The report states
1. This investigation looked at the compensation and support provided to people injured at work in Victoria, particularly those with complex injuries. This follows an earlier investigation by the Ombudsman in 2016 which found the scheme had failed some particularly vulnerable people.
2. Victoria’s workers compensation scheme, also known as ‘WorkCover’, provides a range of entitlements to people who are injured at work under the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic). Entitlements include ‘weekly payments’ for loss of income if they are unable to work and payment of the reasonable costs of medical treatment and other rehabilitative services directly related to their injury.
3. The scheme is funded by compulsory employer insurance and administered by WorkSafe. WorkSafe is responsible for ensuring appropriate compensation is paid to injured workers, while also maintaining a financially sustainable scheme.
4. WorkSafe does not manage WorkCover claims itself, instead outsourcing this to five claims agents. The agents are commercial organisations and as a result have a vested interest in the outcome of individual claims. Notwithstanding this, agents are required to stand in the shoes of WorkSafe and make independent decisions on claims in line with the Act. The Ombudsman’s 2016 investigation
5. In 2016, the Ombudsman investigated WorkSafe and its agents, focussing on agents’ management of ‘complex claims’. These claims involve workers who were unable to work long term and/ or required long term medical treatment. While these claims do not represent the majority, research has shown that these workers are likely to have complex health conditions and represent a substantial and disproportionately high cost to the scheme and broader society.
6. The investigation found cases of unreasonable decision making on complex claims across all five agents, the evidence of which the Ombudsman said was ‘too strong to be explained away as a few “bad apples’’’. This included numerous examples of agents ‘cherry-picking’ evidence to support a decision, while disregarding overwhelming evidence to the contrary. In many cases, agents were found to defend unreasonable decisions when injured workers disputed them, despite knowing they would likely be overturned.
7. The investigation acknowledged that as commercial organisations, it was reasonable for the agents to expect to profit from managing WorkCover claims. However, the evidence suggested that in the case of complex claims, financial reward and penalty measures in agents’ contracts with WorkSafe were driving a focus on terminating and rejecting claims to maximise profit, at the expense of sound decision making.
8. The investigation also identified deficiencies in WorkSafe’s oversight of the scheme, particularly in relation to agent decision making on complex claims.
9. The Ombudsman made 15 recommendations to WorkSafe which included: • improving WorkSafe’s oversight of complex claims and its use of information from complaints, stakeholder feedback and dispute outcomes to identify potential systemic issues • reviewing the financial reward and penalty measures to increase agents’ focus on quality decisions and sustainable return to work outcomes for injured workers • providing training and additional guidance to agent staff.
10. The Ombudsman also made two recommendations to the Victorian Government, which WorkSafe said it did not support. These related to the process for injured workers to dispute claim decisions, which involves conciliation and then court.
Follow-up investigation
11. While WorkSafe and the agents have implemented many changes since the 2016 investigation, the Ombudsman continues to receive many complaints about WorkSafe and its agents, with nearly 700 complaints received in 2017-18 and about 800 in 2018-19.
12. In May 2018, the Ombudsman decided to conduct a ‘follow-up’ investigation to examine whether the implementation of the recommendations from the 2016 investigation had improved agent practices and decision making and the effectiveness of WorkSafe’s oversight.
13. This follow-up investigation concentrated on agent decision making on complex claims in 2017-18, which were primarily long term claims where an injured worker had not worked and had been receiving weekly payments for 130 weeks or more (two and a half years). As at 30 June 2018, these claims represented about a quarter of the 18,519 active weekly payments in the scheme, or about seven per cent of the total 63,085 active claims in the scheme (including those involving medical treatment only).
14. The investigation involved: • reviewing 102 complex claim files in depth, some of which were randomly selected • reviewing WorkSafe’s handling of complaints received in 2017-18 about agent decisions and Independent Medical Examiners (IMEs), about half of which were randomly selected • meeting with WorkSafe during the investigation and interviewing 16 witnesses, including seven Conciliation Officers and the then Convenor of Medical Panels • reviewing othe rinformation, including a sample of agent staff email records, policies and procedures, research reports, data, written submissions from stakeholders and complaints to the Ombudsman.
15. The investigation also asked WorkSafe to review a number of decisions on the complex claim files reviewed, which appeared unreasonable but had not been overturned through the dispute process. As a result, WorkSafe and the agents withdrew 30 decisions across 19 claims and back-paid about $70,000 collectively to two injured workers.
