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United States General Accounting Office: 


Before the Subcommittee on Government Efficiency, Financial Management 
and Intergovernmental Relations, Committee on Government Reform, House 
of Representatives: 

For Release on Delivery At 10:00 a.m. EDT: 
Thursday, May 9, 2002: 

Office Of Workers' Compensation Programs: 

Further Actions Are Needed to Improve Claims Review: 

Statement of George H. Stalcup: 
Director, Strategic Issues: 


Mr. Chairman and Members of the Subcommittee: 

I appreciate the opportunity to testify today on issues regarding the 
Department of Labor's Office of Workers' Compensation Programs (OWCP). 
During fiscal year 2000, OWCP paid compensation totaling about $2.1 
billion in medical and death benefits and received approximately 
174,000 new injury claims. Issues related to OWCP have been, for a 
number of years, a particular focus of this subcommittee. I am here 
today in response to your request that the we examine selected issues 
associated with OWCP's claims' adjudication process, which has been 
the subject of previous hearings before your subcommittee. We believe 
the report we are issuing to you today and our testimony will provide 
a further understanding of the federal government's employee 
compensation program. 

As you requested, we looked at selected aspects of OWCP's process for 
adjudicating claims appeals. In summary, we found the following: 

* Approximately one in four appealed claims' decisions are reversed or 
remanded to OWCP district offices for additional consideration and a 
new decision because of questions about or problems with the initial 
claims decision. 

* In response to the Federal Employees Compensation Act's (FECA) 
requirement on the timing for informing claimants of hearing 
decisions, OWCP has established a goal of informing 96 percent of 
claimants within 110 days of the date of the hearing. Our sample 
showed that it provides notification to 92 percent of claimants within 
this period. 

* Nearly all physicians used by OWCP to provide opinions on injuries 
claimed were board certified and state licensed, and were specialists 
in areas that appeared to be consistent with the injuries they 

* OWCP has used mailed surveys and more recently telephone surveys and 
focus groups, to measure customer satisfaction. Those efforts have 
shown mixed results. Finally, the Labor inspector general is primarily 
responsible for monitoring potential fraud within OWCP's workers 
compensation program and uses the claims examiners as one source in 
identifying potentially fraudulent claims. 

In addressing the objectives, we reviewed a statistical sample of more 
than 1,200 of the estimated 8,100 appealed claims for which a decision 
was rendered by the Branch of Hearings and Review (BHR) or the 
Employees Compensation Appeals Board (ECAB) during the period from May 
1, 2000, through April 30, 2001. 

How the Claims Process Works: 

As you know, FECA[Footnote 1] authorizes federal civilian employees 
compensation for lost wages and medical expenses for treatment of 
injuries sustained or for diseases contracted during the performance 
of duty. A worker's compensation claim is initially submitted through 
the employee's agency to an OWCP district office and is evaluated by a 
claims examiner. The examiner must first determine whether the 
claimant has met each of the following five criteria for obtaining 

* The claim must have been submitted in a timely manner. An original 
claim for compensation for disability or death must be filed within 3 
years of the occurrence of the injury or death. 

* The claimant must have been an active federal employee at the time 
of injury. 

* The injury, illness, or death had to have occurred in a claimed 

* The injury, illness, or death must have occurred in the performance 
of duty. 

* The claimant must be able to prove that the medical condition for 
which compensation or medical benefits is claimed is causally related 
to the claimed injury, illness, or death. 

Because medical evidence is an important component in determining 
whether an accident described in a claim caused the claimed injury and 
if the claimed injury caused the claimed disability, workers' 
compensation claims are typically accompanied by medical evidence from 
the claimant's treating physician. Considerable weight is typically 
given to the treating physician's assessment and diagnosis. However, 
should the OWCP claims examiner conclude that a better understanding 
of the medical condition is needed to clarify the nature of the 
condition or extent of disability, the examiner may obtain a second 
medical assessment of the claimant's condition. In such instances, a 
second-opinion physician, who is selected by a medical consulting firm 
contracted by an OWCP district office, reviews the case, examines the 
claimant, and provides a report to OWCP. 

