Three years after the Rann Government’s legislative reforms to worker’s compensation entitlements in South Australia, a new report compiled by John Walsh of PricewaterhouseCoopers has highlighted ongoing problems with rehabilitation services.

The Walsh Review notes that the increased use and cost of vocational rehabilitation services has not delivered an improvement in return to work rates. Walsh cites several factors which raise the length of injury claims and increase the financial burden of the worker’s compensation scheme:

• A relatively generous benefit structure compared to other states;
• A culture in WorkCoverSA which favours compensation over co-operative outcomes for injured workers and employers;
• A lack of expertise in the current model of injury claim management;
• Poor management of vocational rehabilitation referrals;
• A substantive amount of time spent on vocation rehabilitation processes, without sufficient focus on outcomes.

Budget pressures and calls for reform

The Rann Government’s first raft of legislative changes in 2008 aimed to tackle WorkCover’s unfunded liabilities by revamping the compensation structure for injured workers. From a peak of $1.3 billion dollars, unfunded liabilities have dropped below $900 million since the changes came into effect in July 2010.

Walsh warns that these efforts to make the worker’s compensation scheme sustainable will be threatened by the financial impact of vocational rehabilitation. The review notes that both referral rates to vocational rehabilitation and the cost of rehabilitation per injury claim are double best practice in other states.

The Government also argued at the time that a reduction in compensation entitlements would increase return to work rates once the reforms were implemented. Despite falling on opposite sides of the debate during the 2008 reforms, businesses and unions agreed on the necessity to raise workforce participation.

Speaking to the Adelaide Advertiser, members of the Motor Trades Association and BusinessSA said it was too early to tell whether the 2008 reforms had any effect on increasing return to work rates. Both groups expressed concern that the current regime has not demonstrated an adequate financial turnaround.

The high cost of WorkCoverSA has flow-on impacts in the state economy. WorkCoverSA’s employer levy of 2.75% is the highest in the nation. MTA executive director John Chapman told the Advertiser that the current levy placed South Australian businesses at a competitive disadvantage and hampered investment in the state.

Poor engagement gives poor outcomes

Walsh says insufficient emphasis is placed on outcomes for injured workers, and attempts to act early are frustrated by a lack of effective communication and efficient case management at the claims agent, Employers Mutual Limited (EML). 

EML refers injured workers to the state’s 43 subcontracted rehabilitation providers. Walsh notes EML workplace injury case managers are burdened by a high-turnover environment, which hinders the development of institutional memory. Prompt and informed decisions are less likely to occur with high turnover and lack of case manager experience. Lack of formal training also contributes to poor rates of early intervention.  As a result, claims are more likely to result in a long term problem, and reduced chance of return to work.

The review gives several examples of how the current rehabilitation regime prevents injured workers from returning to durable employment:

• Remuneration structures for rehabilitation managers provide little incentive for success;
• The current structure of responsibilities between rehabilitation manager, insurance providers and employers mean that employees have little input in the process.

EML rehabilitation managers are likely to refer injured workers to rehabilitation providers without being fully appraised of their needs, reflecting an “if in doubt, refer out” culture. Walsh’s findings are supported by the 2008-9 study of the Australia/New Zealand Return to Work Monitor, which notes that South Australian employees on average did not believe that there are clear policies, procedures and goals for returning injured workers to active employment.

Lots of process without making a difference

Walsh reviews claims data to find that the majority of those said to be totally incapacitated for work are referred to a rehabilitation provider. Walsh finds:

• After an initial assessment, most receive a weekly “visit” from the vocational rehabilitation provider, with the average cost of the weekly reviews totalling between $3,000 and $4,000;
• About one-third of claims receive a further initial assessment 15 to 18 months post-injury, for a new employer, followed by another round of weekly visits for several months – amounting to an average cost per visit of $60 or about $800 to $1,500 in total;
• Most of these claimants will also undertake job search activities, typically around eight to ten times each at about $80 per episode – a total of $600 to $800;
• Each injured worker receiving vocational rehabilitation will generate eight to ten reports on progress and eventually closure, at about $70 per report – a total of $600 to $700;
• Travel costs for the vocational rehabilitation provider adds a further 10% to 15% to the total cost;
• This results in a typical cost per claim of about $7,000.

Lessons for the future

The Walsh review demonstrates the importance of prioritising return to work as an outcome for injured employees. Walsh argues that a number of principles need to be incorporated into injury and rehabilitation management to produce best practice outcomes:

• Strong regulatory oversight must be balanced with collaboration and communication between all stakeholders in the rehabilitation process;
• Rehabilitation management must be characterised by expertise, specialisation, and fast and informed decision making;
• Injured employees need holistic, end-to-end case management which is strategic, consultative and focused on outcomes.

Walsh highlights the damaging impact of process taking over. A situation where those who are charged with case management pass the responsibility on to others, who then don't take an active leadership role in return to work. A situation where costs escalate, and key people who ought to be driving return to work - the employee and their line manager - are effectively sidelined.  

Our next article will look at the Walsh Review’s recommendations and what they mean for return to work outcomes in South Australia.