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This Kennedy School of Government case study has been distributed on The Electronic Hallway system under a cooperative agreement between the Public Service Curriculum Exchange and the Kennedy School of Government Case Program, Harvard University. This case was written by Pamela Varley with direction from Assistant Professor Micael Barzelay for teaching use at the John F. Kennedy School of Government, Harvard University. (0787) The Electronic Hallway is administered by the University of Washington's Daniel J. Evans School of Public Affairs. This material may not be altered or copied without written permission from The Electronic Hallway. For permission, email [email protected], or phone (206) 616-8777. Electronic Hallway members are granted copy permission for educational purposes per the Member’s Agreement (www.hallway.org).

Denise Fleury and the Minnesota Office of State Claims

Introduction When Denise Fleury left the private sector to become head of the Minnesota Office of State Claims in June 1984, she knew the job would be challenging. Recent changes in Minnesota’s worker’s compensation law had broadened the mission of State Claims, which administered worker’s compensation benefits for allstate employees. As the incoming manager of the office, Fleury was expected to re-orient State Claims to meet these new responsibilities and to make sure that supervisors throughout state government complied with the new law, as well. When she took the job, however, Fleury did not realize how badly State Claims was handling its old responsibilities. She soon found scrambling to cope with day-to-day crises while trying to assume a host of new tasks. By the end of her first year, Fleury had made real headway, but office operations continued to suffer from misunderstandings, mistakes, and missed deadlines, which exasperated her staff as well as the employees and agencies they served. Fleury was anxious to resolve these problems, but felt that she did not understand the details of the office paper flow well enough to sort them out herself— nor did she have the time to tackle such a job. Background In Minnesota, both public and private sector employers are required by law to pay for the medical treatment of any employee who suffers a work-related injury and to pay lump- sum awards for permanent injuries, such as the loss of a limb. In addition, employers must provide “lost time” compensation (two-thirds the worker’s salary) to any employee who misses more than three days of work due to a work-related injury. Most private sector employers buy insurance to cover their workers’ compensation costs (1). The insurance companies evaluate claims and pay benefits, working to keep their rates competitive by containing costs—for instance, by conducting investigations to make sure

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

the claims are legitimate. Private employers and their insurance companies are monitored and regulated by the Workers’ Compensation Division of the state Department of Labor and Industry, which keeps files on the 50,000 workers’ compensation claims filed annually in the state. If an employee feels s/he has wrongly been denied benefits, s/he can file a complaint with the Records and Compliance office of the division. The state of Minnesota covers its own workers’ compensation costs directly, or is “self- insured.” An office within the Workers’ Compensation Division—State Claims— administers the program (although the actual benefits are ultimately paid out of each agency’s overhead budget). State Claims is also regulated by the Workers’ Compensation Division. In fact, long before Fleury’s arrival, tension had developed between the six-person State Claims office, designed to protect the interests of state agencies, and the rest of the 180-person division, designed to protect employees. “There’s a conflict of interest in being in the agency that regulates you,” says Fleury.

Specialists [in State Claims] used to sit right across the divider from the regulatory specialists. So if [a state] employee called the regulatory people with a complaint, they’d come marching around the divider and scream at whoever was in this unit and tell them what bad people they were (2).

Political Milieu Workers’ compensation was a hot political topic in Minnesota in the late seventies and early eighties. Over the years, benefits had increased and more and more employees were applying for them. As a result, both public and private sector employers found their workers’ compensation costs escalating rapidly (3) and businesses, threatening to leave the state, lobbied the legislature to reduce the benefit level. Unions—politically powerful in Minnesota—strongly resisted the proposed benefit cuts. After years of study and debate, the state legislature fashioned a compromise in 1983, enacting a set of reforms designed to lower costs without reducing benefits. Despite a climate of fiscal retrenchment, the legislature appropriated an additional $7 million to implement its new policy. The lawmakers had concluded that the biggest source of escalating workers’ compensation costs came not from increased benefits but from increased worker utilization of the program. Studies showed that once they began receiving benefits, many workers never returned to their old jobs—or to any job. The new “mandatory rehabilitation” law required employers to see that workers received adequate medical care and returned to their old jobs whenever possible. If workers were unable to perform their

