html.

Unlike previous reports about Minnesota’s vocational

rehabilitation outcomes, which reported statistics relating
to year of plan closure, most of the statistics now relate to
year of injury. These estimates are developed numbers based on analysis of the historical changes in
the values of the measures. For example, using the most recent data for the average cost of vocational
rehabilitation services for workers injured in 2005 and the pattern of growth in average vocational
rehabilitation costs for workers injured in previous years, it is possible to estimate the average cost for
all vocational rehabilitation services provided to all workers injured in 2005. All the figures are based
on data provided by forms filed with the Department of Labor and Industry (DLI). Continuing annual
data analysis will further refine these injury year estimates.

Major findings Figure 1

• Participation in vocational rehabilitation rose
from 15 percent of paid indemnity claimants
in 1997 to 22 percent for 2003, but fell back to
20 percent in 2005. A projected 5,370 workers
Percentage of paid indemnity claims with a
VR plan filed, injury-years 1997-2005
25%
Percentage with plan filed

20%
injured in 2005 will receive VR services.
(Figure 1) 15%

10%
• As expected, workers with more time on
temporary total disability benefits (TTD) were 5%

more likely to receive vocational rehabilitation 0%

services. For workers injured between 2001 and '97 '98 '99 '00 '01 '02 '03 '04 '05

2004, 64 percent of the injured workers with

three to six months of TTD benefits received vocational rehabilitation services, compared to 92
percent vocational rehabilitation use among workers with more than 12 months of TTD benefits.

• The average cost of VR services per participant was $6,500 among workers injured in 2005,
essentially unchanged from 2004 and 23 percent higher than in 1998, after adjusting for average
wage growth. The total cost of VR services for workers injured in 2005, $35 million, was about
2.2 percent of workers’ compensation system cost. (Figure 2, next page)

• The average time from injury to the start of VR services was 7.1 months for workers injured in
2005. This was a decrease of 17 percent from injury-year 1998. For injury-year 2005, half of the
8 • COMPACT • November 2007 Results continues ...
Results continued ...

Figure 2 Figure 3
VR services costs, adjusted for wage growth, Time from injury to start of VR services,
injury-years 1998-2005 injury-years 1998-2005

$8,000 10

8
$6,000

Months
$4,000

4
$2,000
2

$0
'98 '99 '00 '01 '02 '03 '04 '05 0
'98 '99 '00 '01 '02 '03 '04 '05
Average cost Median cost Cost per indemnity claim
Average months Median months

injured workers receiving vocational rehabilitation started receiving services within four months of
injury. (Figure 3)

• Average VR service duration changed very little for workers injured during the 2002 to 2005
period. The average VR service duration among workers injured in 2005 is estimated to be 12.6
months; the median service duration is estimated at 8.2 months.

• The percentage of VR participants with a job at plan closure decreased from 72 percent for
workers injured in 1998 to 64 percent for workers injured in 2005. This was primarily attributable
to a decrease in the percentage of workers finding work with a different employer. (Figure 4)

• The average VR participant returning to work received a wage about the same as their pre-injury wage,
but this varied widely among individuals. About one quarter of the injured workers returning to work
following VR had weekly wages less than 80 percent the level of their pre-injury wages. (Figure 5)

Figure 4 Figure 5
Return-to-work status, injury-years 1998-2005 Ratio of return-to-work wage to pre-injury
80% wage for participants returning to work,
plan-closure-year 2005
Percentage of plan closures

60%

More than 105%: Less than 80%:

20% 24%
40%

20%

0% 80-95%:
'98 '99 '00 '01 '02 '03 '04 '05 11%

Total with job Job with same employer

Job with different employer Without job 96-105%:

45%
 Workers’ compensation coverage for farms
By Brian Zaidman, Research Analyst
Policy Development, Research and Statistics

Farm operations are considered either family farms or employers for the purpose of workers’
com pen sa tion coverage. The chart below may be used in determining whether workers’
compensation coverage is mandatory for a farm operation where other coverage under a farm liability
insurance policy as provided in the
law is underwritten (see Minnesota
Statutes §176.011, subd. 11a). If the
farm liability insurance coverage
requirements are not met, any farm
operation that has $8,000 or more of
payroll for the previous calendar-year
must provide workers’ compensation
insurance for its employees.

The value of work performed (roughly

payroll) during the previous year is
compared to the average annual wage
(AAW) for the year in which the
policy is written. Farm operations with payrolls equal to or greater than the corresponding AAW
are required to provide workers’ compensation coverage for their farm laborers. The AAW figure
is received from the Department of Employment and Economic Development and is the number
from which the statewide average weekly wage (SAWW) is derived.

Family farm coverage

M.S. § 176.011, subd. 11a (a)(2)

Average annual wage under Services rendered Policy written

M.S. §176.011 subd. 20 (roughly payroll) year year

$33,366 Jan. 1-Dec. 31, 2000 Jan. 1-Dec. 31, 2001

$35,311 Jan. 1-Dec. 31, 2001 Jan. 1-Dec. 31, 2002

$36,457 Jan. 1-Dec. 31, 2002 Jan. 1-Dec. 31, 2003

$37,311 Jan. 1-Dec. 31, 2003 Jan. 1-Dec. 31, 2004

$38,441 Jan. 1-Dec. 31, 2004 Jan. 1-Dec. 31, 2005

$40,203 Jan. 1-Dec. 31, 2005 Jan. 1-Dec. 31, 2006

$40,636 Jan. 1-Dec. 31, 2006 Jan. 1-Dec. 31, 2007

$41,996 Jan. 1-Dec. 31, 2007 Jan. 1-Dec. 31, 2008

10 • COMPACT • November 2007