Unreasonable decision making by agents
16. Although witnesses reported to this investigation a temporary ‘marked change’ in agent behaviour after the Ombudsman’s 2016 report was released, the Ombudsman identified continuing issues with unreasonable agent decision making on complex claims.
17. The evidence obtained suggests that the Ombudsman’s 2016 recommendations were not enough to change agent behaviour and stop unreasonable decision making on complex claims. After two investigations by the Ombudsman and a number of reviews commissioned by WorkSafe, the evidence points to this being a systemic problem.
Unreasonable use of evidence
18. Agents may consider a range of evidence when making claim decisions, including medical reports from IMEs or a worker’s treating doctors; information from an occupational rehabilitation provider; ‘circumstance’ investigation reports and surveillance footage of an injured worker.
19. Agents are required to adhere to ‘principles of good administrative decision making’, which include that agents must consider all matters relevant to a decision; make decisions supported by the best available evidence; and give ‘proper, genuine and realistic consideration’ to the merits of a decision.
20. This investigation found that since 2016, agents have continued to unreasonably use evidence to terminate or reject complex claims in some cases by: • conducting surveillance of workers without adequate evidence they were misrepresenting their injury • selectively using IMEs and ‘doctor shopping’, despite new measures introduced to prevent such behaviour • providing incomplete or inaccurate information to IMEs • posingleadingquestionstoIMEsand workers’ treating doctors • relying on an opinion from an IME from the incorrect specialty.
Unfair return to work practices
21. A key objective of the workers compensation scheme is to provide ‘effective occupational rehabilitation’ and ‘increase the provision of suitable employment to workers who are injured to enable their early return to work’.
22. Injured workers have ‘return to work’ obligations, which include that they must make reasonable efforts to return to work and actively use an occupational rehabilitation service. If a worker does not reasonably comply with their obligations, an agent may issue a non-compliance notice, which can impact the worker’s entitlements.
23. In the sample of complex claims reviewed, this investigation identified several non- compliance notices which had been unreasonably or incorrectly issued. This included cases where: • workers were required to participate in occupational rehabilitation at inappropriate stages of their recovery, such as a case where a worker was experiencing severe psychotic hallucinations • selectivelyusingevidence,while ignoring other available information – even where the medical opinion relied on was unclear, contradictory or inconclusive • agents failed to genuinely consider workers’ individual circumstances and the reasonableness of their non- participation, including a case where a worker had just been released from hospital after attempting self-harm and had become homeless • agents incorrectly issued notices under the legislation.
24. The investigation also received evidence that agents sometimes issued non- compliance notices with a focus on liability management. This included evidence from a WorkSafe-commissioned review that occupational rehabilitation consultants perceived in some cases that referrals to their services were ‘not in the interest of the injured worker and were being used as a tool to cut benefits’.
Agents acting unreasonably during conciliation
25. This investigation also looked at agents’ actions with respect to claim decisions disputed at conciliation.
26. When a worker requests conciliation, agents are required to review the disputed decision and withdraw it before conciliation if it would not have a reasonable prospect of success at court (ie not be ‘sustainable’). However, a Conciliation Officer is only able to direct an agent to overturn their decision where there is ‘no arguable case’, which is a lower threshold.
27. While overall the number of disputes at conciliation has reduced since the Ombudsman’s 2016 investigation, the rate at which decisions are withdrawn or changed through the dispute process remains high. In 2017-18, about half of the decisions disputed at conciliation and 70 per cent of decisions that proceeded to court were varied or overturned.
28. Although the dispute process should provide a ‘safety net’, the investigation found that unreasonable decisions are slipping through the cracks. Agents continue to defend ‘arguable’ decisions during conciliation, even if they would not be ‘sustainable’ at court, rendering Conciliation Officers hamstrung to resolve such disputes. Conciliation Officers also reported particular difficulties resolving factual disputes. The result is that injured workers are left to contemplate the costly, stressful and time-consuming path to court if they wish to dispute a decision further. Most workers simply give up.
Decisions contrary to binding Medical Panel opinions
29. Where a dispute involves a medical question, a Conciliation Officer or court may refer questions to a Medical Panel. A Panel’s opinion must be adopted, applied and accepted as ‘final and conclusive’ by all parties.
30. WorkSafe told the investigation that where an agent seeks to revisit the same issue considered by a Medical Panel, it expects the agent to demonstrate there has been a ‘material change’ in the worker’s situation since the Panel’s opinion. This may include, for example, improvement in symptoms as a result of further treatment or an increase in the worker’s skills as a result of retraining.
