WorkSafe2: Follow-up investigation into the management of complex workers compensation claims

Letter to the Legislative Council and the Legislative Assembly

To

The Honourable the President of the Legislative Council

and

The Honourable the Speaker of the Legislative Assembly

Pursuant to sections 25 and 25AA of the Ombudsman Act 1973 (Vic), I present to Parliament WorkSafe 2: Follow-up investigation into the management of complex workers compensation claims.

Deborah Glass OBE
Ombudsman

3 December 2019

Foreword

… they want to make money … it’s a private business. And the best way for a private business is get people who are on compensation, off compensation.

Conciliation Officer

Does anything change after an Ombudsman investigation?

In almost every case I have dealt with in my five years in the role the answer is yes, and meaningfully so: unfair laws, policies and procedures have been replaced, new systems have been introduced, in some cases thousands of dollars have been paid to people wrongfully disentitled.

In 2016 I tabled a report into WorkSafe agents’ handling of complex claims, which concluded that while the whole system was not broken, the handling of complex claims – the most difficult and expensive – needed fundamental reform. The report was widely welcomed by many and WorkSafe accepted all 15 recommendations made to it, with the support of the responsible Minister.

But did anything change?

Complaints to the Ombudsman can be a good indicator. In the case of WorkSafe complaints, despite the implementation by WorkSafe of all 15 recommendations, the complaints have continued, raising the same themes: unreasonable decision making by agents, inadequate oversight by WorkSafe.

While I monitor the implementation of all my recommendations, this is the first time I have launched a fresh investigation into the same issue. All Ombudsman complaints involve people’s individual stories, but the WorkSafe complaints were and are particularly painful. I said in 2016 these cases involve people’s lives, and the human cost should never be forgotten; that human cost continues to this day.

I launched this second investigation in May 2018 on the back of a continued influx of complaints and anecdotal evidence that not enough had changed. Sadly, that has proven to be true.

Agents are still unreasonably terminating complex claims: cherry picking evidence, doctor shopping, relying on Independent Medical Examiners (IMEs) over treating doctors even when evidence is unclear, contradictory or inconclusive – or ignoring it if it didn’t support termination.

If anything, the evidence strongly suggests that much of the impact of my 2016 report has been to drive these practices underground. Agent staff were told to be careful what they put in writing – in case the Ombudsman sees it. Staff were advised to use words like ‘entitlement reviews’ in their emails rather than ‘termination’.

But while this meant less overt evidence of decisions being made for financial incentives, this was the only logical explanation for some of them: agents who came to conciliation not prepared to conciliate beyond a derisory sum; maintaining those decisions knowing they would be overturned by a court, on the basis that many workers would simply give up.

From the evidence in this report, it would appear that my 2016 investigation only scratched the surface.

New issues were also identified in the files we reviewed, and confirmed in interviews, including the use of surveillance without adequate justification. Such an invasion of people’s privacy is only permitted if there is some evidence of worker dishonesty, but we found numerous examples of surveillance being used without a shred of evidence to justify it.

Take the case of Sophia, an aged care worker, who had injured her back at work. The agent used surveillance to check her mobility. Even though the surveillance report confirmed she walked with a limp throughout, the agent considered extending it. The surveillance must have been intrusive, as Sophia asked the agent if they were doing it. Even more troublingly, the agent denied it and told her if she had concerns about being followed she should go to the police.

We also saw significant evidence of unfair return to work practices: many requiring a worker to attend occupational rehabilitation in wholly unsuitable circumstances, such as the man experiencing severe psychotic hallucinations, or the homeless man in hospital after attempting self-harm, and whose non-compliance notice was sent to the residential address he had been obliged to leave despite knowing he was homeless.

For the injured worker, it's like a court. They're traumatised, they're stressed ... they're the only person in the room not paid to be there ...

Conciliation Officer

The workers affected in the cases we reviewed included nurses, teachers, police officers, aged care and childcare workers, truck drivers, baggage handlers and tradesmen. The emotional toll was unequivocal; the cost not only to them and their families, but to society, should not be underestimated.

Many of the decisions and actions we saw were not only unjust, unreasonable and wrong. Some were downright immoral and unethical.

It provides little consolation to say not every decision we saw was bad. Given the impact on people’s lives, good decision making cannot be left to chance, or an individual agent’s better instincts.

What is WorkSafe doing about this?

They audit decisions, handle complaints, survey injured workers and oversee the IME system. We saw improvement in some areas.But we also found questionable audit passes on decisions that were plainly not sustainable; workers being referred to conciliation or court despite clearly inadequate or unreasonable agent decision making; and insufficient oversight of the IME system.

The system is failing to deliver just outcomes to too many people; agents continue to make unreasonable decisions, the dispute process is time consuming, stressful and costly, and Worksafe is too often unwilling or unable to deal.

I said in 2016 that the system needs a better safety net for the vulnerable. In 2019 we need it more than ever. If the problems are persisting despite the adoption of my previous recommendations, the reforms were plainly not fundamental enough.

The financial viability of the scheme is imperative; but the balance between financial sustainability and fairness for injured workers has tilted too far away from the latter.

It is time for the change that makes a difference. I am pleased the government has accepted my two key recommendations: an independent review of the agent model to determine how and by whom complex claims should be managed, and to introduce a new dispute resolution process which allows for binding determinations.

In the meantime, I welcome WorkSafe’s commitment to establish a dedicated team to review disputed decisions and use its powers to issue directions to agents when decisions are not sustainable. For the sake of the next generation of injured workers, and the wider community that bears the cost, we should not have to investigate this issue again.

Deborah Glass
Ombudsman

Executive summary

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 51 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 other information, 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. 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:

• selectively using evidence, while ignoring other available information – even where the medical opinion relied on was unclear, contradictory or inconclusive
• 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
• posing leading questions to IMEs and 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
• 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:

• 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.

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.

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.

Background

48. This investigation looked at the compensation and support provided to people injured at work in Victoria, particularly those with complex injuries who are unable to return to work long term. This follows an earlier investigation by the Ombudsman in 2016 which found the scheme set up to provide this compensation and support had failed some particularly vulnerable people.
49. 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) (WIRC Act).
50. The scheme is funded by compulsory employer insurance and administered by the Victorian WorkCover Authority, operating as WorkSafe Victoria (WorkSafe). WorkSafe is responsible for ensuring appropriate compensation is paid to injured workers, while also maintaining a financially sustainable scheme.
51. WorkSafe does not manage WorkCover claims itself, instead outsourcing this to five claims agents. WorkSafe oversees the scheme, including agents’ management of claims.

The Ombudsman’s 2016 investigation

52. In 2016, the Ombudsman investigated WorkSafe and its agents to look at whether:

• agents had unreasonably rejected or terminated injured workers’ claims
• agent decisions were motivated by financial performance incentives offered by WorkSafe
• WorkSafe provided effective oversight of the scheme.

53. The investigation was prompted by:

• an increasing number of complaints to the Ombudsman
• an increasing number of disputed claim decisions
• consultation with stakeholders, which suggested individual complaints were a sign of a more widespread problem and that agent decisions may be financially motivated.

54. The investigation focussed on agents’ management of ‘complex claims’, involving workers who were unable to work long term and/or required long term medical treatment.
55. While complex 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. ¹
56. The investigation looked at agent decision making during 2014-15 and 2015-16.

What we found

57. 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.
58. The investigation acknowledged that as commercial organisations, it was reasonable for the agents to expect to make a profit. 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 good decision making.
59. The investigation also identified deficiencies in WorkSafe’s oversight of the scheme, particularly in relation to agent decision making on complex claims.

What we recommended

60. 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.

61. The Ombudsman made two recommendations to the State Government:

• review the process for injured workers to dispute claim decisions, which involves conciliation and then court, to ensure the process is fair and timely
• increase Conciliation Officers’ powers to direct agents to overturn a decision.

62. WorkSafe said it did not support these two recommendations. Although introducing an additional arbitration process² following unsuccessful conciliation may produce more timely outcomes for workers (compared to court), WorkSafe said this would:

• ‘add another layer of complexity and cost to the system’
• be ‘contrary to the general objective of reducing the level of disputation’.

63. WorkSafe also said it did not support increasing Conciliation Officers’ powers to direct because it would ‘fundamentally and detrimentally’ affect their ‘capacity to mediate negotiated outcomes’, and would make the process ‘considerably more adversarial’.

How WorkSafe implemented the recommendations

64. WorkSafe has implemented all 15 of the Ombudsman’s recommendations, with some work ongoing. Among other things, WorkSafe said it has:

• adjusted the financial reward and penalty measures and provided training to agent staff
• improved its process for auditing the quality of agent decisions
• introduced a ‘recovery assistance pilot’, which provides tailored case management to injured workers who have been receiving compensation for more than four years
• improved internal reporting on and monitoring of dispute outcomes
• revised its complaints management framework and increased reporting of complaints data
• improved its oversight of Independent Medical Examiners (IMEs) and agents’ use of them.

Actions taken by agents

65. There were five agents subject to the Ombudsman’s 2016 investigation; however, one of them, QBE, was replaced by a new agent, EML Vic Pty Ltd on 30 June 2016. The other four agents remained the same, meaning the current agents are:

• Allianz Australia Worker’s Compensation (Victoria) Limited (Allianz)
• CGU Workers Compensation (Vic) Limited (CGU)
• EML Vic Pty Ltd (EML)
• Gallagher Bassett Services Workers Compensation Vic Pty Ltd (Gallagher Bassett)
• Xchanging Integrated Services Victoria Pty Ltd (Xchanging).

66. Although the Ombudsman did not make any recommendations to agents, these agents said they changed some practices and processes following the Ombudsman’s 2016 investigation. This included:

• improving staff capability and organisational culture, including training and new specialised roles to support case management
• changing processes for endorsing and reviewing terminations
• introducing new initiatives, including transition support to injured workers exiting the scheme and mobile case management.

Follow-up investigation

67. 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.
68. In May 2018, the Ombudsman decided to conduct a follow-up investigation to examine whether the implementation of the recommendations from her 2016 investigation had improved:

• agent practices and decision making
• the effectiveness of WorkSafe’s oversight.

69. The Ombudsman notified the then Chair and Chief Executive of WorkSafe, the Minister for Finance and the General Managers of the five agents on 31 May 2018 of her intention to conduct the follow-up investigation. The Ombudsman also notified the then Acting Senior Conciliation Officer at the Accident Compensation Conciliation Service (ACCS), which is not a subject of the investigation but is a key stakeholder within the scheme.
70. 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, there were 4,544 active claims which had exceeded 130 weeks of weekly payments. This represented about a quarter of the 18,519 active weekly payments claims in the scheme, or about seven per cent of the total 63,085 active claims in the scheme (including those involving medical treatment only).
71. The investigation also looked at WorkSafe’s oversight during 2017-18, with a focus on:

• financial reward and penalty measures
• quality decision making audits
• handling of complaints about agent decisions and IMEs
• the IME system.

Authority to investigate

72. The Ombudsman investigates administrative actions by Victorian public authorities. The definition of an ‘authority’ includes WorkSafe and the five agents by virtue of items 13, 16 and 17 of Schedule 1 to theOmbudsman Act 1973 (Vic).
73. The investigation was conducted as an ‘own motion’ investigation under section 16A of the Ombudsman Act. The Ombudsman often uses this power to investigate possible systemic problems in public authorities.