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

old job duties, employers were encouraged to adjust their old jobs or to find them new ones. Employers were asked to phase employees gradually back to work when appropriate and to work with a rehabilitation counselor when any employee was absent more than 30 days with a back injury or more than 60 days with any other kind of injury. The law also addressed employees’ complaints of delays in receiving their benefits. It effectively reduced the amount of time allowed for processing initial report-of-injury claims from 60 to 14 days, and imposed a 21-day limit on payment of medical bills. If an employer paid benefits late, s/he was required to pay a fine. In the state of Minnesota, agencies were required to pay 210 percent of the initial benefit if payments were made late: 110 percent to the employee; 100 percent to a Special Compensation Fund in the state. Keefe's Agenda for State Claims One of the chief architects of this law was a former state legislator named Steve Keefe, whom Democratic Gov. Rudy Perpich appointed commissioner of Labor and Industry in January 1983. The Department of Labor and Industry was the regulatory agency that enforced all labor and safety standards in the state, and nearly half of the department’s staff worked in the Workers’ Compensation Division. Keefe hoped to tone down the division’s identity as pro-employee, adversarial, and litigious and move to a more neutral role as arbiter and facilitator. “The system was a lawyer’s system,” says Keefe. “What we tried to do was redesign compensation the way a health care person would design it.’

What you’ve got to do is not let the [injured employee] feel sort of lost out there. You’ve got to keep him thinking [of himself] as an employee who’s temporarily not working, not as someone who’s stopped being an employee and become a workers’ compensation recipient. It’s a fairly elaborate system, but it means things like checking up on him to see if he’s okay. If you had a friend who came down with cancer, you wouldn’t just forget about him. You’d call him up and see how he’s doing. You’d wonder, “Is he going to be able to come back? Can he do his old job? Should we keep it open for him?” You wouldn’t want to just throw him on the scrap heap.

In implementing the state’s new workers’ compensation policy, Keefe wanted State Claims to model itself after some of the more progressive private insurance companies. “Something like 95 percent of [people with] work-related injuries should be back at work in less than six weeks, and that was not the case,” says Keefe. “[About] half of our cases went longer than three months.”

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

Perhaps most importantly, Keefe wanted State Claims to train and support each line agency to manage its own workers’ compensation cases. “Somebody whose title is ‘claims investigator’ is not going to be very effective at developing a sympathetic rapport with the employee,” says Keefe. What you want is somebody he knows from his office. His immediate supervisor is best. … [But] the people [in the agencies] who are doing this are amateurs at it. They may have only had one workers’ compensation injury before and they don’t know anything about the system. It’s the job of the people in State Claims to kind of bring them along.” Ultimately, Keefe says, “What we wanted to do was set an example for good, sympathetic, humane treatment of workers compensation claims as a way of saving money, demonstrating to the business community that this could work.” The Job of State Claims When Keefe arrived, the State Claims staff was made up of three lawyers, three workers’ compensation analysts (known as claims analysts), one account clerk, and two general clerical workers. No one oversaw the work of the office as a whole. The claims analysts, account clerk, and general clerical workers reported to a clerical supervisor while the lawyers, for all practical purposes, worked without supervision, reporting to a deputy commissioner in another office. When a state worker was injured, s/he filed a “first report of injury” (see Exhibit 1) with his/her supervisor. The supervisor added his/her own assessment of the injury to the report, then sent it to State Claims. State Claims received about 5,000 first reports of injury a year. Only a handful of cases involved serious permanent injuries. In about 4,000 cases, employees continued to work but sought payment of injury-related medical bills. In the other 1,000 cases, employees stayed home from work and applied for ‘‘lost time” salary benefits. Thus, State Claims had traditionally been responsible for accepting or rejecting the worker’s initial claim of injury, authorizing or denying payment of “lost time” compensation or medical bills, and—when necessary—defending its decisions in court. For 90 percent of all first reports of injury and medical bills, the cases were clear- cut, according to Stephanie Hayes, a claims specialist. “But those other 10 percent can be a real problem.” Processing First Reports of Injury When a first report of injury arrived at State Claims (see Exhibit 2), it was immediately sent out of the office to the Labor and Industry computer division and returned to State Claims after it was entered into the computer. The office’s clerical supervisor, who opened all the mail, then put the report into either the “lost time” or “medical only” category and gave it to any one of three claims analysts. The analyst made sure the form was completed correctly, then took the claim to any one of three lawyers for a decision.

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

The standard for making these decisions—to determine whether the employee had suffered a work-related injury that either caused or worsened a medical condition— allowed for a fair amount of discretion, and sometimes the situations were murky. Hayes explains:

If you’ve got a real specific incident—somebody is at work and they trip over an electric cord and fall and there are 35 witnesses—it’s pretty evident. [But there are other cases] where someone will come in a week after the date of the injury and say, “Oh yeah, I tripped at work a week ago and my leg is real sore now.” [Or cases] that are basically wear and tear on the body over a long period of time, [where it is] real hard to determine whether or not the employer is liable.