If the second-opinion physician's reported determination conflicts 
with the claimant physician's opinion regarding the injury, the claims 
examiner determines if the conflicting opinions are of "equal value." 
[Footnote 2] If the claims examiner considers the two conflicting 
opinions to be of equal value, OWCP appoints a third or "referee 
physician" to evaluate the claim and render an independent medical 

Claims may be approved in full or part, or denied. When all or part of 
a claim is denied the claimant has three avenues of recourse for 
appeal: (1) an oral hearing or a review of the written record by the 
Branch of Hearings and Review (BHR), (2) reconsideration of the claim 
decision by a different claims examiner within the district office, or 
(3) a review of the claim by the Employees Compensation Appeals Board 
(ECAB). While OWCP regulations do not require claimants to exercise 
these three methods of appeal in any particular order, certain 
restrictions apply that, in effect, encourage claimants to file 
appeals in a specific sequence—first going to the BHR, then requesting 
another review at the OWCP district office, and finally involving the 

Evaluation Problems, Case File Mismanagement, and New Evidence Are 
Reasons Appealed Claims Decisions Are Reversed or Remanded: 

From May 1, 2000, to April 30, 2001, decisions were rendered by BHR or 
ECAB on approximately 8,100 appealed claims. We found that BHR and 
ECAB affirmed an estimated 67 percent of these initial decisions as 
being correct and properly handled by the district office, but 
reversed or remanded an estimated 31 percent of the decisions[Footnote 
3]--25 percent because of questions or problems with OWCP's review of 
medical and nonmedical information or management of claims files, and 
the remaining 6 percent because of additional evidence being submitted 
by the claimant after the initial decision. 
About one-fourth of the appealed claims decisions were reversed or 
remanded due to OWCP evaluation problems or claims file mismanagement: 

We found that about one in four appealed claims decisions during our 
period of review were reversed or remanded because of questions about 
or problems associated with the initial decision by the OWCP district 
office. These included problems with (1) the initial evaluation of 
medical evidence (e.g., physicians' examinations, diagnoses, or x-
rays) or nonmedical evidence (e.g., coworker testimonies) or (2) 
management of the claim file (e.g., failure to forward a claim file to 
ECAB in a timely manner). 

Problems in evaluating medical evidence frequently involved, for 
example, an OWCP district office failing to properly identify medical 
conflicts between the conclusions of the claimant's physician and 
OWCP's second-opinion physician, and therefore not appointing a 
referee physician as required by FECA. OWCP has interpreted the FECA 
requirement for referee physicians to apply only when the opinions of 
the claimant's and second-opinion physicians are of equal value, that 
is, when both physicians have rendered comparably supported findings 
and opinions. 

Some remands and reversals resulted from OWCP failing to administer 
claims files in accordance with FECA or OWCP guidance for claims 
management. The guidance includes (1) a description of the information 
that is to be maintained in the claim file and transmitted by OWCP to 
the requestor (i.e., BHR or ECAB) and (2) requires claims files to be 
transmitted within 60 days after a request is received. Failure to 
meet this 60-day requirement was one of the more common deficiencies 
in claims file management. For example, ECAB initially requested a 
claim file for one injured worker from OWCP on April 29, 2000. On 
December 19, 2000 (almost 8 months later), ECAB notified OWCP that the 
claim file had not been transferred and that if the file was not 
received within 30 days, ECAB would issue orders remanding the claim 
decision to the relevant district office for "reconstruction and 
proper assemblage of the record." As of March 12, 2001—more than 10 
months after the initial ECAB request-—the claim file had still not 
been transferred and the decision was remanded back to the district 
office. We estimate that 4 percent of appealed decision were reversed 
or remanded by BHR or ECAB because of claim file management problems. 

For claims that were initially denied at a district office and then 
decisions were reversed by BHR or ECAB due to problems identified with 
the initial evaluation of evidence or mismanagement of claims files, 
there are delays in claimants receiving benefits to which they were 
entitled. According to OWCP, the average amount of time that elapsed 
from the date an appeal was filed with BHR or ECAB until a decision 
was rendered was 7 months and 18 months, respectively, in fiscal year 
2000. Thus, when an initial claims decision is reversed upon appeal, 
while claimants are provided benefits retroactively to the date of the 
initial decision, claimants may be forced to go without benefits for 
what can be extended periods and may have to incur additional expenses 
during the appeals process, such as representatives' fees, that are 
not reimbursable. 

New Evidence Submitted After OWCP Rendered Decision Also Result in 
Reversals and Remands	We also found that 6 percent of appealed 
claims decisions were reversed or remanded because of new evidence 
being submitted by the claimant after the initial decisions were made. 
OWCP regulations allow claimants to submit new evidence to support 
their claims at any time up until 30 days-—or more with an extension—-
after the BHR hearing or review of the record occurs.[Footnote 4] 
Additional evidence could include medical reports from different 
physicians or new testimonial evidence from coworkers that in some 
significant way were expected to modify the circumstances concerning 
the injury or its treatment and make the previous decision by OWCP now 
inappropriate. Upon appeal of the earlier district office decision, 
the BHR representative determines whether any new evidence is 
sufficient to remand the decision back to the district office for 
further review, or to reverse the initial decision. 