How we investigated

74. The investigation reviewed 102 complex claim files in depth, which included the following types of decisions:

• 20 terminations of workers’ weekly payments at 130 weeks, which were randomly selected from lists of disputed and undisputed decisions
• 25 notices issued to long term claimants for failing to comply with their return to work obligations,³ including:
  • 15 randomly selected warning notices
  • 10 disputed suspension and termination notices
• all nine terminations of long term claimants’ weekly payments, where a Medical Panel found less than two years prior that they were indefinitely incapacitated for all work⁴
• 28 decisions selected based on complaints to the Ombudsman or stakeholder feedback
• 20 terminations of weekly payments audited by WorkSafe.

75. The way claims were selected for review during this investigation differed from the Ombudsman’s 2016 investigation, where all claims reviewed were selected based on concerns and complaints about agents’ handling.
76. The investigation also reviewed:

• information from WorkSafe and the agents regarding changes implemented since the Ombudsman’s 2016 investigation
• WorkSafe’s handling of 51 complaints received in 2017-18 about agent decisions and IMEs, 22 of which were randomly selected
• email records of 20 staff across the five agents for the period 1 March 2018 to 15 June 2018
• information from WorkSafe, including policies and procedures, research reports, data, WorkSafe’s contracts with the agents and reports from its audits of agent decisions
• written submissions and other information from Maurice Blackburn, the Police Association Victoria, an academic involved in workers compensation research and a number of injured workers or their support persons
• complaints the Ombudsman received in 2017-18 about the agents and WorkSafe.

77. The investigation met with WorkSafe during the investigation and interviewed16 witnesses, including:

• seven Conciliation Officers who oversee injured workers’ disputes of claim decisions, and whose tenures ranged from six to 26 years ⁵
• other stakeholders including:
  • the then Convenor of Medical Panels, who oversees independent panels which provide binding medical opinions
  • a WorkSafe Clinical Advisor, whose role is to provide advice on medical issues
  • two representatives of the Australian Medical Association
  • two worker representatives
  • two representatives of IMEs
  • a former agent employee. ⁶

78. In response to a draft of this report (the draft report), WorkSafe raised concerns about the ‘evidentiary basis’ of some of the comments included in the report by the seven ‘unnamed’ Conciliation Officers and the one former agent employee. WorkSafe said:
    
    ... In our submission, it is not appropriate to include … [anecdotal] comments in your report because the comments lack an appropriate evidentiary basis. They are largely expressions of opinion by persons who are not qualified as experts and in addition, the selection of stakeholders quoted are not representative of all stakeholders who have a role and interest in the workers compensation scheme.
    
    We are concerned that the Draft Report includes these types of prejudicial comments of unnamed Conciliation Officers making assumptions about the apparent state of mind of agent staff in making statutory decisions, but without reference in the quotes to specific supporting evidence or cases. It is not clear how the rationale and motivations of the witnesses has been tested.
    
    The quotes are from a very small sample of witnesses and they do not accurately reflect WorkSafe’s experience in dealing with the vast majority of agent staff in taking a responsible and concerned approach to managing claims and assisting injured workers.
    
    Your final report may fairly discuss the same issues and concerns relying on the case studies and documentary evidence without reproducing these unbalanced quotes from unnamed sources. ...
    
79. Gallagher Bassett also raised concerns in its response to the draft report about the ‘[u]nbalanced selection of witnesses’:
    
    ... [E]ach type of witness brings a level of bias to the inquiry, from those supportive of injured workers (worker representatives, including a plaintiff law firm) to those with particular philosophical positions … What is lacking in this investigation is the balancing views of those working in claims management, being WorkSafe and agent witnesses.
    
    The use of non-specific opinion evidence from unnamed witnesses is problematic especially when it becomes the foundation of a finding of improper behaviour. The probative value of anonymous opinion, unsupported by reference to particular claims, to which an agent cannot respond, is outweighed by the significant prejudice it causes. ...
    
80. Although the Conciliation Officers interviewed have been de-identified in this report, they did not provide evidence anonymously to the investigation. The Ombudsman remains of the view that their evidence is relevant to the investigation and this report, noting:

• the function Conciliation Officers perform in resolving disputes about claims decisions, which enables them to make firsthand observations about agent decision making and behaviour
• the independent role of Conciliation Officers
• the experience of the Conciliation Officers interviewed, whose tenures ranged from six to 26 years.

81. The Ombudsman also considers it relevant to include the evidence of the former agent employee interviewed during the investigation, given their direct experience in managing claims.
82. Additionally:

• No evidence of bias was apparent in the interviews of these witnesses, conducted by Ombudsman officers; they appeared to have no motive for providing evidence other than their concerns about the system in which they worked.
• The investigation did not rely on witness evidence in isolation; rather it was corroborated by other evidence obtained by the investigation.
• Under the Ombudsman Act, the Ombudsman may investigate in such a manner as she thinks fit and is not bound by the rules of evidence which apply to legal proceedings. Notwithstanding this, the Ombudsman considers the credibility, reliability and relevance of evidence received, as well as the weight that should be attached to it.

83. Although the investigation did not interview agent staff, the Ombudsman provided the agents the opportunity to submit information to the investigation, including details of changes they have made since 2016. The investigation also contacted two employer groups and gave them the opportunity to provide information, but no response was received.

Informal resolution of 30 claim decisions

84. Following the review of claim files, the investigation asked WorkSafe to review decisions on 23 claims which appeared unreasonable but had not been overturned through the dispute process. WorkSafe’s reviews resulted in the withdrawal of 25 decisions across 16 claim files and the back-payment of about $70,000 collectively to two injured workers.⁷
85. In addition, the investigation sought information from WorkSafe about 49 decisions WorkSafe audited in 2017-18. This resulted in the withdrawal of a further five decisions across three claims and the reinstatement of the workers’ entitlements.
86. The decisions were withdrawn because WorkSafe considered they were not appropriately issued and/or would not be sustainable if disputed at court. Some of these feature in the case studies throughout this report.

Procedural fairness and privacy

87. This report contains adverse comments about WorkSafe, five agents and an IME. In accordance with section 25A of the Ombudsman Act, the Ombudsman gave WorkSafe, the five agents and the IME a reasonable opportunity to respond to the draft report. This report fairly sets out the IME’s response dated 13 September 2019; responses from WorkSafe, Xchanging, Gallagher Bassett and EML dated 16 October 2019; Allianz’s responses dated 16 and 25 October 2019; and CGU’s response dated 17 October 2019.
88. General comments WorkSafe and the agents made in response to the draft report are outlined in Appendices 1 and 2. Comments in relation to specific issues or case studies have been incorporated into the relevant sections throughout the report.
89. In accordance with section 25A(3) of the Ombudsman Act, any other persons who are or may be identifiable from the information in this report are not the subject of any adverse comment or opinion. They are identified because the Ombudsman is satisfied:

• it is necessary or desirable to do so in the public interest and

• identifying those persons will not cause unreasonable damage to their reputation, safety or wellbeing.

90. This report also contains 59 case studies describing the experiences of 51 injured workers and their families, all of whom have been de-identified for privacy reasons. While some individuals may be able to identify themselves in the report, the Ombudsman considers it is in the public interest to include these stories.

About the workers compensation scheme

91. In Victoria, a person injured at work can make a WorkCover claim for:

• ‘weekly payments’ for loss of income if they are unable to work
• payment of the reasonable costs of medical treatment and other rehabilitative services directly related to their injury.

92. This includes workers who have a pre-existing injury or disease which has been aggravated by work.⁸
93. The scheme operates on a ‘no fault’ basis, meaning employees are covered if they are injured at work, regardless of who is at fault.
94. Other types of claims an injured worker can make include:

• an ‘impairment benefit’ claim for a once-off lump sum payment, where a worker has a permanent impairment as a result of their injury
• a common law claim for pain and suffering and/or economic loss where a worker sustains a serious injury and someone other than the worker is at fault. ⁹

Evolution of the scheme

95. To understand the current landscape, it helps to appreciate the evolution of the scheme and the considerable reforms it has undergone over the last century. These reforms have been the end-product of successive governments trying to strike the right balance between financial viability and adequate compensation for injured workers.
96. The most notable government intervention into workers compensation occurred in 1914 when new legislation made employers liable for accidental injuries that workers sustained in the course of employment. Employers were required to obtain insurance from either a state or approved private insurer to cover such injuries. Prior to this, workers could only seek compensation for injuries where employers were at fault or found to be negligent.
97. From 1914 up until the 1980s, the scheme underwent a number of changes but remained underwritten by private insurers. This eventually resulted in ‘soaring premiums’ and the ‘inadequacy of compensation payments for injured workers’.¹⁰
98. Consequently, in the mid-1980s there was a call for change which led to the creation of a new scheme known as ‘WorkCare’, characterised by a mix of public scheme regulation and private claims administration. This reformed scheme focussed on prevention, rehabilitation and compensation as a way of reducing the social costs of workplace accidents.
99. The WorkCare scheme experienced ‘turbulent teething problems’ and underwent ‘multiple modifications’ over the next two and a half decades, before eventually evolving into the current scheme today known as ‘WorkCover’. ¹¹

WorkSafe

100. WorkSafe is the State Government authority responsible for overseeing the workers compensation scheme and administering the WIRC Act.
101. WorkSafe’s objectives under section 492 of the WIRC Act include:

• managing the scheme ‘as effectively, efficiently and economically as is possible’
• managing the scheme in a ‘financially viable manner’
• ensuring appropriate compensation is paid to injured workers ‘in the most socially and economically appropriate manner and as expeditiously as possible’.

102. WorkSafe’s functions under section 493 include:

• receiving, assessing and accepting or rejecting claims for compensation
• paying compensation to injured workers entitled to it under the Act
• promoting the effective occupational rehabilitation of injured workers and their early return to work
• encouraging the provision of suitable employment opportunities to injured workers
• providing insurance and determining, collecting and recovering premiums
• ensuring the scheme is ‘competitive and fully funded’.

103. WorkSafe delegates most of its claim management and premium collection functions to the agents, who are engaged via a common contract. WorkSafe pays the agents a fee to perform these functions, in addition to financial rewards and penalties associated with performance measures.¹²
104. While WorkSafe does not directly manage claims, the WIRC Act states:

• WorkSafe is directly liable to an injured worker to pay compensation and damages in accordance with the Act (section 70).
• A function or power performed or exercised by an agent is taken to have been performed or exercised by WorkSafe (section 500(4)).
• Agents must act in accordance with the terms and conditions of their contract and any written directions by WorkSafe (section 501(2)). WorkSafe may terminate an agent’s appointment if they fail to comply with any of these (section 501(4)).

105. WorkSafe oversees agents’ management of claims through a number of different mechanisms, including performance reporting, audits of the quality of decisions, complaint handling and targeted ‘health checks’ of claims management issues.

Agents

106. Agents are responsible for the management of WorkCover claims, which includes:

• receiving claims
• assessing them to determine what compensation an injured worker is entitled to
• managing accepted claims
• defending disputed claim decisions at conciliation and court.