About 95 percent of lost time claims were accepted. Once accepted, lawyers handed them over to the account clerks who calculated the benefits to be paid. Every two weeks, the account clerks brought the payment authorizations back to the lawyers for final approval before they were sent to another state agency—the Department of Finance— which issued the actual checks. When medical-only claims were accepted, lawyers returned them to claims analysts, who sent out forms to the employees’ doctors seeking information on the treatment prescribed. Processing Medical Bills Doctors, pharmacies, or other vendors sent their bills directly to State Claims (or to the employee’s agency, which forwarded them to State Claims). (See Exhibit 3.) The office received about 20,000 medical bills each year. The clerical supervisor gave the bills to the file clerk, who put them in the worker’s file sticking out sideways to show that the file needed action. Any one of the three claims analysts could pick up these files, make sure the forms were complete and the treatment costs fell within state guidelines, and then take the files to any one of the three lawyers who approved or denied payment of the bill. About 99 percent of the time, payment was approved. Once approved, lawyers gave their files to account clerks who sent payment authorization to the Department of Finance. Like the first reports of injury, these bills were sometimes questionable. For instance, was treatment for an ulcer related to a back injury? Maybe so, if the employee had taken analgesics to relieve the back pain. If a doctor prescribed a waterbed for a patient, was that compensable treatment or not? Was it reasonable for a patient to see a chiropractor four times a week several months after an injury?

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

When either lost time or medical claims were denied, the employees had the option of challenging the decisions—first through the Workers’ Compensation Division, then in court. The State Claims lawyers would then defend their decisions. Keefe's Initial Changes in State Claims To cope with State Claims’ added responsibilities and to mirror more closely staffing arrangements in the rest of the Workers’ Compensation Division, Keefe upgraded the three claims analysts from clerical to professional status and renamed them “specialists.” During the year before Fleury’s arrival, Keefe increased the specialist staff to six and added two new clerical workers to the office. In addition, when the clerical supervisor—a 30-year veteran of the office—retired in 1983, he upgraded the post to that of a manager to oversee the entire office. Until Keefe hired Fleury, the new manager’s position was filled by an “acting manager”—one of the claims analysts-turned-specialist. Wayne Jahr, one of the newly-hired claims specialists, recalls that when he first arrived in November 1983, the office was “a mess—physically: Files everywhere, piles of them, with pieces of paper sticking up out of them. There was a table against the wall and it was piled as high as you could see with files.” The paper sticking out of the files, he soon discovered, was incoming mail that had not yet been processed. Some files with mail sticking out were also stuffed into drawers. When the drawers were opened, all the pieces of paper were pulled out and had to be re-filed. “It was a chaotic system,” says Jahr, and there was little rhyme or reason to the order in which work was being processed:

Truthfully, [the specialists] would go and they would thumb through the files that were there, and if it was something quick that they could get out right away, they would put it in their pile to take back to their desk. If there was too much mail to cope with [in a given file], they just left it and passed on to the next one. If there were rehabilitation reports, something from an attorney, they just passed over it. They didn’t have time to read that stuff.

The backlog mounted as 270 pieces of new mail—injury reports, bills, and related paperwork—relentlessly poured in each day. What’s worse, the farther behind the office became in processing all the paperwork, the more paperwork there was to process, as employees, vendors, doctors, and other agencies sent in duplicates of their original material. Jahr remembers at one point finding files with as many as “25 pieces of [unprocessed] mail in them—an original bill and 24 outstanding-balance-due statements. … There were so many delays, we were having to continually go back to hunt down bills somewhere in the process.”

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

During the next few months, several improvements were made. The claims specialists convinced the acting director to assign them each a caseload—a set of agencies for which each specialist would take responsibility. Each specialist was also given a table on which to stack his or her case files. But for the most part, office operations did not improve during this period. Although the size of the staff had increased markedly, the newcomers received only catch-as-catch-can training, usually learning the ropes from their predecessors or from co-workers who passed along idiosyncratic systems they had developed on their own. And—aware that a new manager would be hired within a few months—the acting manager was reluctant to make any changes. Fleury Takes the Reins Keefe had initially been looking for someone with experience in a self-insuring company to manage State Claims, but hired Fleury from a private insurance firm. “Denise’s credentials were unusually good,” he says.

She was a claims supervisor for the company with probably the best [reputation for] claims management, Wausau. Wausau has a similar sort of philosophy to our philosophy about management of claims. They’re activist, they get involved, they use rehabilitation extensively. She was also known to some of our [regulatory] people as being tough but very good. (See Exhibit 4.)

