MARINA DEL REY, Calif. -- Labor-management antagonism that for years had plagued the San Francisco Newspaper Agency organization also trickled down into the workers compensation system.

With just 2,300 employees in 1996, the publisher had 745 open claims and 444 new filings, giving it one of the highest incidence rates in the newspaper industry.

At the same time, reserves often were miscalculated, and the money set aside to pay claims was being "kited" from claim to claim to make the underreserving seem less apparent.

So newly appointed Risk Management Director Susan K. Moreland had her work cut out for her when she attempted to get the newspaper agency's worker compensation claims experience under control.

The issues she faced were similar to those faced by risk managers at other unionized newspapers trying to reduce work comp claims costs and expedite return to work (BI, Nov. 10, 1997).

Now she is hoping a more cooperative approach may work better over time than the "them-vs.-us" attitude that had historically permeated the organization.

During a luncheon speech at the Sixth Annual Business Insurance Workers Compensation Conference in Marina del Rey, Calif., Ms. Moreland said that for years, serious labor issues have plagued the two papers, The San Francisco Chronicle and The San Francisco Examiner, which have been managed jointly since 1965.

The year 1994 saw a 15-day strike and 800 workers compensation claims, which was almost twice the annual average.

Ms. Moreland knew workers comp had become as political as labor issues, so she opted to tread softly when she began revamping the program. Her first step was to consolidate the risk management function, which had been in the finance department, with the workers comp and safety programs, which had been in the labor department. This created a separate, autonomous risk management department.

The next step was to audit the program, comparing its costs to other California self-insurers. The audit revealed underreserving by as much as 20%, inadequate loss prevention efforts, poor medical and disability management and too many open claims. Furthermore, "the reserves were being kited -- moved from claim to claim as needed -- and then shuffled back," she recalled.

Ms. Moreland's department also set up a return-to-work tracking system using software from Applied Risk Management to keep departments updated on light-duty status. Although return-to-work and light modified duty were being employed, there was no way of tracking them, she explained.

Another problem was that light-duty assignments were limited to 30 days because union rules prohibited the creation of new positions. Furthermore, employees in one union were not permitted to do jobs assigned to other unions' workers.

But the San Francisco Newspaper Agency established an examiner incentive program to encourage the third-party administrator to meet annual targets for reducing claims inventory and litigation rates. And a settlement authorization process was established to further expedite claims handling.

To speed up claims reporting, supervisors were given a toll-free number to phone in claims. And finally, because sprain and strain injuries were the most frequent, an ergonomics program was launched.

It wasn't, however, entirely smooth sailing for Ms. Moreland's reforms.

Grievances were being filed for every change of practice, which often hindered the introduction of new programs, according to Ms. Moreland. Likewise, an "adjustment of management's attitude was necessary," she said. "Training and advocacy was a big part of it. We also developed handbooks for supervisors on how to file claims. Convincing supervisors that they had any responsibility was a big hurdle. They thought risk management should handle comp," she explained.

"The attitude needed to be changed throughout the organization," Ms. Moreland said.

At first, it seemed the changes were producing the desired results. By the end of 1997, the open inventory of 1996 claims was down to 560, and claim costs had dropped 50%.

"By the end of 1997, we were feeling pretty good. Our inventory was down another 24%, future liabilities were down 22%, and there was a 12.5% cut in TPA expenses," Ms. Moreland reported. "But by the end of 1998, old claims returned with increased exposures and reserves. We were so focused on closure that claims with future medical (expenses) were not being looked at closely enough," she said.

A state audit of 1997 claims found $1.4 million in underreserving.

"We had already caught roughly $800,000, but that resulted in a net increase of $600,000. Then the state wanted to do another audit of 200 files. We looked at 300 files and found $800,000 in underreserving. We're at an all-time record high as far as future liabilities go," she said.

But Ms. Moreland isn't disheartened.

"So far, post-closing future medical costs are running $200,000 and $300,000 less than established reserves," she said.