107. WorkSafe’s contract with the current agents runs for five years, commencing on 1 July 2016 and ending on 30 June 2021.
108. As employers choose the agent by which they are insured, agents’ share of the workers compensation market varies.
109. The current agents held the below percentage share of the market (based on premium) at 30 June 2018:

Agent market share as at 30 June 2018

Source: WorkSafe Victoria

110. Each of the agents employ specialist staff to assist case managers, including:

• Technical Managers/Advisors, who provide technical advice and review decisions which are adverse to a worker’s entitlements
• Injury Management Advisors, who provide expert injury management advice
• Dispute Resolution Officers, who review disputed decisions and attend conciliation.

Injured workers

111. Under section 18 of the WIRC Act, injured workers are obliged to notify their employer of their injury within 30 days of becoming aware of it. They can make a WorkCover claim by giving it to their employer or lodging it directly with their employer’s agent or WorkSafe.
112. Section 20 of the Act states that injured workers who cannot work must provide a ‘certificate of capacity’ from their doctor to be eligible for weekly payments. If their claim is accepted, they must provide a certificate every 28 days for the duration of their incapacity, unless special circumstances exist.¹³
113. Under section 27 of the WIRC Act, injured workers are obliged to attend an examination with an IME at ‘reasonable intervals’. If they have an incapacity for work, they also have return to work obligations, which include making reasonable efforts to return to work and participating in occupational rehabilitation.

IMEs

114. WorkSafe appoints IMEs to examine injured workers and provide an opinion about their condition, work capacity and treatment. Under the WIRC Act, an IME may be a:

• medical practitioner, such as an occupational physician, psychiatrist or surgeon
• registered dentist, physiotherapist, chiropractor, osteopath or psychologist.

115. Agents engage IMEs to provide an independent opinion regarding a worker’s injury or capacity and may use their report to make decisions about a worker’s entitlements. IMEs do not provide treatment to injured workers.
116. To be approved, IMEs must meet criteria set by WorkSafe and agree to adhere to service standards.
117. IMEs are not employees or representatives of WorkSafe or the agents. However, they are paid by the scheme for their opinion.

Treating doctors

118. An injured worker’s treating doctor(s) are responsible for the overall management of their injury, including their treatment.
119. WorkSafe can pay a worker’s treating doctor(s) for the reasonable costs of treatment for a work-related injury.
120. Throughout the management of a claim, agents may ask a worker’s treating doctor(s) to provide reports about the progress of the worker’s recovery and capacity to return to work.

Employers

121. Employers have a number of obligations under the WIRC Act when one of their employees is injured, which include to:

• acknowledge receipt of any WorkCover claims received and forward them onto their agent within 10 days (section 73)
• pay an injured worker weekly payments for loss of income if their claim is accepted and they have an incapacity for work ¹⁴
• maintain an offer of suitable employment for 52 weeks after an injured worker starts receiving weekly payments (section 103)
• appoint a return to work coordinator and develop return to work plans (sections 104 and 106).

Occupational rehabilitation providers

122. WorkSafe appoints occupational rehabilitation providers to provide services to workers to assist them to return to work. This may include an assessment of a worker’s skills, assistance preparing a resumé and applying for jobs, or organising retraining for the worker.
123. Under the WIRC Act, agents are required to give workers a choice of three occupational rehabilitation providers.
124. While WorkSafe is responsible for the registration of these providers, agents may refer injured workers to these services direct.
125. During the period examined by this investigation, there were 29 approved providers. WorkSafe said its providers deliver services to over 10,000 injured workers each year.

Private investigation firms

126. WorkSafe appoints private investigation firms to carry out ‘circumstance’ (factual) investigations and conduct surveillance of injured workers.
127. Like occupational rehabilitation providers, WorkSafe registers these providers but agents can directly engage them to provide investigative services.

Clinical Panel and Medical Advisors

128. WorkSafe has established a Clinical Panel of medical and allied healthcare professionals who undertake reviews and provide clinical and rehabilitation advice to WorkSafe, the agents and healthcare providers.
129. In addition, there are Medical Advisors based at the agents, who provide advice to claims staff on medical issues.

Claim process

Accident Compensation Conciliation Service

130. The ACCS is an independent authority established under the WIRC Act¹⁵ that provides conciliation services at no cost to injured workers, to help resolve disputes about claim decisions. Conciliation ‘facilitates the resolution of disputes by involving all parties in an informal, non-adversarial process to pursue an agreement that is fair and mutually acceptable’.¹⁶
131. The ACCS employs a number of Conciliation Officers who are assigned to individual disputes as an independent third party. Conciliation Officers primarily play a ‘facilitative’ rather than ‘determinative’ role in relation to the dispute and its resolution.
132. In most cases, a conciliation conference is held to allow the parties, including the injured worker, agent and sometimes the employer, to discuss the dispute, with a view to reaching an agreement about how it can be resolved.
133. Where a matter cannot be resolved by agreement, Conciliation Officers have the power to make recommendations, refer medical questions to a Medical Panel or issue a ‘genuine dispute certificate’ allowing the parties to go to court. In very limited circumstances, Conciliation Officers also have the power to make a direction.
134. In 2017-18, there were 13,316 disputes referred for conciliation, 59 per cent of which were resolved.

Medical Panels

135. Medical Panels can be used by the ACCS or a court to resolve a dispute where there are medical questions regarding a worker’s injuries. These questions may relate to diagnosis, causation, work capacity or the appropriateness of treatment.
136. Each Medical Panel is independent and made up of medical professionals from specialities relevant to the worker’s injuries. The Panel functions as a tribunal that provides final and legally binding answers to the medical questions referred to it.¹⁷
137. In 2017-18, there were 3,410 referrals to a Medical Panel.
138. An agent may only review a worker’s entitlements after a Medical Panel opinion if there is sufficient evidence of a ‘material change’ in the worker’s condition.¹⁸
139. The Convenor of Medical Panels oversees all panel referrals and is responsible for:

• convening each panel once a referral is received, including deciding the size and specialisations of the panel
• recommending appropriate medical practitioners to the Minister for appointment as a Medical Panel member
• providing advice to the Minister about matters relating to Medical Panels.

WorkCover Assist and Union Assist

140. WorkCover Assist is a free service WorkSafe provides to assist injured workers during conciliation. This may involve explaining the process, providing technical assistance and attending a conciliation conference to support the worker.
141. Union Assist is another free service WorkSafe funds, which can assist workers during conciliation when a referral is made by a union.

Dispute process

Key legislation and policy

WIRC Act

142. The workers compensation scheme is primarily governed by the WIRC Act, which came into operation on 1 July 2014, replacing two previous Acts.¹⁹
143. The WIRC Act sets out what happens when a worker is injured, including the compensation a worker is entitled to, the obligations of workers and employers, the functions of WorkSafe and the dispute process.
144. The objectives of the Act include to:

• ‘reduce the incidence of accidents and diseases in the workplace’
• ‘make provision for the effective occupational rehabilitation of injured workers and their early return to work’
• ‘increase the provision of suitable employment to workers who are injured to enable their early return to work’
• ensure ‘appropriate compensation’ is paid to injured workers ‘in the most socially and economically appropriate manner, as expeditiously as possible’
• ‘ensure workers compensation costs are contained so as to minimise the burden on Victorian businesses’

• ‘maintain a fully-funded scheme’
• ‘improve the health and safety of persons at work and reduce the social and economic costs to the Victorian community of accident compensation’.

Claims Manual

145. WorkSafe has created a Claims Manual to assist agents make decisions in line with the Act. The Manual outlines detailed requirements in relation to decision making and claims management, which agents are contractually required to follow.

Ministerial Guidelines

146. Agents are also contractually required to comply withthe Ministerial Guidelines as to Authorised Agent, Self-insurer, Employer and Workers’ Assistant Conduct at Conciliation Conference (2011) (the Ministerial Guidelines), which require agents to ‘take all reasonable steps to settle disputes’. They state that this includes:

• ‘meaningfully and genuinely discussing all relevant issues’ raised at conciliation
• ‘ensuring that … [the agent] maintains only the decisions which have a reasonable prospect of success were they to proceed to Court’.

Model Litigant Guidelines

147. Through their contract with WorkSafe, agents are also required to comply with theVictorian Government Model Litigant Guidelines when defending decisions through the dispute process. These Guidelines set the standard for how State Government agencies should behave when involved in legal action, which includes during alternative dispute resolution processes such as conciliation.
148. The Guidelines state agencies must:

• act fairly and consistently in handling claims and legal action brought by or against the agency
• deal with legal claims promptly without causing unnecessary delay
• make an early assessment of the agency’s prospects of success in the legal action
• pay legitimate claims without legal action
• when participating in alternative dispute resolution, ensure the agency’s representatives:
  • have the authority to settle the matter so it can be resolved in an appropriate and timely manner
  • participate ‘fully and effectively’
• not take advantage of a claimant who lacks the resources to take legal action regarding a legitimate claim
• not pursue appeals unless the agency believes it will have a reasonable prospect of success or the appeal is otherwise justified in the public interest
• consider apologising where the agency is aware that it acted ‘wrongfully or improperly’.

Charter of Human Rights and Responsibilities Act 2016 (Vic)

149. WorkSafe and its agents must comply with theCharter of Human Rights and Responsibilities Act 2016 (Vic) (the Human Rights Act) when managing WorkCover claims. However, the rights under the Human Rights Act are not absolute. WorkSafe or an agent can limit an injured worker’s rights if the limitation can be ‘demonstrably justified in a free and democratic society based on human dignity, equality and freedom’.
150. This means that when WorkSafe or an agent does something that impinges on a worker’s right, it needs to show that it is ‘demonstrably justified’. This requires consideration of ‘all relevant factors’, including the nature of the right, the importance and purpose of the limitation and whether there are less restrictive means available to achieve that purpose (section 7).

Part One: Unreasonable decision making by agents

151. Agent decision making was a key focus of the Ombudsman’s 2016 investigation. The investigation identified many examples of unreasonable decision making practices on complex claims across all five agents, such as ‘cherry picking’ evidence, ‘doctor shopping’ and defending indefensible decisions at conciliation.
152. The Ombudsman’s recommendations from the 2016 investigation sought to improve the quality of agent decisions on complex claims to ensure the most vulnerable injured workers receive the compensation they are entitled to.
153. This follow-up investigation looked at whether agent decision making practices on complex claims have improved.
154. Witnesses interviewed during the investigation variously said they observed a temporary ‘marked change’ in agent behaviour after the Ombudsman’s 2016 report was released, as agents seemed ‘more cognisant of the scrutiny’ and became ‘very tentative’ about making decisions. However, they said that as time passed, ‘old habits came back’ and it had ‘slipped back to where it began’.
155. The evidence obtained during this investigation was consistent with this view. Additional issues were also identified regarding agent decision making which were not a focus of the 2016 investigation.
156. This part of the report sets out evidence this investigation obtained regarding agents’ decision making practices, which included agents:

• unreasonably using evidence, such as IME reports and surveillance of injured workers
• delaying decision making
• engaging in unfair return to work practices
• acting unreasonably during conciliation
• making decisions contrary to binding Medical Panel opinions
• allowing employers to influence claims management.