When she arrived in June 1984, Fleury had several things working in her favor. For one, she had $100,000 available to her for hiring new staff, and another one-time allocation of $100,000 for problem-solving. In addition, she had the enthusiastic backing of Keefe, who supported her ideas and ran interference for her with the department’s accounting and personnel offices, allowing her to make certain kinds of changes more quickly than usual. And, from her experience at Wausau, Fleury had in mind a clear model for how to run the office. But soon after her arrival, the new manager realized that she had vastly under-estimated what she was up against. When she had visited the office during her job interview, she recalls, “it looked neat and tidy” and under control. “Later on, I found out that they had just bought some new lektrievers [lateral file cabinets] and kind of thrown everything into them and closed the doors.” In fact, office operations were “totally crazy,” Fleury says. She estimates that when she arrived, only 20 percent of claims were being paid on time and the staff was inundated with piles of backlogged work. Fleury soon discovered some of the reasons for the backlog. For one, although agencies were supposed to send first reports of injury to her office immediately, most of them delayed two to four weeks before doing so. The biggest

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

internal problem, Fleury believed, was the fact that the three staff lawyers were still the only people in the office who made any decisions. Despite Keefe’s “upgrading” of the claims analysts to claims specialists, in reality they were “nothing but glorified file clerks,” Jahr says. “The attorneys were God”:

Everything that was done had to have [the lawyers’] stamp of approval on it. Even on cases of continuing compensation where a doctor has said, “This employee will not be able to work for six months because of this surgery,” and payments go out every two weeks—the account clerks would have to gather up all the pay sheets, write in [the] amount from this period to that period, take them into the appropriate attorney’s office and the attorney would have to go through all those and put his initials next to that payment. Without the attorney’s initials, the payment didn’t get made.

This arrangement meant that lawyers were all-powerful in the office and also tremendously over-extended, so that they often “found themselves preparing their trials in the odd minutes that they could get away from claims handling duties,” according to staff lawyer Jacob Forsman. Because of their legal obligations and independent schedules, the lawyers were periodically out of the office for days at a time, effectively halting claims from being processed. Oftentimes when claims specialists left a questionable claim with a lawyer (for instance, whether or not to allow the purchase of a waterbed as medical treatment), the lawyer would not pick it up for weeks or even months, according to Jahr. “By that time, the issue had come and gone and was long since dead. We would always lose because whatever [the employee] wanted [permission] to do had happened. I mean, it may have been three months since they bought their waterbed, so it’s kind of a moot question at that point.” The decisions about whether to accept or deny claims were also very “haphazard,” according to Fleury. Sometimes lawyers relied heavily on the opinion of the employee’s supervisor included on the first report of injury. One attorney admits that he and the other lawyers were so overburdened that “when I was looking at a medical report or something [I would ask myself], ‘Should I question this? Do I really want to increase my workload by questioning this? Or should I just let it slide?”’ On the other hand, “attorneys like to litigate and they like to go to court,” says Fleury:

They would end up trying some cases even though the best business decision might be to settle it or to pay it and manage it from a rehabilitation standpoint. But they could only see the legal issues and not the whole scope of it.

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

As a result of the delays and inconsistent decisions, the office was constantly flooded with phone calls from irate employees or supervisors. The claims specialists spent between a third and a half of their time fielding these phone calls. “The specialists would get a lot of the pressure but not the control, and the attorneys were often not available,” says Fleury. “They would come out and say, ‘Send out a denial on this case,’ and then the specialist would get the phone call from the employee about their starving children or ‘how come this surgery’s not being paid for’ and those kinds of things.” The specialists’ patience had long since worn thin and they were often rude on the telephone, says Fleury, screaming at employees or administrators that they did not care what anyone thought of a particular decision and slamming down the receiver: “When I started here, it was kind of like that Lily Tomlin routine where she says, ‘We don’t have to care. We’re the Phone Company.”’ Staff morale was also at low ebb. Fleury recalls:

[Many of the] people who had been here a long time had been forced to come over at some point in their careers, because it was a place no one wanted to work. [Some were transferred from] Records and Compliance [the regulation wing of the Workers’ Compensation Division] where you can be the “good guys” because you tell people that they should get all these benefits. But over here you have to be the “bad guy” because you have to cut off people’s benefits. The other reason it was a bad place to work was because it was so understaffed that they couldn’t even get to the phones or manage the papers. It’s real hard to spend your day [in conditions like] that.

“There was an extremely defeatist attitude among the employees,” adds Jahr. “They really felt they were the bottom of the barrel in Labor and Industry, that they were the dumping grounds, that they were ignored, were not given any training, any guidance, any assistance.” In addition to the general disarray in State Claims, Fleury was personally bombarded as soon as she arrived because the office operated by the maxim that decisions should be made at the highest level possible. “When I started this job,” Fleury says, “every single first report of injury came across the [manager’s] desk.” In addition, she found her staff— especially the claims specialists, frustrated by the limited availability of the lawyers—lined up at her door asking, “‘What should I do with this? What should I do with that?’ I thought, ‘There’s no way I can make decisions for all those people,”’ she recalls. Even worse, employees and administrators throughout the state now directed all their questions and complaints to her. “For the first year I was here, I couldn’t even hold a five-minute

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

meeting,” she says. “[The phone] was ringing all the time. All the problems came to me.” From the start, therefore, Fleury found herself waging battles on several fronts, trying to win the cooperation of agencies across the state, re-orient her own office to cope with the return-to-work policy, bring the basic operation of State Claims under control, and, in the meantime, keep the office running, which meant coping with crises day in and day out.

