Reprinted with permission from The Harkey Report.

Genuine Parts Gains Control of Workers' Comp Costs.

Three years ago Atlanta-based Genuine Parts Company (GP) undertook an aggressive program to reduce workers' comp costs and refine the claims management process. Those efforts have proven extremely successful in both tangible and intangible ways and the first measurable results are just beginning to come in. The first division of the company to implement the program, Rayloc, has seen open liability on claims drop from an average of $383,000 annually for the four prior years to $139,237 at the end of the first full year of the program. In addition, lost time decreased from 1,745 days average for the previous four years to 1,329 and open cases from 131 to 23.

Founded in 1928, Genuine Parts is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts and office products. The Company is probably best known as the largest member of the NAPA organization of retail auto parts outlets and the supplier of parts to many other members of that organization. The S.P. Richards division of the company is a wholesale distributor of office products serving clients all over the country. The company has 62 distribution centers, 5 remanufacturing plants and approximately 26,000 employees located in 46 states, Canada and Mexico. GP has 29 distribution centers in the eight states covered by this newsletter, each of which serves multiple owned retail outlets in addition to client sites. The five remanufacturing plants make up the Rayloc Division of GP with two of those plants in the southeast in Memphis (171 employees) and Morgansfield, Kentucky (508 employees).

Genuine Parts carries high retention workers' comp policies through The Travelers Group in all states except Ohio were the company is self-insured. According to Richard Geiger, Vice President, Insurance and Audits, the deductible on those policies is $500,000 per claim, a situation which makes the company very much aware of the need for effective claims management from the first dollar paid. The company has traditionally relied upon Travelers to designate physicians for the posted panels in states where that is allowed. Travelers handles all intervention with their PPO networks although on occasion GP has requested specific providers and Geiger indicates that they have generally been responsive in adding those providers to the network.

Responsibility for handling of comp cases generally lies with human resources managers in the various distribution centers and plants. In some smaller sites, an operations manager with other responsibilities handles the human resources function. Losses are allocated back to operations and the human resources manager is expected to coordinate handling of the cases with the claims adjusters.

Management Action Plan on workplace injuries.

In the fall of 1996, Genuine Parts engaged GuilfordPare, a consulting firm specializing in the management of employers' medical and disability costs, to create a Management Action Plan (MAP) to address workplace injury. The plan was developed through a process that began with the retrieval of pertinent historical data, and included the analysis of the data, company policy information and on-site worksite evaluation. Based upon that initial plan, in December, 1996, Genuine Parts engaged GuilfordPare to implement a program to train their management team and supervisors to effectively deal with workers injured on the job. The training encompasses all the activities that company personnel would normally handle in working with employees, claims adjusters and physicians relative to workers' compensation cases. Those activities include the claims reporting process, timeliness of reporting, employee interaction, physician selection and relationships, use of transitional duty, and troubleshooting. The intent of the training program was to prepare GP managers to deal with workers' compensation themselves and to support and guide them in the day to day handling of claims over a period of up to two years as they gained expertise and confidence in assuming responsibility for the program themselves.

Initial Implementation.

The first division to implement the program was the Rayloc Division. That decision was based upon several factors. First the division consists of only five physical locations, each with a designated person to handle human resources, making it the most practical in terms of logistics and structure. While the division did not have the greatest overall costs for workers’ comp, the analysis showed that it was among the highest in the three major problem areas for the company: number of lost days, "repeaters" or employees who filed multiple claims over time, and open cases.

In addition to training of GP personnel, Guilford also began to evaluate and monitor the performance of physicians who treated work comp injuries. In some cases, they have changed physicians on the panels or requested that Travelers add physicians to their PPO networks. Guilford has also obtained contracts directly with physicians in many areas to obtain agreement regarding waiting times, timeliness of appointments, reporting requirements, etc. Those agreements are not discounted but are intended only to ensure adherence to performance standards.

Resolving Open Cases.

As the Rayloc program was implemented, GP was also addressing the need to resolve as many as possible of 1,331 open workers’ compensation cases company-wide. Due to the intensity of effort needed to work with those cases and the determination that very strong medical and vocational expertise would be critical in reaching their goal, GP expanded the engagement of GuilfordPare to include hands on management of those cases. That program was implemented in June, 1996, and two years later, the fruits of those efforts are apparent in that the number of open workers’ comp cases now stands at only 154. The resolution of the cases has been accomplished through a team approach including the Guilford injury managers, GP management, company legal counsel, claims adjusters and attending physicians. The level of open liability outstanding, as of 9/30/96 was $26,760,000 and that amount was reduced to $18,870,000 by year-end 1998. Open liability includes reserves as well as projected settlement costs and other anticipated costs of the case.

In June, 1998, GP and Guilford determined that the skills of the Rayloc managers in dealing with workers’ comp issues had advanced to the level that minimal ongoing support would be needed and the same work injury management program was implemented with another division of the company, the Southern region. That division includes distribution centers and their associated retail outlets in the states of Georgia, Florida, Alabama, Mississippi, and Louisiana.

According to Geiger, the rollout of the work injury management program will continue along the same pattern with training then ongoing support of the human resources managers in one additional region at a time until the program is well underway at which point another region will be implemented. Concurrently, several other programs that relate to workers’ comp are under development. An accident prevention/loss prevention program is a high priority for the company. Also, efforts are underway to measure the company’s total cost of disability – long and short term disability, absence, and workers’ comp. As a first step in addressing this issue, GuilfordPare will also be involved in piloting an integrated disability management program in the Rayloc Division.