Unreasonable use of evidence

157. 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.
158. This investigation found that since the Ombudsman’s 2016 investigation, agents have continued to unreasonably use evidence to terminate or reject complex claims in some cases by:

• selectively using evidence
• conducting surveillance of workers without adequate justification
• selectively using IMEs and ‘doctor shopping’
• posing leading questions to IMEs and workers’ treating doctors
• providing incomplete or inaccurate information to IMEs
• relying on an opinion from an IME from the incorrect specialty

159. In addition, issues were identified regarding agents’ use of evidence in rejecting mental injury claims on the basis that they were caused by ‘reasonable management action’.

Selective use of evidence

160. Agents are required to make decisions ‘based on and supported by the best available evidence’. However, the investigation identified a number of complex claims where agents selectively used evidence to terminate or reject workers’ entitlements, while ignoring other available information. This included cases where agents:

• relied on one IME opinion, while disregarding all other available evidence including reports from a worker’s treating doctor(s)
• ignored medical reports supporting a worker’s entitlement, including those from IMEs and Medical Advisors
• terminated a worker’s weekly payments when they reached 130 weeks, without sufficient evidence.

Reliance on one IME opinion

161. Witnesses interviewed during the investigation gave evidence that agents generally preferred an IME opinion over that of a worker’s treating doctor(s), particularly when the IME opinion supported a termination or rejection. Conciliation Officer A acknowledged they saw ‘the worst files or the most difficult files’ which could skew their view of claims management, but said:
     
     ... Unfortunately agents still defer to an IME opinion. They don’t truly take into consideration all medical opinions on file.
     
     …
     
     [C]ertainly with issues that come to conciliation, more often than not, the agents, if they’re relying on an … [IME] in making a decision they will stick to that decision regardless of how many treating doctors’ reports may say something to the contrary. ...
     
162. Conciliation Officer B said agents relied on an IME opinion if it supported a rejection or termination, even if it was contrary to the opinion of a worker’s treating doctor who was a specialist in their field. They said:
     
     ... [W]e get reports from workers’ specialists. Very well renowned specialists who make comments about a worker’s condition, about their capacity … And the [agents] will never change their decisions based on the worker’s medical reports. You never see it. And they say things like ‘we prefer to adopt the opinion of the … [IME]’. Even if that person doesn’t have nearly as much qualification as the worker’s own treating doctors. ...
     
163. Conciliation Officer B said these disputes were often referred to a Medical Panel, which ended up agreeing with the worker’s treating specialist.
164. Conciliation Officer C said there was ‘great reticence’ for agents to ‘look at the weight of medical evidence’ and that:
     
     ... [T]he insurer will rely solely on the fact they have an … [IME] and that seems to be what – not only makes the decision … but any alteration or change to that decision is not affected really by any other report. So a worker could bring in six reports, it wouldn’t necessarily make a difference … because the agent will say ‘well this is what our … [IME] says’.
165. The investigation found this occurred in cases even where the IME opinion the agent relied on was unclear, contradictory or inconclusive. The then Convenor of Medical Panels raised concerns at interview about agents’ reliance on inconclusive IME opinions, stating:
     
     ... [T]he IME may have said ‘I think the diagnosis might be this, but I don’t have enough information. I’d like to see an MRI’. [Or] ‘I’d like to see some additional information in order to have a diagnosis’. And … [the IME has] gone on to answer some other questions that are probably predicated on the diagnosis, and so … the answers to those questions are probably advisory answers … not definitive answers … but the agent has acted on them anyway, rather than … going back and saying ‘Okay well this is preliminary advice. We may need to go back to you [the IME] once additional information is available’. ...
     
166. Conciliation Officer E interviewed during the investigation also said:
     
     ... I think as long as an IME says something in the whole of their report that indicates for example that the worker’s got … a capacity for work … even though they might be really ambiguous in what they’re saying or may say the opposite in another sentence, they [the agent] will focus on the one sentence … And sometimes reports are quite confused … they go ‘on the one hand this, on the one hand that’ … [the agent will] just … read you out one line … [and will say] ‘but we’ve got an arguable case’. ...
     
167. In one complex claim reviewed by the investigation, Gallagher Bassett relied on an unclear and contradictory IME opinion to terminate a worker’s entitlements, despite the opinion being inconsistent with all other available medical evidence on the worker’s file. Even after acknowledging deficiencies in the IME’s opinion, Gallagher Bassett maintained its decision at conciliation.

168. In response to the draft report, CGU said:
     
     ... CGU will in most cases prefer the opinion of an IME to that of the treating health practitioner (who is generally a GP). This is because of the ‘specialist’ nature of the advice from the IME, and the fact that the IME has no existing relationship with the injured worker (which may inhibit independence).
     
     CGU acknowledges that from time-to-time, the opinions of IMEs and treating health practitioners may contradict each other. When this occurs, CGU may prefer the opinion of one IME over another practitioner, but it is not a ‘cookie cutter’ approach and each decision is based on its own merits at the time. Our process at CGU is that decisions should focus on three core components:
     
     1. How recent the information is;
     2. The relevance of all information received; and
     3. If there is conflicting opinion, the difference in the opinion and whether further clarification should be sought.
     
     In the situation where there are multiple reports with conflicting information, and an agent uses part of one of the reports to make a decision, [it] does not mean that the use of the information is inappropriate. Reliance on a specific part of a report where there is conflicting information will be determined following consideration of the above core components for specific circumstances of the decision required/ claim. ...

Opinions of IMEs or Medical Advisors ignored

169. The investigation also identified instances where agents chose to ignore opinions they had requested from IMEs or Medical Advisors if they did not support a termination or rejection.
170. The Police Association Victoria raised concerns about the practice of Victoria Police’s agent, Gallagher Bassett, disregarding IME reports and other ‘critical evidence’ which would support a member’s claim. The Police Association said:
     
     ... [It] has realised if the agent obtains evidence that is contrary to the insurer’s position, it is often disregarded in preference for the narrative of the employer or the [employee’s] manager. If conflicting versions of an incident are reported by employer and employee during an investigation, the case is routinely rejected, regardless of available evidence to support the employee. ...
171. The sample of agent staff emails obtained by the investigation provided examples of agents choosing to ignore IME opinions where they were favourable to the worker, one of which is outlined on the following page.

172. The following case study is an example of a complex claim reviewed by the investigation where Xchanging ignored the opinions of three WorkSafe Medical Advisors to reject a worker’s request for repayment of two medical procedures.

173. In response to the draft report, WorkSafe said it considered the statement that agents ‘ignore’ IME reports is ‘not an accurate overall representation of the use and application of IME reports’.

130-week terminations issued without sufficient evidence

174. Witnesses interviewed during the investigation raised specific concerns about agents unreasonably terminating workers’ weekly payments at 130 weeks without sufficient evidence. In 2017-18, 451 of these terminations were issued across the scheme.
175. Injured workers who are incapacitated for work are only eligible to receive weekly payments for up to 130 weeks, unless there is evidence they are likely to have no capacity for any work for the foreseeable future (ie ‘indefinitely’). Agents must terminate a worker’s weekly payments at 130 weeks if the worker has a work capacity, or their incapacity is not likely to continue indefinitely.
176. In response to a recommendation from the Ombudsman’s 2016 investigation, WorkSafe provided additional guidance to agents in the Claims Manual about the evidence required to terminate a worker’s entitlements at 130 weeks. The Claims Manual now states that agents can only terminate weekly payments because a worker’s incapacity is not likely to continue indefinitely where:

• medical opinion confirms that the worker will have a capacity for suitable employment in the foreseeable future
• the normal or expected course of recovery is that the worker will have a capacity for suitable employment based on evidence-based clinical practice and/or previous experience
• the duration of the worker’s current incapacity can be defined and is proximate, eg < 9 months
• there are reasons why the worker will gain a capacity for suitable employment, eg surgery recovery, gaining a qualification etc and
• there is consistent information supporting the change of capacity.

177. Despite the clearer requirements, information provided to the investigation suggested that in some cases, agents have continued to make these decisions without the required evidence.
178. Conciliation Officer B told the investigation:
     
     ... They [the agents] are making those decisions based on those very ambivalent claims about a worker’s capacity into the future. And the amount of times I’ve said, there’s a crystal ball that’s being used here to determine this person’s capacity going into the future. And it’s not really saying the worker will have a capacity. And yet they’re basing their decisions on those IMEs that say ‘they may’. ...
179. A worker representative similarly said at interview that they had continued to observe agents relying on inconclusive IME opinions regarding the duration of a worker’s incapacity, despite the requirement that it be ‘defined’ and ‘proximate’. They queried agents’ reliance on such IME opinions and said ‘realistically until we actually know what the worker can do, why do we say “maybe?”’.
180. The following case study is an example of a complex claim reviewed by the investigation where Xchanging terminated a worker’s weekly payments at 130 weeks, without clear and conclusive information about when the worker could return to work.

181. The investigation also identified two other examples. Example 1
     

Use of surveillance without adequate justification

182. Agents may use surveillance as a claims management tool to ‘discreetly determine a worker’s activities and capabilities’. WorkSafe has a panel of registered private investigation firms that agents can engage to covertly watch a worker’s activities and movements, which may be recorded through photographs, video footage and observation logs. Private investigators may also undertake searches of workers’ social media accounts (or those of their family members), as well as other publicly available information about them.
183. In 2017-18, the agents collectively spent nearly $9 million on surveillance.²⁰
184. According to the WorkSafe Claims Manual, agents are only permitted to conduct surveillance of a worker if there is ‘adequate evidence’ they may be misrepresenting their injury, claiming excessive injuries, malingering or involved in committing fraud (for example, working while also receiving WorkCover payments). Noting the privacy implications of surveillance, agents also must have:

• considered or tried less intrusive methods of investigation and found them to be ‘ineffective or inadequate’
  
• assessed the benefits of obtaining the surveillance as outweighing ‘to a substantial degree’ the intrusion on the worker’s privacy
• considered an individual’s right to privacy and reputation under the Human Rights Act, unless a limitation of the right is ‘demonstrably justifiable’ taking into account ‘all relevant factors’.

185. Agents’ use of surveillance was not examined in the Ombudsman’s 2016 investigation, nor was it a focus of this investigation. However, when reviewing complex claims files for this investigation, numerous instances were identified where agents conducted surveillance of a worker without adequate justification.
186. In some cases, agents did not record any reasons for the surveillance, other than a statement that it had been approved by a manager. In other cases, agents recorded reasons, however, they did not reflect the criteria in the Claims Manual.
187. Examples of reasons that agents conducted surveillance in the complex claims reviewed are outlined on the following pages.

188. In the following case study, Gallagher Bassett conducted surveillance of a worker, so it could then ‘discuss terminating the claim’. This occurred despite the absence of evidence on the worker’s claim file to suggest she had been dishonest about her work capacity.