It was hard for me personally. I mean, it was really hard. I worked six or seven days a week for twelve hours a day and people thought I was crazy—and I suppose I was kind of intense—but I knew I couldn’t handle it the way it was, because it was so wild, and I knew there was a better way to do it, and I knew it would be easier once I had gotten it straightened out.

Dealing with the Agencies To put workers’ compensation recipients back to work as soon as possible, Fleury’s office needed active support from supervisors throughout state government, which, she notes, “is a lot of people if you’re talking about a 65,000-employee base” spread across 125 agencies. With the assistance of a newly-hired rehabilitation counselor and occasional help from the claims specialists, the new manager spent between 30 and 40 percent of her time traveling to other state agencies to explain the new law and its requirements. “The audiences really varied,” she says. “Sometimes it would just be a few top people. Sometimes it would be first line supervisors. Anyone who would listen to us, basically. “In the beginning, Steve Keefe went with me, and of course everyone gets totally impressed if commissioners come to speak to you, so everybody shows up and then they see that my commissioner is there, pushing what I’m doing,” she adds. But as time wore on, Fleury encountered increasing resistance from the agencies. For one thing, the supervisors were not directly affected by the state’s financial losses under the existing workers’ compensation system. The benefits were paid out of agency overhead, not out of operating budgets within the agencies. In addition, they were accustomed to operating by a simple rule of thumb: “No one in the state system could come back to work until they were 100 percent recovered from whatever it was that had happened to them,” says Fleury. The advantage to this system was that it was easy to administer. To many supervisors, says Fleury, it was disruptive enough to have to cope with an absent worker—juggling other workers’ schedules or calling around for a replacement. The last thing they wanted was a host of new obligations. What’s more, the supervisors often believed the employees out on workers’ compensation were “malingerers” or “problem employees,” Fleury says:

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

There’s one guy [in the Department of Transportation who says things like], “Ha-ha—I’ve got a ‘light duty’ job and you guys don’t. You have to work hard.” The fellow workers get all upset [that he’s] making a mockery of the whole thing—getting paid the same amount of money and just sitting around.

Employees who had been-out of work for several years represented an especially difficult problem. “A lot of old cases had been terribly, terribly mismanaged for years and were costing lots of money.”

If people sit home for six or seven years and just get their checks and no one bothers them, and all of a sudden you knock on their door and say, ‘Oh, we have a job for you, by the way,’ they probably say, ‘Well, I can’t do that job and my back really hurts,’ and they probably get an attorney, and you get into a lot of back and forth.

Many supervisors, resentful that these employees had been granted benefits in the first place, did not want to deal with them further. They also objected to paying a rehabilitation counselor $60 to $70 an hour to work with injured employees and complained that oftentimes cases dragged on without results. (The problem in many cases, Fleury says, was that no one within the agencies would exercise the necessary authority: “We had a guy with a broken toe. Our [rehabilitation counselor] called six different people and not one of them would take responsibility to say, ‘Yeah, it’s okay to come back to work with a broken toe.”’) In talking to other state administrators, Fleury also suffered a credibility problem because of her own agency’s reputation for erratic decisions, missed deadlines, and mistakes. After all, the managers asked, who was she to give management advice? If the state wanted to save money, some managers told Fleury, it should use the $100,000-worth of new staff at State Claims to do more thorough investigations, deny more claims, and defend the cases all the way “to the Supreme Court,” if necessary. By the end of the year, however, Fleury succeeded in launching a rehabilitation pilot project in a state hospital with unusually high workers’ compensation costs, and had laid the groundwork for another five pilot sites. Dealing with the Office In her own office, faced with overwhelming problems, Fleury’s first impulse was to turn to the claims specialists for help:

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

I realized I wasn’t going to be able to do it by myself, so I started to have meetings with them and I said, “Well, this is kind of your chance. I don’t know anything about how you do things here, and I have had enough jobs to know that no matter who you are, you have pet peeves or things you’d like to change about your job, so here it is—here’s your chance.” We sat through quite a few long silences because no one had ever asked them questions like that before.