OWCP Has Taken Some Actions to Identify and Address the Causes of 
Reversals and Remands: 

OWCP officials told us that several actions are taken to monitor 
remands and reversals. For example, ECAB decisions are reviewed and 
advisories are prepared to call claims examiners' attention to select 
ECAB decisions which represent a pattern of district office error or 
are otherwise instructive. Where more notable problems are identified 
through ECAB reviews, OWCP informed us that a bulletin describing 
correct procedures may be issued or training might be provided. While 
OWCP similarly monitors reasons for BHR reversing and remanding claims 
decisions, this information is not as routinely disseminated to claims 
examiners as is done for information on ECAB decisions. 

Clearly, these actions are providing some information on reasons for 
remands and reversals. However, this information is not providing a 
full picture of the underlying reasons for remands and reversals 
occurring at their current rates and what actions might be taken to 
address those factors. For example, OWCP might detect that district 
offices are failing to appoint referee physicians when required. OWCP 
might then notify district offices that such a problem was occurring. 
However, with the information currently available, it would not be 
able to identify the nature or frequency of specific underlying 
reasons, such as (1) how often are inexperienced claims examiners not 
sufficiently aware of the requirement for a referee physician when a 
conflict of equal value occurs or (2) how often are examiners 
experiencing difficulty in determining whether two physicians' 
opinions are of equal value? Not knowing the frequency with which 
reasons for remands and reversals are occurring, or the specific 
underlying causes, it would be difficult for OWCP to identify actions 
that might be taken to address the problem. 

We believe that OWCP should examine the steps it currently takes to 
determine whether more can be done to identify and track remands and 
reversals—including improper evaluation of evidence and mismanagement 
of claim files—and address their underlying causes. 

OWCP officials told us that they have not conducted such an overall 
examination of its current process, adding that they instead rely on 
adjustments to their current monitoring and communication process 
(circulars and bulletins) based on available information. 

OWCP Has Established a Hearing Standard That Allows 110 Days For 
Claimant Notification: 

FECA requires that OWCP notify claimants in writing of hearing 
decisions "within 30 days after the hearing ends." In interpreting 
this provision of the act, OWCP has allowed time for certain actions 
to take place, such as claimant and employing agency reviews of and 
comment on hearing transcripts. Accordingly, in setting guidelines, 
the BHR director told us that the hearing record is not closed until 
two separate but concurrent processes are completed: (1) printing of 
the hearing transcript and review of the transcript by both the 
employee and the employee's agency, which can take from as few as 25 
days to as many as 47 calendar days or more from the hearing date and 
(2) opportunity for the claimant to submit new evidence for 30 days 
following the date of the hearing, and longer if the claimant needs 
additional time (regulations allow the OWCP hearing representatives to 
use their discretion to grant a claimant a one-time extension period, 
which may be for up to several months). 

Considering these factors, OWCP has established two goals for the 
timing of notifying claimants of final hearing decisions: (1) 
notifying 70 to 85 percent of the claimants within 85 calendar days 
and (2) informing 96 percent of claimants within 110 calendar days 
following the date of the hearing. Based upon our review of the 
applicable legislation, we determined that OWCP has the authority to 
interpret the FECA requirement for claimant notification in this 

Of an estimated 2,945 appealed claims for which BHR rendered a 
decision on a hearing during our review period, notification letters 
for an estimated 2,256 (77 percent) were signed by OWCP officials 
within 85 days of the date of the hearing and an estimated 2,716 (92 
percent) of the claims were signed within 110 days of the hearing 
date.[Footnote 5] OWCP officials signed an estimated 158 (5 percent) 
of the claimants' notification letters from 111 to 180 days after the 
hearing date and 70 claims (2 percent) from 181 days to more than 1 
year after the hearing date.[Footnote 6] 

OWCP's Physicians Were Board Certified, Licensed, and had Specialties 
Consistent with the Injuries Examined: 

OWCP referee physicians in our sample were nearly all board certified 
and state licensed. We also found that OWCP's second opinion and 
referee physicians had specialties that were appropriate for claimant 
injuries examined. 

Most of OWCP's Physicians were Board Certified and Have State Medical 

Although neither FECA nor OWCP's procedures manuals require second-
opinion physicians to be board certified, the procedures manual 
provides that OWCP should select physicians from a roster of 
"qualified" physicians and "specialists in the appropriate branch of 
medicine." The manual further requires that for referee physicians 
"the services of all available and qualified board-certified 
specialists will be used as far as possible." The manual allows for 
using a noncertified physician in special situations. 