189. Witnesses raised concerns with the investigation about agents’ use of surveillance for terminations and queried the weight that should be afforded to surveillance material, given it only provides a ‘snapshot’ of a worker’s activities at a point in time and can sometimes be open to subjective interpretation.
190. A former agent employee said at interview that while the General Manager of the agent had ‘put out an instruction’ about using surveillance ‘properly and appropriately and only when justified’, middle management ‘offline’ said:
     
     ... We need to do more surveillance and we need to do surveillance on people with mental injury claims and we need to discover if they’re working or if they’re faking it. ...
191. The former agent employee reiterated the message from middle management was ‘more and more surveillance please’, which they said was ‘inappropriate a lot of the time’ and took away from ‘the focus of genuinely helping someone’. When investigators queried the reason for this instruction, the former employee said:
     
     ... To get the termination … the instruction from middle management was … get surveillance, get the independent medical examination, get the IME to comment on the surveillance and get the termination to try to prove that somebody’s work capacity was far greater than what they were presenting in the IME. ...
192. The then Convenor of Medical Panels highlighted the importance of viewing surveillance material ‘fairly’, ‘appropriately’ and ‘objectively’, stating:
     
     ... [I]t might be that they’ve got multiple IME opinions saying ‘no current work capacity’ but … the agent might obtain two minutes of footage where the person’s seen reaching for the boot of the car and putting the car boot down and they want to make an adverse decision [termination]. The IME might say ‘oh well, that changes my opinion, they’ve suddenly got a work capacity’. And it might be that it reaches the Medical Panel, and the Medical Panel says ‘well, this is only two minutes and it’s one movement’ … it’s about understanding how to view material fairly and appropriately and objectively. ...
193. They further said:
     
     ... One of the things that we look at very rigorously when we look at DVD surveillance on a Medical Panel is ‘Yes, that’s what we saw. But are there things here, are there gaps here where there could be things that we’re not seeing but which were captured, which were relevant to this matter?’ So it’s about looking at the surveillance … in a very analytical way … because it may tell a particular story but it may not be a representative story. ...
194. The then Convenor said Medical Panels see cases where agents have relied on surveillance to terminate a worker’s entitlements. He said that in about two thirds of those matters, the Panel:

• did not consider the surveillance useful in their assessment of the worker or
• considered it useful, but ultimately concluded the worker had no work capacity.

195. Conciliation Officer G said at interview agents sometimes used surveillance that was inconsequential, and described an example:
     
     ... [T]here was some surveillance that was really nothing. The man went to the shop to buy himself a couple of cans of something. Got in his car, didn’t bend his back, as far as I could see, and the IME saw that and said ‘oh, he can do a lot more than he’s telling everyone he can’. Which just isn’t right
     …
     People are allowed to go to the shop. I mean they’d done surveillance over four days, and one day he went out for 20 minutes out of those four days. And so it’s this inability to put things in context but rather just take something they [the agent] think is helpful [and then] run it through an IME. ...
196. A worker representative similarly said that agents often conduct 15 hours of surveillance and use three minutes of video footage against the worker. They said agents provide ‘snippets’ of a surveillance report to IMEs, along with a request for a supplementary report, to ‘question the credibility of the worker’ and see if it changes their initial opinion.
197. Conciliation Officer B said agents provide surveillance material to IMEs which can sometimes ‘completely change their opinion’, despite the surveillance material just showing the worker ‘living their life as best as they can, not actually going out and dancing’.
198. In response to the draft report, Gallagher Bassett said:
     
     ... Inclusion of the narrative around the efficacy of surveillance evidence … appears to be outside the scope of the investigation, and aimed at the question of whether the tool of surveillance has a role to play in claims management. ...
199. The following case study is an example where an agent used surveillance to terminate a worker’s entitlements, despite an IME having reviewed the surveillance material and finding the worker could not return to work. This case also highlights issues around the subjective interpretation of surveillance material.
     

200. The investigation provided WorkSafe a list of 19 complex claims where issues were identified regarding agents’ use of surveillance. WorkSafe said it reviewed these claims and ‘did not identify any significant issues about the appropriate use of surveillance’. However, it said ‘some quality issues were identified particularly around documenting reasons for undertaking surveillance’.

Selective use of IMEs

201. Agents’ selection of an IME to examine an injured worker should primarily be based on matching the speciality of the IME to the worker’s injury, medical treatment, and return to work or claim issue to be resolved. WorkSafe states that where possible, agents should consider arranging an examination with an IME who has previously examined a worker, noting that:
     
     ...IME familiarity with worker can also support IME in providing opinion and enhance worker experience, eg the IME can comment on how the worker’s condition has changed over time ...
202. WorkSafe states that agents must also ensure that:

• selection of an IME is undertaken in a ‘fair and equitable manner without preference to particular IMEs’
• they are not motivated by the opportunity to obtain an opinion from an IME who is considered to hold particular views on specific medical conditions or treatment issues.

203. The Ombudsman’s 2016 investigation identified cases where, contrary to these requirements:

• agents’ choice of IMEs was motivated by or based on a belief the IME would provide an opinion that would support a termination or rejection
• agents had engaged in ‘doctor shopping’ by seeking opinions from multiple different IMEs, where previous IMEs’ opinions did not allow the agent to terminate or reject a worker’s claim.

204. Since then, measures have been introduced to prevent such behaviour, which include:

• centralising all bookings for psychiatric IME examinations to WorkSafe ²¹
• monthly reporting of IME usage by each of the agents to identify and address any overuse of certain IMEs.

205. In response to the draft report, WorkSafe also highlighted that agents are required to provide IME reports to a worker’s treating doctors to ‘provide greater transparency on information contained in [the] report’.
206. A former agent employee interviewed during the investigation discussed the introduction of monthly reporting on IME usage, stating that the results were shared among staff, along with an instruction from senior management to ‘share the load and not continually select the same individual [IME]’.
207. The sample of agent staff email records obtained by the investigation also suggested that the introduction of this reporting had led to a focus on ensuring an even spread of IME usage. For example, an email from an Allianz manager highlighted Allianz’s aim to ‘reduce the over utilisation of any particular IME’ and encouraged staff to ‘spread the use around and to not be too overzealous’ with certain IMEs. In response, another manager wrote:
     
     ... Let’s ensure we keep this in mind when receiving IME reports. We get a good one from someone we don’t use that much - let’s send them some more. Important to note, this is not aimed at using IMEs that get us outcomes, but the purpose is … a report that is very thorough in relation to their opinions that can be utilised to help support … [injured workers] back to work/health. ...
208. While the new measures appear to have increased scrutiny of IME usage and reduced the opportunities for selective use of IMEs, the investigation received evidence suggesting the practices identified by the Ombudsman’s 2016 investigation have continued to occur in some cases.
209. A former agent employee interviewed during the investigation said agent staff kept ‘offline’ lists of IMEs who had provided an opinion that resulted in a termination or rejection. They said:
     
     ... There would also be conversations about … ‘that’s the best doctor for that type of injury’ … ‘that’s the best doctor that’s going to tell you about a knee injury [that] isn’t related to work’ and ‘that’s the best doctor to tell you that carpal tunnel isn’t work-related’. ‘That’s the best doctor that’s going to tell you that back surgery isn’t appropriate’. ...
210. The Ombudsman received a complaint in mid-2017 from another former employee of one of the other agents who said this also occurred, stating:
     
     ... The branch manager advised of the last ombudsman findings in which the agent[s] were not to use ‘preferred providers’ of … [IMEs] and were not allowed to keep a list of … [IMEs] most likely to terminate claims and give the insurer a favoured outcome. The branch manager said … ‘although this is the case each team still have this list of preferred providers for IMEs we are just more discreet about this and which folders they were kept in’. She thought that was funny. ...
211. At the time, the Ombudsman referred this matter to WorkSafe, which in turn referred the matter to the agent. The agent said it was ‘unable to find evidence to substantiate the allegations made’.
212. The sample of agent staff emails obtained by the investigation also suggested in some cases, agents’ selection of IMEs may have been motivated by a belief that the IME would provide an opinion favourable to the agent. For example, an email from a CGU Technical Advisor to other CGU employees said:

213. A CGU Manager sent an email in response stating:

214. Witnesses interviewed during the investigation spoke about agents’ reliance on IMEs who often provided favourable opinions to them. Conciliation Officer C said, while they did not see every IME report:
     
     ... [I]t’s quite true that we see reports from certain IMEs and it’s almost like … you could write the report for them, because you know what the report is going to say. ...
215. Conciliation Officer G said reports from particular occupational physician IMEs often provided favourable opinions to agents and said:
     
     ...I think that category of doctor is problematic because it’s a bit of one size fits all … it’s a cookie cutter approach, you could substitute the worker’s name and you’re pretty much reading the same thing.
     …
     [I]t’s frustrating because I think that the choices are still made around these doctors … it validates this very mean-spirited approach to claims. And if upon scrutiny by a Panel accords they’re not accepted, how is it that WorkSafe still endorses what they do? And agents get to choose to insert them in these processes that only create hurdles. The question is whether the worker has the energy to clear the hurdles. ...
216. The then Convenor of Medical Panels also said Medical Panels saw ‘patterns … of approach with particular IMEs’. He said he could only comment on the proportion of IMEs’ names seen in referrals to Medical Panels, but said ‘we do certainly see patterns’.
217. Conciliation Officer B said from the disputes they see at conciliation, they had observed there were a number of IMEs who ‘always provide very agent-friendly reports’. They said they believed there was ‘still a particular drive to use them [IMEs] in a dishonest way’, when agents ‘know that they’re going to get a certain opinion’ from some IMEs.
218. Conciliation Officer F said they believed there were ‘still certainly preferred IMEs’ and they ‘would have a perception that most of those IMEs are not going to be in favour of the worker’.
     In response to the draft report, Gallagher Bassett said:
     
     ...The conclusion … that abuse of the IME selection process is continuing is based upon the unspecified opinion evidence of anonymous former agent employees and is unsupported by any corroborative evidence. Indeed, the only evidence on this issue … supports the effectiveness of changes since 2016. The reported opinions of the conciliation officers and the Convenor of Medical Panels relates to the quality of IME reports, not alleged abuse of IME selection. The allegation by a conciliation officer of agent “dishonesty” in selection of IMEs … is so extreme, unsupported and prejudicial that it ought to have been excluded from the draft report. ...
219. CGU said in response to the draft report:
     
     ... [I]n appointing an IME, the intent is to obtain a specialist opinion about an injury, recovery strategy, prognosis and treatment pathways to inform and assist in the return to work of an injured worker.
     
     The selection of an IME is based on specialty, and availability. It is commented in the draft report that agents ‘doctor shop’, however the determination of which IME to use is more specifically based around the:

• Speciality as it relates to the injury;
• Quality of reporting (historical assessment), including timeliness of the delivery of the report;
• Availability of the IME at the time (to prevent delays); and
• Rate of usage of a particular IME (so as not to incur criticism of preference or over-use).

‘Doctor shopping’

221. The investigation also identified complex claims where there was a perception that agents had engaged in ‘doctor shopping’ for an IME opinion to support a termination or rejection.
222. This included examples of potential ‘doctor shopping’ WorkSafe highlighted in its audits of agent decision making in 2017-18. Examples of its comments from these audits are outlined below.
223. In one complex claim, Xchanging sent a worker to a variety of different IMEs over a period of about 15 years, until it received an opinion suggesting the worker may be able to return to work. This was despite the weight of medical evidence suggesting she was severely and possibly permanently incapacitated for work as a result of her work-related injuries.