31. In the complex claims reviewed by this investigation, agents generally waited at least 12 months after a Medical Panel before re-assessing a worker’s capacity. While this is positive, the investigation identified several complex claims where agents terminated workers’ entitlements without sufficient evidence of a ‘material change’ in the worker’s condition since a Medical Panel opinion.
The effect of financial rewards and penalties on agent decisions
32. This investigation also revisited the financial rewards and penalties WorkSafe pays agents, based on their performance against key measures.
33. Since the Ombudsman’s 2016 investigation, WorkSafe has made a number of changes to these, which included reducing the rewards and penalties for terminating claims, and increasing the rewards for quality decisions.
34. The investigation found limited overt evidence in the complex claim files and sample of agent staff emails reviewed of the financial rewards and penalties influencing agent decisions. However, the investigation received evidence that some agent staff have made efforts to conceal certain behaviours and practices identified by the Ombudsman’s 2016 investigation, including agents’ focus on managing liabilities.
35. Although less documentary evidence was identified, compared with the 2016 investigation, this investigation still found evidence showing: 36. This evidence, when combined with the extent of unreasonable decision making on complex claims identified by the investigation, raises questions about the suitability of commercial organisations to manage complex claims.
WorkSafe’s oversight
37. Although WorkSafe delegates the management of claims to the agents, WorkSafe has a role in overseeing agents to ensure injured workers receive appropriate compensation and are not ‘wrongfully disentitled’.
38. WorkSafe has made a number of changes to its oversight mechanisms since 2016. However, the investigation found that WorkSafe is still not optimally using them to address unreasonable agent decision making on individual complex claims and to identify and respond to systemic issues.
39. WorkSafe’s process for auditing the quality of agent decisions has improved since 2016. However, the investigation found that WorkSafe has not always held agents accountable for unsustainable decisions identified through the audits. In its 2017-18 audits, the investigation found instances where WorkSafe: • passed questionable decisions where the agent had only one piece of supporting evidence • re-assessed failed decisions as ‘passes’ when disputed by the agent, even if they would not hold up at court • did not require the agents to overturn most of the failed decisions. • agents’ continued focus on terminating claims and maximising profit. This included agent staff emails where staff referred to claims which achieved a financial reward as ‘wins’; • congratulated staff for terminating claims; discussed the monetary value to the agent of terminating individual claims; and referred to targets for terminating claims the influence of the rewards and penalties on agents’ offers at conciliation, which meant that offers were not always informed by the merits of a decision. •
40. Complaints and stakeholder feedback also offer WorkSafe opportunities to check agents’ performance and identify areas for improvement; however, the investigation found that its role in complaints about agent decisions is unclear. On the one hand, WorkSafe considers agents maintain authority on the vast majority of decisions and that the dispute process is the appropriate mechanism for an injured worker to dispute an agent decision. On the other hand, WorkSafe has the power to direct an agent to change a decision and has established a procedure for when it identifies a worker has been ‘wrongfully disentitled’.
41. The investigation found that this has led to inconsistent approaches in the way WorkSafe handles complaints, including cases where WorkSafe: • referred workers to conciliation, even though WorkSafe identified concerns with the agent’s decision and could have resolved the complaint itself • accepted agent responses without questioning whether they were correct or reasonable.
42. WorkSafe appears reluctant to adequately deal with unreasonable agent decision making when it is brought to their attention, which raises the troubling prospect that WorkSafe feels beholden to the agents and dependent on their participation to deliver a financially viable scheme.
43. Given WorkSafe’s statutory responsibility to ensure appropriate compensation is paid to injured workers ‘in the most socially and economically appropriate manner, as expeditiously as possible’, it must do more.
Recommendations
44. Nothing short of wholesale changes to the system will address the issues identified by both the 2016 investigation and the current one.
45. The Ombudsman therefore recommended the Victorian Government: • commission an independent review of the agent model to determine how and by whom complex claims should be managed • introduce a new dispute resolution process which allows for binding determinations on the merits of claim decisions; is inexpensive; and provides timely outcomes.
46. The Minister for Workplace Safety, the Honourable Jill Hennessy MP said the Victorian Government accepted both recommendations, stating she was ‘committed to reform’ and ‘disturbed by the findings’ of the investigation.
47. Given the time it will take to implement these recommendations, the Ombudsman also made 13 recommendations to WorkSafe to address the immediate issues identified by the investigation. This includes a recommendation that WorkSafe establish a dedicated business unit to independently review disputed decisions when requested by workers following unsuccessful conciliation. WorkSafe accepted all 13 recommendations.