The reason for the silence, according to Jahr, had partly to do with the split between the long-time claims specialists and the new hires: “The old crew didn’t trust her because they didn’t know her. The new crew—we had our opinions but we had nothing to base it on and we didn’t want to come in and be the young upstarts to the old crew.” But Fleury found that one on one, the specialists were much more willing to talk:

I had a lot of in and out of my office, a little bit like a confessional—some days it felt like that. Everyone would come in and close the door and tell me what they really thought of the whole situation. [There were] a lot of power struggles between attorneys and specialists.

Fleury tried to convince the attorneys that they would be better off if they allowed the specialists to manage the cases, thus freeing their own time for legal work. She also monitored the attorneys’ work, letting them know when she disagreed with their decisions, and requiring them to keep more thorough files. What’s more, in order to develop a professional claims staff, Fleury needed the attorneys to spend “as much nonhostile time with the claims specialists as possible,” helping her train them. The ground rule that Fleury established was that at first, the attorneys could continue to make the decisions, “but they had to explain to the specialists either verbally or in writing what their reasoning was and why they chose to do what they did.”

There was a period when there was a heavy demand on my time because [the specialists] could either go to the attorney or they could come to me if they had a question about how to deal with certain problems. People tended to come to me. Some people tended to come to me after they asked the attorney for an opinion. And so I spent some time refereeing and sometimes explaining there could be different approaches.

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

Some lawyers resisted the changes, Fleury says, and two of the three left within six months of her arrival. Training the Claims Specialists Fleury’s central task was to train the claims specialists, which meant, for one thing, teaching them how to evaluate messy claims:

For instance—this happens pretty typically in a claim operation—you get a first report of injury in from an agency, and on the bottom you see [the supervisor has written], “Do not pay this claim under any circumstances,” or “This guy is a faker. We know he went bowling last week.” So my job was to teach them how to evaluate that. What kinds of questions to ask, and of whom. [You might find out,] “Oh, gee, there were three witnesses. The guy picked up something that weighs 200 pounds and he hurt himself.” Doesn’t matter whether he went bowling last week.

Fleury also trained the specialists how to follow up on cases in order to speed the employees’ return to work. For instance, the question to ask doctors was not whether the employee should or should not be doing his old job, but rather, what the actual restrictions on the employee were. If s/he should not pick up more than 50 pounds or repeatedly stoop to the ground, the agency might be able to adjust the job to accommodate those limitations. Although rehabilitation counselors were usually not brought into a case for 30 or 60 days, Fleury encouraged specialists to assign them right away to cases that showed signs of being difficult or complicated—for instance, when an employee had suffered catastrophic injury, or when a supervisor announced that s/he was pleased to be rid of a particular worker. For difficult cases, Fleury also instituted group discussions among claims and rehabilitation specialists as a way both to cope with the immediate problem and to help train the specialists to think through such cases. She also tried to get the specialists “to see themselves as servicing a customer.” Therefore, for example, “they had to call the person who wrote, ‘Don’t pay this claim under any circumstances’ [on the first report of injury] and explain to them why it was being paid so they would understand it.” A few months after her arrival, Fleury changed the name of the office to “State Claims Management” to reflect the shift in image from a paper-processing operation to a system of case management. Gradually, Fleury gave the claims specialists more decision-making authority, which was nerve-wracking for her and also for them:

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

They’d be terrified that they’d have to make a decision on [something]. They’d come in and they’d say, “What’s going to be the ‘policy’ on this?” They had this view that somehow I could make rules about every situation that would come up. You just can’t make policies and rules about all the different things we have to deal with. I’d say, “Do whatever you want. Use your judgment and we’ll deal with whatever happens.”

To show confidence in the specialists, Fleury began to insist that employees and administrators, calling in with questions or complaints, speak to the claims specialists before turning to her. If they were still unsatisfied, she told them, they could call her back. Fleury also used performance reviews as a way both to recognize the staff and to hold them to standards.

Historically in this agency, they checked a bunch of boxes [on the evaluation forms] and they said, “Well, you’re pretty good at that and not so good at that and OK at that. We’ll give you ‘satisfactory’ because you can’t check too many of these [boxes] too high. Personnel doesn’t like that.” During the first performance reviews that I did with people—especially the claims specialists—I talked to them for two hours. I figured, I can’t give people money, I can’t give them raises. The only thing I can do is give them time and a lot of positive feedback. And the people that weren’t performing, I rated “below satisfactory” and there was a lot of stink about that because they had always been rated satisfactory for mediocre performance. So it was pretty wild there for awhile.