Comments from WorkSafe audits 2017-18

‘IME … is of the opinion that the worker’s injury was misdiagnosed and was never related to employment in any way. Previous IMEs … and treating GP are of the opinion that the worker’s condition is work related and surgery has been approved on claim. It is not clear from the notice why the opinion of … [the latest IME] was considered to have more weight than other opinions previously obtained. Given IMEs were previously obtained from different practitioners, this gives the perception of opinion shopping particularly as the latest IME has been used to terminate the claim.’

‘2 IMEs with different practitioners within 3 months, this gives the impression of opinion shopping.’

‘While CWC [current work capacity] has been demonstrated, 2 IMEs within a short period of time with differing opinions gives the perception of doctor shopping.

224. In another case outlined below, Gallagher Bassett sent a worker to seven different IMEs within less than three years, until it received opinions which enabled it to terminate the worker’s entitlements.

Leading questions to IMEs and treating doctors

225. When seeking a report from an IME or an injured worker’s treating doctor, agents provide a list of questions they would like answered. These usually relate to the worker’s injury, what caused it, how they are recovering, the appropriateness of their treatment, and whether they can work.
226. After receiving a report from an IME, agents may ask the IME to provide a supplementary report addressing further questions, without re-examining the worker. This may occur where less than six months has elapsed since their examination of the worker and:

• clarification around the opinion in their original report is required
• additional information has become available that the agent would like the IME to consider and comment on
• there are additional questions the agent would like the IME to answer.

227. WorkSafe has developed a range of standard questions agents use in requests to both IMEs and treating doctors; however, they may also add tailored questions specific to the circumstances of a worker and their injury.
228. While it is reasonable for agents to do this, the Ombudsman’s 2016 investigation found that in some cases, agents posed leading questions to IMEs to elicit a certain opinion. This included cases where agents:

• asked IMEs to respond to questions ‘without factoring the worker’s age’, despite the WIRC Act requiring that this be considered when assessing a worker’s capacity to return to work in ‘suitable employment’
• requested supplementary reports to try to change an IME’s opinion or gain further evidence to support a termination or rejection.

229. While only limited further instances were identified during this investigation of agents asking IMEs not to factor in a worker’s age, further examples were identified of agents posing other leading questions to IMEs, as well as injured workers’ treating doctors.
230. The following case study is one example, where Gallagher Bassett used information about a worker with post-traumatic stress disorder (PTSD) playing golf to try to change an IME’s opinion.

231. In another case, Allianz terminated a worker’s weekly payments after leading a psychiatric IME to say the worker no longer had a work-related psychiatric incapacity, because their work-related physical injury had resolved.

232. The investigation identified two other examples.

233. The investigation also identified examples of agents posing leading questions to a worker’s treating doctor, one of which is outlined below. In this case, CGU attempted to influence the opinion of a worker’s doctor by providing leading information and exerting pressure on the doctor to certify the worker as fit for employment.

234. CGU also said in its response to the draft report:
     
     ... As a generalisation, the strategy to request a supplementary report or to ask specific questions is to seek greater clarity around components of a report, to address conflicting information between the report received and opinions of others, to seek clarification where additional information is received, and to ask questions which may not have been adequately addressed in the report. ...

Failure to provide documents to IMEs

235. WorkSafe requires agents to provide an IME copies of relevant documentation relating to an injured worker’s injury and claim, to inform their examination of the worker. This is particularly important in complex cases where a worker has been incapacitated for a number of years or has multiple injuries, as an IME may have had no previous contact or involvement with an injured worker prior to the examination.
236. Agents are required to provide these documents to an IME at least five days before the scheduled appointment, to allow the IME enough time to prepare. WorkSafe states that agents should provide an IME:

• details about if and when the IME has previously examined the worker
• any previous IME reports from different IMEs that are not outdated
• any treating doctor(s) reports, x-rays, scans, copies of radiology reports, surgical reports and assessor reports.

237. Other relevant information may include:

• the worker’s previous claim history
• the worker’s claim form and employer injury claim report
• certificates of capacity (possibly the first and last issued)
• employer information, including details of return to work planning and arrangements
• occupational rehabilitation reports
• the worker’s pre-injury and/or current position description.

238. The Ombudsman’s 2016 investigation identified that in some complex claims, agents failed to provide key information and reports to IMEs, which sometimes led to IMEs providing an opinion without being fully informed of the worker’s circumstances. In some cases, agents then relied upon such opinions to terminate or reject the worker’s claim.
239. This investigation identified further instances where this occurred, one of which is outlined in the case study on the following page. In this case, Gallagher Bassett failed to provide an IME with any information or documentation about a worker’s previously accepted claim for a similar mental injury at the same workplace. Gallagher Bassett then relied on the IME’s opinion to reject the worker’s claim.

240. The investigation also found in a number of complex claims reviewed by the investigation that agents had provided IMEs with outdated reports they had relied on to terminate workers’ entitlements, even where those reports had been superseded by a contrary and binding Medical Panel opinion.
241. In addition, concerns were raised with the investigation about delays in agents providing information to IMEs prior to their examination of an injured worker. An IME representative said at interview that agents’ ‘lack of organisation’ had caused delays in documents being provided to IMEs before an examination, which affected their ability to complete proper examinations. They said such delays were making complex cases ‘untouchable’ for IMEs because the volume of documents expected to be reviewed in a short period was too great.
242. The IME representative said that in about 100 cases in early 2019, the agent provided documents to the IME only two days prior to the scheduled examination. When asked what occurred if an IME did not receive the relevant documents from an agent before an examination, the IME representative said ‘very often [IMEs] continue’, despite having no background information about the worker’s injury and claim.

Reliance on IME from incorrect specialty

243. When selecting an IME to examine an injured worker, agents must ensure they match the speciality of the IME to the worker’s injury, medical treatment, and return to work or claim issues to be resolved. Agents may seek advice from a Medical Advisor about the appropriate choice of specialty if assistance is required.
244. The Ombudsman’s 2016 investigation did not identify concerns about agents’ choice of IMEs by speciality. However, this investigation found in a number of complex claims, agents had unreasonably terminated a worker’s entitlements by relying on an opinion from an IME from the incorrect specialty. This primarily related to complex claims where a worker had originally sustained a physical injury and later developed a secondary injury, namely:

• chronic pain syndrome
• mental injury.

245. In several claims reviewed, agents did not arrange for an IME of the appropriate specialty to assess the secondary conditions. Instead, agents relied on an IME’s opinion about the worker’s physical injury to terminate their entitlements.

Chronic pain syndrome

246. A number of complex claims reviewed by the investigation involved workers who had been diagnosed with chronic pain syndrome after sustaining a physical workplace injury. Chronic pain syndrome causes persistent pain which may have no physical basis.
247. WorkSafe told the investigation that chronic pain syndrome or pain related disorders are ‘challenging conditions to assess and manage as there are almost always other presenting ailments including anxiety and depression’.
248. While a psychiatrist IME or occupational physician may comment on a worker presenting with symptoms indicative of a pain disorder, WorkSafe said the appropriate IME specialty to assess such conditions and their impact on a worker’s capacity to return to work is a pain specialist.
249. In a number of the complex claims reviewed by the investigation, workers were not assessed by a pain specialist IME. The impact of this was that agents relied on opinions from IMEs not qualified to assess chronic pain syndrome to make claim decisions that were adverse to workers. This practice was confined to one agent, Gallagher Bassett, however, other evidence suggested there may be opportunities to improve understanding about the assessment of chronic pain syndrome across all five agents.
250. At interview, the then Convenor of Medical Panels raised concerns about agent practices regarding the assessment of chronic pain, stating:
     
     ... [T]he chronic pain issue is a very significant area because it’s an area of medicine that’s not particularly well understood to start with, and where there is some uncertainty … we’re seeing all sorts of management practices and approaches to diagnosis there that we find are a problem. ...
251. The then Convenor said not enough workers with chronic pain conditions were referred to pain specialists and, even when they were, agents had difficulty interpreting these opinions to inform decision making. The then Convenor said a ‘common’ error observed by Medical Panels was agents’ assumption that if a worker no longer had a physical injury and was not diagnosed with a psychiatric condition then ‘there’s nothing’. The then Convenor said this was incorrect as ‘there are conditions in between’. He said:
     
     ... [I]f the pain arises from what was originally [a] musculoskeletal injury … they need to have seen the appropriate musculoskeletal specialist, orthopaedic surgeon, neurosurgeon, rheumatologist to sort that part out. And then the chronic pain part could be … seen by a person with a pain discipline specialty. But the problem then for the agent is they’ve got this opinion from orthopaedic surgeons and neurosurgeons and this opinion from pain specialists, how do they put it all together? ...
252. The then Convenor said Medical Panels were able to better assess these conditions due to ‘the luxury of being able to put together a Medical Panel which can contain musculoskeletal specialists, psychiatry, and pain specialty disciplines’. He said a Panel was able to ‘come up with a much … better approach to the problem than the IME process did’.
253. The following case study is an example of a complex claim the investigation reviewed where Gallagher Bassett required a worker with a long term back injury, chronic pain disorder and mental injury to participate in occupational rehabilitation without arranging for a pain specialist IME to examine him. The worker’s treating doctors said it was ‘essentially futile’ to try to return him to work given the permanency of his condition and that requiring him to do so was increasing his anxiety, stress and pain.

254. In another complex claim reviewed by the investigation, Gallagher Bassett sent the worker to an IME of the incorrect specialty to assess her ongoing pain symptoms. Without obtaining an opinion from a pain specialist IME, Gallagher Bassett attempted to force the worker to return to work, issued her non-compliance notices for failing to return to work and then terminated her entitlements (return to work non-compliance notices are further discussed on page 84).

255. Another example the investigation identified is outlined below, where Gallagher Bassett rejected a worker’s request for pain consultations and required her to participate in occupational rehabilitation based on the opinion of an IME of the incorrect specialty.

Secondary mental injury

256. The investigation also identified instances where there was information to suggest the worker may have suffered a secondary mental injury, but the agent did not arrange for a psychiatrist IME to assess them to ascertain the impact on work capacity and treatment needs. In some cases, agents also terminated the worker’s entitlements based on their physical injury alone, without considering the possibility of a secondary mental injury.

257. WorkSafe’s audits of agent decisions in 2017-18 also highlighted examples where agents had not adequately assessed a worker’s secondary mental injury. This included a case (see page 162) where WorkSafe commented:
     
     ... The T/D [treating doctor] indicated in contact prior to the notice that the … [worker’s] psychological condition was related to employment. While this was not reflected on certs [certificates of capacity] or a request for treatment received at the time of the notice, a psych IME could have been arranged to determine impact on CWC [current work capacity] as this may impact on the sustainability of the decision. ...

Unreasonable rejection of mental injury claims caused by ‘reasonable management action’

258. While this investigation focused on ‘complex claims’ typically involving long-term periods of incapacity and/or medical treatment, concerns were raised with the investigation about agents’ initial rejection of mental injury claims because the injury was caused ‘wholly or predominantly’ by ‘reasonable management action’. Many of these decisions were complex in their own right due to the circumstances which gave rise to the mental injury and claim.
259. Section 40(1) of the WIRC Act states that an injured worker is not entitled to compensation in respect of a mental injury caused ‘wholly or predominantly’ by:

• management action taken on reasonable grounds and in a reasonable manner by a worker’s employer
• a decision of an employer on reasonable grounds to take, or not to take, any management action
• any expectation by a worker that any management action would, or would not, be taken or any decision made to take, or not to take, any management action.