Based on our statistical sample, we estimate that at least 94 percent 
of OWCP's contracted second-opinion physicians and at least 99 percent 
of the contracted referee physicians were board certified.[Footnote 7] 
In making these determinations, we relied primarily on information 
from the American Board of Medical Specialties (ABMS), the umbrella 
organization for the approved medical specialty boards in the United 
States. For the remaining 6 and 1 percent of the second-opinion and 
referee physicians in our sample, respectively, information we 
reviewed was not sufficient to determine whether they were or were not 

Although neither FECA nor OWCP regulations specifically require either 
second-opinion or referee physicians to be licensed by the state in 
which they practice, OWCP officials stated that OWCP has the 
expectation that all physicians will have valid state medical 
licenses. Based on our sample of physicians, we estimated that at 
least 96 percent of the second-opinion physicians and at least 99 
percent of the referee physicians had current state medical licenses. 
For the 4 and 1 percent of the remaining physicians respectively, we 
did not have sufficient information to determine their licensing 

Second-Opinion and Referee Physicians had Specialties that were 
Relevant to Injuries Evaluated: 

We also estimated that 98 percent of OWCP's second-opinion and referee 
physicians had specialties that appeared to be relevant to the types 
of claimant injuries they evaluated. While there is no specific 
requirement related to physician specialties, OWCP officials told us 
that a directory is used to select referee physicians—with appropriate 
specialties—to examine the type of injury the claimant incurred. 

For assistance in reviewing relevancy of physician specialties, we 
contracted with a Public Health Service (PHS) physician. With that 
assistance, we were able to review our sample of claimants' injuries 
and the board specialties of the physician(s) who evaluated them to 
determine if the knowledge possessed by physicians with a specific 
specialty would allow them to fully understand the nature and extent 
of the type of injury evaluated.[Footnote 8] 

Several Methods Are Used to Identify Customer Concerns and Potential 
Claimant Fraud: 

OWCP uses surveys of randomly selected claimants and focus groups to 
monitor the extent of customer satisfaction with several dimensions of 
the claims program, including responsiveness to telephone inquiries. 
Claims examiners and employing agencies are among the inspector 
general's (IG) primary information sources for identifying potentially 
fraudulent claims. When such potential fraud is detected, the IG will 
investigate the circumstances and, if appropriate, prosecute the 
claimants and others involved. 

Customer Satisfaction with the Claims Process: 

OWCP obtains information concerning customer satisfaction with the 
handling of claims through surveys of claimants and conducting focus 
groups with employing agencies. Since 1996, OWCP has used a contractor 
to conduct customer satisfaction surveys via mail about once each year 
to determine claimants' perceptions on several aspects of the 
implementation of the workers' compensation program. For example, the 
surveys ask claimant's about their satisfaction with overall service, 
as well as questions about selected aspects of the program, such as 
whether claimants knew their rights when notified of claims decisions, 
and whether or not they receive written responses to claimants' 
inquiries in a timely manner.[Footnote 9] Because the questionnaires 
we reviewed did not include questions specific to the appealed claims 
process, it was not clear whether any respondents based their 
responses on experiences encountered when appealing claims. 

In the 2000 survey, customers indicated a 52 percent satisfaction rate 
with the overall workers compensation program, and a 47 percent 
dissatisfaction rate.[Footnote 10] The level of claimant satisfaction 
indicated in their responses for selected aspects of the program have 
been largely mixed (i.e., more positive responses for some questions 
and more negative responses for other questions). For example, survey 
responses in fiscal year 1998 showed that 34 percent of the 
respondents were satisfied with the timeliness of responses to their 
written questions to OWCP concerning claims, while 63 percent were 
not, and 35 percent were satisfied with the promptness of benefit 
payments, while 26 percent were not. Based on these and previous 
survey results, OWCP created a committee to address several customer 
satisfaction issues, including determining if the timeliness of 
written responses could be improved.[Footnote 11] 

In fiscal year 2001, OWCP took two additional steps to measure 
customer satisfaction. First, OWCP used another contractor to conduct 
a telephone survey of 1,400 claimants focused on the quality of 
customer service provided by the district offices. As of March 25, 
2002, a contractor was still evaluating the results of this survey. 
Second, OWCP held focus group meetings with employing agency officials 
in the Washington, D.C., and Cleveland, Ohio, district offices 
jurisdictions. An OWCP official stated that this effort provided an 
open forum for federal agencies to express concerns with all aspects 
of OWCP service. In the Washington D.C., focus group, employing agency 
officials expressed their belief that some of the claims approved by 
OWCP did not have merit, while in the Cleveland, Ohio focus group, 
employing agencies expressed frustration about not being informed of 
OWCP claims decisions. 