Still Plagued by Operational Problems By the end of her first year, Fleury had increased her staff to 19 (4) and felt she had made some progress on all fronts. Several agencies were already saving money by bringing workers’ compensation recipients back to work, and the annual increase in workers’ compensation benefits had dropped from 20 percent to 9 percent. The claims specialists were making 50 to 60 percent of all major decisions on claims. The number of injury

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

reports received late from agencies had dropped from 90 to 20 percent, and the overall number of claims and bills processed late had dropped from 80 to 20 percent. But problems in office operations persisted. Mistakes were frequent—duplicated payments, for instance, or check authorizations made in the wrong amount, or addressed to the wrong vendor. Phone inquiries often fell through the cracks. The office was perpetually out of routine supplies. Workers were so unfamiliar with one another’s jobs, no one could fill in when an employee was out sick or on vacation. “Everybody was under stress and the clericals hated the specialist staff and the specialist staff was getting upset with the clerical staff,” recalls Jahr. “The clerical staff perceived us as dumping on them. We perceived them as sloughing off.” To try to get a handle on the problems, Fleury sat down and did some of the tasks in the office herself after hours “to see what the jobs were really like.” She also tried to make small improvements here and there. In one case, says Fleury, “They’d thrown a computer system in here in ‘83 and [someone] said ‘OK, before you do anything on the file, we want it on the computer.’ By the time it got back to us from Data Processing, we lost a week, maybe 10 days, and hadn’t even started to take any action on the claim.” In that instance, after conferring with her clerical staff, Fleury arranged to have the claims entered into the computer after her office had acted on them. From a Labor and Industry employee survey conducted in October 1984, Fleury learned, to her surprise, that even though she had spent relatively little time working with the support staff, they appreciated the fact that she had asked their opinions.

I thought that they would have really blasted me because I felt like I wasn’t really spending that much time on them. In some ways I was just kind of taking them for granted. Taking for granted that they would answer the phone and cover this and cover that. [But on the survey, the people that were] most positive about having input and employee participation and feeling like they had a sense of what was going on and had some control were the clericals.

At the same time, Fleury was frustrated and felt that her attempts to improve the process sometimes created new problems:

What’s constant for us is the piece of paper that flows from person to person. You change something about one person’s job in dealing with that piece of paper and chances are you’re having a ripple effect on the timing of how it’s done.

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

So it was hard to make quick, simple improvements and Fleury didn’t have time for anything more elaborate. “There wasn’t enough of me to go around,” she says.

And I didn’t know enough about the operation. I could talk about technical things and legal things, but as far as getting down and figuring out when a piece of paper should move or how often it should move or who had to sign it, I could care less. That was the hardest part of this job for me, knowing I had to care about that.

By spring of 1985, Fleury decided she needed help in tackling the problem. She accepted the offer of a private consultant to do a free assessment of her operation, but this did not prove too helpful: “They came in and said, ‘Yep, these are the problems that need to be solved.’ They sat here and didn’t tell me anything I didn’t already know.” For $20,000, the consultants would come in and “re-do the structure and streamline it,” she says, but she could not afford the expense and was dubious about the consultants anyway. Finally, Fleury turned to John Mirocha, director of the Department of Labor and Industry’s Organization Management office, whose job was to improve the internal management of the department:

I said, “Help! I’m in over my head. I need someone to come in and help me solve these systems problems. Otherwise we’re going to go down. I’m going to go down and everybody else is going to go down, even though we really have good ideas and we’re making good headway. “

Organization Management's Agenda In the spring of 1985, Keefe, his deputy David Renz, and Mirocha were called together to hear a presentation from a representative of the Department of Administration about a new program called Strive Toward Excellence in Performance (STEP), designed to encourage innovative management at all levels of the state bureaucracy. Under the STEP program, they were told, mid-level managers throughout state government could submit ideas for improving their divisions to their commissioners who, in turn, could decide whether to submit them to an independent steering committee that would select a group of “winners” (5). State managers should be encouraged to think of the projects as experiments and to find a way to measure the results, the DOA representative explained. They should design their goals with close attention to the “customer” of their service and with input from

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

employees. If possible, they should use modern management techniques and create partnerships with private businesses. While the Department of Administration wanted all state agencies to participate in the program, it was up to each commissioner to decide how to solicit proposals in his or her own department. Keefe delegated to Mirocha the task of coming up with at least one STEP project for Labor and Industry. Meanwhile, Mirocha had hired Mike Cuffe, a graduate student of organizational communication, as a part-time intern in November of 1984 and had assigned him to assess the training needs of managers at Labor and Industry. The department was suffering in many offices from “huge backlogs,” Cuffe discovered. Through a colleague, he learned of a new software product that he thought might address this problem. “Process Flow Analysis” (PFA), developed by the Minnesota-based Control Data Corporation, was a method of analyzing administrative procedures and highlighting their inefficiencies. Cuffe visited Control Data to learn more about the product, and while listening to Principal Consultant Dick Booth describe its features, Cuffe recalls, “I just had a creative thought.” Cuffe asked Booth whether any other state offices used PFA. No, Booth replied. Control Data had not yet been able to convince any state offices to try it. Cuffe recalls: “I said, ‘Well, my challenge to you is to join forces with us on a joint venture to explore the application of your technology to state government,’ and I basically marketed the STEP concept to them.” The managers of Control Data—a firm with a reputation for public spiritedness—quickly agreed to donate their software product and training services, hoping that a successful, high visibility pilot project might encourage other state managers to purchase PFA. The next step for Cuffe was to find “an environment where we could pilot it, it would have support, and [where we] could get some management on board at the middle management levels.” State Claims Management seemed like a good bet: “Denise was one of the more progressive, newer people with that outside perspective. We saw a real opportunity.” When Cuffe proposed to Fleury that she agree to try the PFA pilot experiment in her office, however, Fleury was reluctant:

It was hard to sell it to me. I was under pressure [thinking], “Are we going to have enough time to do this? We have real work to do.” I said, “Mike, I’ve got a lot of things going on, and I’ve got a lot of work to do, and I’m working long hours and there’s no way I can do this and manage [the office] too.”

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

But she agreed to attend a meeting for state managers at which representatives of Control Data explained PFA. There Fleury learned that PFA provided a system for documenting any work process in an office—that is, breaking it down into a detailed series of steps. The idea was that once a process was laid out in this kind of detail, managers or employees would have a clearer understanding of how work in the office was actually accomplished. This might be useful in a number of ways, Control Data suggested: to identify unnecessary steps in a process, to identify tasks performed by an inappropriate category of employee, to see how the work of one employee affected the work of another, or to speed the training of new employees. While much of the actual work was done before the information was entered in the computer, PFA provided a structure and common language for analyzing work flow, and the PFA software translated the information into a graphic display that highlighted potential problem-spots in work processes. “Several managers who were there walked out. They thought it was real boring,” Fleury recalls. “But it clicked for me and I was really excited about it.” 1. A few large private sector companies are self-insured.

2. In fact, there was a lot of joking within the division about the “cold and heartless” State Claims staff. One senior

clerical worker, Denita Johnson, says the staff began to relish the Scrooge image: “I’d get on the elevator with somebody and if they tripped, I’d just turn around and tell them they were ‘denied.’”

3. Between FY 1975 and FY 1984, workers’ compensation costs for Minnesota state employees rose from $1.7

million to $11 million. 4. The staff was made up of three lawyers, seven claims specialists, two rehabilitation counselors, two account

clerks, and five general clerical workers.

5. The steering committee was made up of leaders in business, government, and organized labor and was co- chaired by the governor and the former chief executive officer of Dayton Hudson, a major Minnesota-based

corporation. In addition to drawing a certain amount of fanfare, the winning projects would be eligible for training and administrative support from the staff of STEP.

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

Exhibit 1

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

Exhibit 1 (cont.)

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

Exhibit 2 Flow Chart: First Report of Injury

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

Exhibit 3 Flow Chart: Medical Bills

Denise Fleury and the Minnesota Office of State Claims C15-87-744.0

Exhibit 4

Denise H. Fleury 6409 Nicollet Avenue South

Minneapolis, Minnesota 55409 Home: 824-0362 Work: 830-1795 PROFESSIONAL A career in business utilizing my technical and managerial skills. OBJECTIVE EDUCATION Currently, University of Minnesota Evening MBA Program University of Minnesota Paralegal Program Macalester College, BA English SKILLS/ASSETS Self-starter, work well under pressure, willing to take responsibility and make decisions, excellent analytical skills, enjoy problem solving, excellent communication skills, good developer of people, good sense of humor. INSURANCE Seven years, Wausau Insurance Companies. Two years as EXPERIENCE an adjuster of casualty, property and product liability claims for all types of businesses, including construction, trucking, manufacturing, restaurants and hotels. One year as a Claim Examiner. Four years as Claim Supervisor, Workers' Compensation. As Supervisor, I am responsible for high exposure claims, supervising investigations, coordinating and directing all rehabilitation and litigation. I work directly with corporate policyholders, keeping them informed of losses, reserves and on-going claim activity. RELATED Prepared extensive legal brief, product liability case. EXPERIENCE Wrote legal study of pregnancy as a temporary disability. Prepared position paper on HMO regulations for presentation to the Minnesota Legislature. RELATED Risk Management and Insurance, Business Law, Financial Accounting, COURSEWORK, Business Statistics, Management and Organization Theory, U OF M Decision Science and Information Systems, Managerial Economics, Marketing Management, Financial Management, Income Tax Law, Real Estate Law, Litigation. OTHER EXPERIENCE Waitress, to pay my way through college Mail carrier, U.S. Postal Service Paralegal Member, Twin Cities Moneymakers, an investment partnership.