260. The WIRC Act states that ‘management action’ includes, but is not limited to:

• appraisal of a worker’s performance
• counselling of a worker
• suspension or stand-down of a worker’s
• employment disciplinary action
• transfer of a worker’s employment
• demotion, redeployment or retrenchment
• dismissal
• promotion
• reclassification of a worker’s position
• provision of leave of absence to a worker
• provision to a worker of a benefit connected with their employment
• training
• investigation by a worker’s employer of any alleged misconduct of the worker, or any other person, in which
• the worker was involved or to which the worker was a witness
• communication in connection with any of the above.

261. Of the 1,686 mental injury claims rejected across the scheme in 2017-18, about 60 per cent of these (1,018 claims) were rejected on the ‘reasonable management action’ ground.
262. A number of witnesses interviewed during the investigation raised concerns about agents’ application of this ground to reject mental injury claims.
263. Conciliation Officer G said they understood the rationale for the inclusion of the reasonable management ground in the Act, stating:
     
     ... I know that this is a real scheme concern, and if we’re talking about keeping the thing viable, there has to be some boundaries around what’s compensable and what isn’t. ...
264. However, they said:
     
     ... What is usually overlooked is the aspects of the test, so you know, there’s a couple of aspects to it. There’s diagnosed injury, then it needs to have been caused wholly or predominantly by the reasonable management action, and that’s generally ignored … So yes, you might identify reasonable management action and a chronology of events that suggests it’s had some kind of impact. But was there really something else going on that was much more dominant that has led the worker to this injury that is compensable? ...
265. Conciliation Officer G further said there was ‘no respect’ for the policy intent of the provision and it was just about:
     
     ... Finding an argument to hold out on a claim, rather than looking constructively about what should happen, how it could be better managed, and how you really look after people’s health. ...
266. Conciliation Officer H said agents commonly used ‘factual grounds’ (such as the ‘reasonable management action’ ground) to reject new claims ‘when no factual information … [was] being relied on’. They explained that disputes involving such factual issues cannot be referred to a Medical Panel as they can only determine medical issues and said:
     
     ... My cynical self wonders whether these grounds are being … [used] in an attempt to eliminate the option of a Medical Panel referral as Agents have a clear preference for Genuine Dispute certificates in many instances, despite the costs of court.
     …
     I would argue that the Act is too broad in what constitutes ‘management action’ … Indeed, I think it contributes to greater disputation, longer absences from work and more overall damage to individuals and their relationship with their employer. ...
267. Conciliation Officer C said at interview that agents do not look at whether the injury was caused ‘wholly or predominantly’ by the management action. They said often management action taken by the employer was reasonable, but it was not necessarily the whole or predominant cause of the injury.
268. A worker representative similarly said at interview they had ‘major concerns’ regarding agents’ use of the ‘reasonable management action’ ground to reject claims and stated that agents did not take into account ‘the whole picture’.
269. The Police Association Victoria raised concerns about the high number of police officers’ mental injury claims rejected on the reasonable management ground by the agent responsible for managing police claims, Gallagher Bassett. It provided a number of case examples to the investigation, one of which is outlined on the following page.
270. In this case, Gallagher Bassett rejected a worker’s mental injury claim on the basis that it was wholly or predominantly caused by reasonable management action, despite the evidence suggesting the worker had experienced a relapse of previous work-related post-traumatic stress disorder (PTSD). The worker in this case was subject to performance management prior to lodging his claim, however, there was no evidence that this was the whole or predominant cause of his injury.

271. In another case identified from the sample of agent staff emails obtained, CGU rejected a mental injury claim on the ‘reasonable management action’ ground, despite initially concluding there was no evidence to support this and acknowledging it was ‘by no means a strong argument’.

Delays in decision making

272. Concerns were raised with the investigation about delays in decision making by agents and the consequent impact on an injured worker’s recovery. The concerns primarily centred on the timeliness of agents’ approval or rejection of requests for:

• reinstatement of entitlements due to further incapacity
• treatment.

Requests for reinstatement of entitlements

273. An injured worker’s entitlement to weekly payments and/or medical treatment ceases if they recover and can make a full return to work. However, if the worker subsequently suffers a relapse, they may request their agent reinstate or ‘reactivate’ their entitlements.
274. While an agent must decide whether to initially accept or reject a claim within a strict 28-day legislative timeframe, there are no such timeframes for reinstatement requests. This is despite workers facing similar circumstances, where they are unable to work, have limited or no income and cannot access funding for medical treatment until their claim is accepted.
275. Requests for reinstatement of entitlements can involve complex circumstances which warrant exploration before an agent is able to make a decision. This may include looking at the cause of the worker’s further incapacity and whether it is related to their original work injury. While this is appropriate, the evidence obtained during the investigation showed that decision making was unreasonably delayed in some cases.
276. The Police Association Victoria told the investigation that its members have waited up to six months to have their entitlements reinstated after experiencing a relapse and highlighted the significant impact such delays can have on a worker, particularly those with a mental injury.
277. The following case study is an example of a claim highlighted by the Police Association Victoria. The worker waited six months for Gallagher Bassett to reinstate his payments, during which time the worker said he was suffering financial hardship.

278. Although case study 17 relates to Gallagher Bassett, CGU highlighted the internal procedure it has introduced to deal with reinstatement requests in its response to the draft report. CGU said:
     
     When a request for reinstatement or reactivation is received, it needs to be thoroughly reviewed to determine if there is an entitlement to weekly compensation and/or treatment under the claim.
     
     In a lot of cases, these requests are typically for claims which have had significant time without compensation or being active. This requires an Agent to determine the cause of deterioration which may entitle them to compensation, through information gathering from several different sources (for example, practitioners, employer/s and/or independent examiners).
     
     In December 2018, CGU examined its internal review procedure of reinstatements and reactivation requests. During this assessment we made several changes to enhance our decision-making process, such as ensuring we keep the worker better informed and improving oversight of outstanding decisions within the business.
     
     CGU’s expectations are that where possible, the request is assessed, and a decision made within a 28-day timeframe. For any claim where the decision has not been made within 28 days (for example, awaiting an IME report, practitioner information or worker information), the claim must be conferenced every 4 weeks until the decision has been made and to ensure the employer and injured worker are updated on the progress of the request.
     
     For any claim where the decision is not made by the 28th day, a discussion is to be held with a senior staff member and a case note added as to why a decision can’t be made and any follow up actions that need to be undertaken.
     
     In addition, we have created a reinstatement and reactivation tracking database to capture ongoing reviews and improve business oversight on outstanding decisions.
     
     CGU acknowledge that this is an area of importance and we will be scheduling further training with staff to ensure they understand this and how we service these injured workers.
279. The investigation identified cases where workers resorted to requesting conciliation about an agent’s failure to respond to their reinstatement request, in an attempt to get the agent to make a decision one way or the other. This resulted in workers unnecessarily being involved in the dispute process twice, as if the agent then rejected their request, they had to request conciliation again to dispute the substantive decision.

280. The sample of agent staff email records reviewed by the investigation also provided examples of this issue.

281. In its response to the draft report regarding the two above examples, EML said:
     
     [I]t should be noted, that both claims relate to reinstatement requests following a significant period since the workers last received compensation … [In Example 1 above] there was an 11-year gap … [in Example 2 there was] a 12-year gap. In both cases, acknowledgement of the reinstatement requests was prompt. Due to the significant gap since the last payment of compensation, and the fact that there was intervening employment (and not with the pre-injury employer), further evidence was required to support the reinstatements. The process was delayed by the difficulty in obtaining medical records, and in one case, the fact that the IME used to provide an assessment had been struck off the IME list by WorkSafe, part way through the evidence gathering process. In one case, the worker’s current contact details were not up to date because of the large gap since receiving compensation ... In each case, the workers were kept informed of the process and the reasons for the delay …

282. Some of the Conciliation Officers interviewed during the investigation raised concerns about the number of requests for conciliation regarding an agent’s failure to respond to a reinstatement request. In 2017-18, 174 such requests were received.
283. Conciliation Officer A said:
     
     ... [T]he agent just doesn’t make a decision at all and it’s not until it gets to the conciliation [conference] that they are pressured into doing something about it. ...
284. Conciliation Officer E suggested Conciliation Officers should have the discretion to direct that interim payments be made to a worker in cases where there is evidence supporting their reinstatement request but there are delays in decision making. They said this would reduce some of the ‘harm’ caused to injured workers and increase agent accountability for delays.

Requests for treatment

285. The investigation also received evidence that in some cases, agents have unreasonably delayed decisions regarding requests for treatment.
286. In 2017-18, the ACCS received 856 requests for conciliation for an agent’s failure to make a decision regarding a worker’s request for treatment.
287. Witnesses to the investigation raised concerns about the impact of such delays on injured workers’ recovery, particularly those with a mental injury. For example, one psychiatrist providing treatment to injured workers said:
     
     Some claims managers do seem to sit on decisions and if I am seeing someone for a second or third time, may have no conclusion reached about the claim. This … stress can really prolong or create psychiatric disorders or maintain them far past what one would otherwise expect.
288. Another psychiatrist who treats injured workers described examples where they had experienced delays in agents’ approval of treatment, which included:

• a request for funding of psychological treatment made for a worker, where the psychiatrist was asked to provide additional information, which they supplied; however, ‘[n]o action was taken’ and the worker remained an ongoing suicide risk
• an inpatient client who consistently told the psychiatrist over the course of a year that he wanted treatment so he could go back to work; however, it took ‘a year of grunt and trench warfare’ for the psychiatrist to get funding for treatment.

289. A third psychiatrist said since the Ombudsman’s 2016 report, their patients were ‘still experiencing the same delays in getting approvals and requests for inpatient treatment’ and highlighted that delaying a referral to a psychiatrist or psychologist was ‘clinically unsafe’.

290. Conciliation Officer A interviewed during the investigation said that agents were ‘still continuing to delay decisions’, particularly ‘in more difficult areas like surgery’ or where there was a gap in treatment.
291. Maurice Blackburn, a law firm which represents injured workers, told the investigation that it had ‘certainly continued to observe inadequate processes and unfair practices’ by agents which often led to injured workers experiencing delayed treatment, which in turn delayed their recovery.
292. A 2018 research report²³ relating to outcomes for injured workers in Victoria with long term claims also identified issues regarding delays in treatment approval. A number of stakeholders working in the scheme interviewed as part of the study described the process of getting treatments approved as ‘onerous’ and highlighted how delays in approvals ‘translated directly’ into delays in workers’ treatment and recovery.

Unfair return to work practices

293. 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’.
294. If a worker is unable to return to their original job due to their injury, they are assisted, when medically appropriate, to return to ‘suitable employment’. Consideration of whether jobs are ‘suitable’ for a worker must have regard to:

• the nature of the worker’s incapacity and pre-injury employment
• the worker’s age, education, skills, work experience and place of residence
• return to work planning documents and occupational rehabilitation services provided to the worker.