The DOL IG Monitors Potential Claimant Fraud: 

The Department of Labor's IG—using information from claims examiners 
and other sources—monitors, investigates, and prosecutes fraudulent 
claims made by federal workers. The IG's office provides guidance to 
claims examiners for identifying and reporting claimant fraud, 
including descriptions of situations or "red flags" that could 
indicate potentially fraudulent claims. Red flags include such items 
as excessive prescription drug requests and indications of unreported 
income. DOL's Audits and Investigations Manual requires claims 
examiners and other employees to report all allegations of wrongdoing 
or criminal violations—including the submission of false claims by 
employees—to the IG's office. 

Once a potentially fraudulent claim is identified, the IG will review 
information submitted by the claimant, coworkers, physicians, and 
others. If appropriate, based on this review, the IG will also conduct 
additional investigations. According to the Office of the Inspector 
General, approximately 600,000 workers' compensation claims were filed 
with district offices from fiscal years 1998 through 2001. During this 
time, the IG opened 513 investigations of claims that involved 
potential fraud. Of these, 212 led to indictments and 183 resulted in 
convictions against claimants and/or physicians.[Footnote 12] 

In summary, based on our sample, one out of four initial claims 
decisions were either reversed or remanded upon appeal because of 
questions about or problems with either OWCP's evaluation of medical 
and nonmedical evidence or improper management of claims files. 

While OWCP monitors and disseminates some information on BHR and ECAB 
remands and reversals, we believe that OWCP should examine the steps 
it is now taking to determine whether more can be done to identify and 
track specific reasons for remands and reversal and in so doing better 
address underlying causes. OWCP comments and our related responses are 
detailed in our report. 

Mr. Chairman, this concludes my prepared remarks. I would be pleased 
to answer any questions you or other subcommittee members may have. 

[End of section] 


[1] 5 USC 8101, et seq. 

[2] OWCP's procedures manual state that to determine if the medical 
evidence is of equal value, each physician's opinion is to be 
considered against the following factors: (1) whether the physician 
involved in the case is a specialist in the appropriate field relevant 
to the claimant's injury or illness, (2) whether the physicians' 
opinions are based upon a complete and accurate medical and factual 
history, (3) the nature and extent of findings on examination of the 
claimant, (4) whether the physicians' opinions are rationalized, and
(5) whether the physicians' opinions are stated unequivocally and 
without speculation. 

[3] The remaining 2 percent of the decision summaries we examined did 
not include information regarding what decision was reached on the 
claimant's appeal or the rationale for the decision. 

[4] Most reversals and remands resulting from claimants submitting new 
evidence were made by BHR. 

[5] Our analysis reflects only appeals for which necessary dates were 
available in the claim decision files. We estimate that the dates we 
used to determine the length of time required to provide decision 
information to a claimant were available in the decision files for 95 
percent of the BHR appeals with hearings. 

[6] The percentages of claim decision notifications signed within 110, 
111 to 180, and 181 days or more of the hearing date do not total 100 
percent due to rounding. 

[7] We were only able to search for board certification and licensing 
for—and consequently only included in our sample—those physicians for 
whom we could identify a first and last name and an area of medical 
specialty from the appealed claims decisions summaries. Our estimates 
regarding board certification and licensing cover about 63 percent of 
second-opinion and 85 percent of referee physicians. 

[8] We were not able to attempt to evaluate the appropriateness of the 
physician's specialty in comparison to the injury for some claims 
because the claims decisions summaries did not contain the type of 
injury or the physician's specialty. We estimate that the information 
needed to evaluate the appropriateness of the specialty was available 
in the appealed claims decision summaries we used for an estimated 61 
percent of second-opinion physicians and 83 percent of referee 

[9] The claimants were selected on a random sample basis and the 
surveys were conducted in 1996, 1997, 1998, and 2000. 

[10] The remaining 1 percent did not provide information on overall 
satisfaction level. 

[11] Prior GAO testimony, U.S. General Accounting Office, Office of 
Workers' Compensation Programs: Goals and Monitoring Are Needed to 
Further Improve Customer Communications, [hyperlink,], (Washington D.C.: Oct. 3, 
2000) addresses deficiencies in the goals OWCP set for customer 
satisfaction and the evaluative data collected for measuring progress 
in improving customer satisfaction. 

[12] A number of the cases involved more than one claimant or