295. Key stakeholders involved in a worker’s return to work may include their employer, treating doctor(s), WorkCover agent, and sometimes an occupational rehabilitation provider.
296. Occupational rehabilitation providers approved by WorkSafe provide independent return to work services to injured workers, which focus on assisting them return to work with their original employer or, if necessary, a new employer.
297. Injured workers have ‘return to work’ obligations under the WIRC Act, which include that they must:

• make reasonable efforts to actively participate and cooperate in planning for their return to work (section 111)
• actively use an occupational rehabilitation service and cooperate with the service provider, to the
  extent that it is reasonable to do so (section 112)
• actively participate and cooperate in any assessment of their work capacity, rehabilitation progress and future employment prospects, when requested and to the extent that it is reasonable to do so (section 113)
• make reasonable efforts to return to work (section 114)
• actively participate in an interview with their agent for the purpose of enhancing their opportunities to return to work, as required and to the extent that it is reasonable to do so (section 115).

298. 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.
299. This investigation examined agents’ issuing of non-compliance notices in complex claims when reviewing whether the quality of agent decision making has improved. Non-compliance notices were selected as a focus area for the investigation based on trends in complaints to the Ombudsman about these notices.
300. In the sample of complex claims reviewed, the investigation identified several return to work 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
• agents failed to genuinely consider workers’ individual circumstances and the reasonableness of their non-participation
• agents incorrectly issued notices under the legislation.

301. The investigation also received evidence that agents sometimes issued non-compliance notices with a focus on liability management.
302. Additionally, the investigation identified issues regarding agents’:

• consideration of ‘suitable employment’ options for workers
• termination of weekly payments of workers who had returned to work part-time, but due to their injury, were unable to make a full return to work.
  

Agents’ issuing of return to work non-compliance notices

303. Agents may issue return to work non-compliance notices via a three-stage process, comprising a warning, suspension and then termination.

Process for issuing return to work non-compliance notices

304. Agents may also issue a ‘cease and determine’ notice where a worker has been repeatedly non-compliant over a 12-month period. This is a more severe sanction than a termination. The effect of these notices is that a worker’s weekly payments are terminated and they cannot re-establish their entitlement, even if their circumstances change (as a result of a change to total incapacity or later compliance, for example), without the notice being overturned.
305. A cease and determine notice can only be issued where a worker does not comply with their obligations after being issued a suspension notice and has within the preceding 12 months been issued:

• two previous warning notices without a subsequent suspension; or
• a previous suspension notice, resulting in their weekly payments being suspended.

306. Agents are required to consider a worker’s individual circumstances prior to issuing a return to work non-compliance notice. Sanctions should not be applied where a worker has made a reasonable effort to comply with their obligations or their non-participation was reasonable.
307. To assist agents’ consideration of this, they are required to contact a worker to discuss their obligations and ask why they are not being compliant before deciding to issue a notice.
308. The WorkSafe Claims Manual outlines examples of ‘common factors’ that may influence the nature and extent of a worker’s participation, which include:

• the worker’s incapacity
• the seriousness of their injury, including psychological effects
• non-work-related injuries or illnesses
• language and literacy skills
• availability of and access to their treating doctor(s)
• the effect of medication or other treatments
• access to transport and residential location
• access to a phone
• family or carer responsibilities.

309. Training provided by WorkSafe to agent staff in April 2019 emphasised:

• The legislation requires a worker to make ‘reasonable efforts’ to meet their obligations.
• The onus of proof is on the agent to prove the worker acted unreasonably.
• Understanding the reasons why the worker did not comply is vital
  

Non-compliance notices issued in 2017-18 by type

Source: WorkSafe Victoria

310. In 2017-18, 621 return to work non-compliance notices were issued across the scheme. Of the total notices issued, there were 386 warnings, 99 suspensions, 131 terminations and five cease and determine notices.
311. One hundred of the total notices were issued on complex claims where a worker had been receiving weekly payments for more than 130 weeks.
312. The investigation reviewed a sample of 25 return to work non-compliance notices issued on complex claims, three quarters of which related to workers’ participation in occupational rehabilitation.

Workers required to participate in occupational rehabilitation at inappropriate stages of their recovery

313. While occupational rehabilitation can be an effective tool to assist injured workers to return to work, the investigation identified a number of complex cases where workers were required to participate in occupational rehabilitation at inappropriate stages of their recovery. This led to workers being deemed non-compliant with their obligations and subject to sanctions which affected their entitlements.
314. A review into occupational rehabilitation recently commissioned by WorkSafe²⁵ identified issues regarding the ‘inappropriate timing’ of occupational rehabilitation referrals by agents in some cases.
315. Additionally, occupational rehabilitation consultants interviewed during the review reported that claims were sometimes referred to them after ‘a number of other options had failed’, which led to ‘difficult and complex cases fraught with secondary complications’.
316. Occupational rehabilitation consultants variously reported that agent staff:

• ‘demanded’ they complete tasks, enforce return to work obligations and/or ‘push’ injured workers, even when their judgement told them not to and the worker’s treating doctor(s) had said they were not ready to go back to work
• did not consider the impact of psychosocial issues on workers’ return to work and ‘placed unrealistic expectations on how long it took to support the injured worker back to work’.

317. One occupational rehabilitation consultant interviewed during the review said:
     
     ... We get a lot of referrals for people … [who have] got surgery in two months’ time so obviously immediately [they think] ‘why would I be engaged with you when I’m going to go into surgery?’ Or people that are highly suicidal and psychologically unwell even if the claim may have been a back injury but psychologically they’re not in a place to look at RTW [return to work]. Part of that claim tells the insurance companies they’ve got to refer them so they just do and that completely derails any chance of progression or I guess trust with us. ...
318. In the following case study, EML referred a worker to occupational rehabilitation despite medical evidence suggesting he could not return to work and could not participate in occupational rehabilitation as a result of ‘psychotic hallucinations’. When the worker did not participate, EML terminated his weekly payments on the grounds of non-compliance.

You will note that at the time that I saw this gentleman, he was having psychotic hallucinations. If you expect someone who is having psychotic hallucinations to give a rational medical history and provide a satisfactory clinical examination, then you’ve had little experience in dealing with psychiatrically disturbed people.

Occupational Physician

319. In another complex claim reviewed by the investigation, Gallagher Bassett required a worker to complete a computer course, despite the medical evidence suggesting he was indefinitely incapacitated for work and may never return. When the worker did not attend the course, Gallagher Bassett issued him a non-compliance warning notice.

320. The investigation also observed cases where there was sufficient medical evidence to support referring a worker to occupational rehabilitation initially, however, agents received subsequent information suggesting the worker’s condition had deteriorated and occupational rehabilitation services should not continue. Notwithstanding this, agents continued to require workers to participate.
321. The following case study is an example of this. Allianz continued to require a worker with a mental injury to participate in occupational rehabilitation despite evidence her condition had deteriorated and she no longer had a work capacity. Under pressure, the worker attended these appointments but was sanctioned with non-compliance notices when she did not provide evidence to the occupational rehabilitation provider that she had applied for jobs.

322. The investigation also identified some examples of good practices by agents in relation to the use of occupational rehabilitation and return to work non-compliance notices. This included the following case study, where Gallagher Bassett decided not to suspend a worker’s entitlements after it identified it was relying on outdated medical information about her capacity to return to work and participate in occupational rehabilitation.

Workers’ individual circumstances and reasonableness of non-participation not considered

323. In a number of complex claims reviewed by the investigation, agents did not genuinely consider workers’ individual circumstances or whether their non-participation was reasonable before proceeding to issue non-compliance notices. This included cases where agents did not contact a worker to seek their explanation prior to issuing a non-compliance notice, or allowed them less than 24 hours to provide an explanation.
324. Witnesses interviewed during the investigation also raised concerns about this, with Conciliation Officer A querying whether agents were ‘really truly impartially looking at the full circumstances of the worker’ before issuing a notice. Conciliation Officer A said agents tended to only get an opinion regarding return to work from an IME, but not the worker’s treating doctor(s), which they said did ‘fly in the face of the proper processes that they’re meant to follow’.

I think that they’re unfairly using that part of the legislation to bully somebody into going back to work when their own doctor is saying ‘look, you can’t’.

Conciliation Officer

325. WorkSafe’s recent training to agents emphasised they should not rely solely on an IME’s opinion without consideration of the worker’s treating doctors’ opinions and that a worker was not necessarily being non-compliant where they were following the advice of their treating doctors.
326. Conciliation Officer B said:
     
     ... I think that they’re unfairly using that part of the legislation to bully somebody into going back to work when their own doctor is saying ‘look, you can’t’. And so then the worker is in the position where they either go back to work in contravention of their treating doctor’s opinion and potentially get worse. Or they have their payments stopped because they’re refusing to participate. It’s an awful situation. ...
327. In the following case, Gallagher Bassett issued a warning to a worker with a mental injury for failing to attend an occupational rehabilitation appointment, despite the worker having been admitted to hospital after engaging in self-harm behaviour five days prior. Gallagher Bassett was aware of the worker’s hospital admission, but issued a warning on the basis that the worker was not physically in hospital on the day of his appointment. The worker had also become homeless around this time.

328. In another case detailed below, EML persistently required a worker with a mental injury to participate in occupational rehabilitation, despite receiving evidence this was causing his mental health to deteriorate. EML issued the worker two non-compliance warning notices on the basis he was not ‘actively participating’ in the occupational rehabilitation appointments he attended.

For you to go on about warnings is extremely silly and can only provoke a significant decline in … [Stephan’s] medical condition … [Stephan’s wife] tells me that … [Stephan] is always a nervous wreck after these meetings … He shakes and he avoids any conflict or confrontations and he doesn’t eat for days and he cries and by the time that they get him settled, it … [is] time for him to go back to another meeting.

General Practitioner

329. After reviewing the notices in the above case, WorkSafe also appropriately requested EML undertake a ‘health check’ of non-compliance notices issued over the last 12 months and report the findings to WorkSafe. EML reviewed 20 claims where non-compliance notices had been issued and found that three did not comply with the Claims Manual. The remaining 17 were considered to comply; however, in three of these, it was unclear whether the agent contacted the worker to clearly establish the worker’s reason for non-compliance. The review did not specifically focus on notices issued on complex claims.
330. The investigation also identified cases where an agent issued a worker a non-compliance notice for non-attendance at an appointment, despite providing a reasonable excuse and demonstrating cooperation and participation prior to the missed appointment.
331. The following case study is an example where Allianz issued a warning notice to a worker for missing two occupational rehabilitation appointments, despite being unwell with the flu and having no history of non-compliance. Allianz concluded she had not made reasonable efforts to participate, without contacting the worker direct to discuss the reasons for her non-attendance.

Non-compliance notices incorrectly issued under legislation

332. The investigation identified instances where notices did not comply with the requirements of the WIRC Act. This included cases where agents:

• did not provide the worker with the required notice period
• issued notices to workers for failing to contact their case manager, even though this is not a legislative obligation on workers
• issued notices under the incorrect section of the WIRC Act.

Non-compliance with notice period

333. After issuing a non-compliance notice, agents are required to provide a worker adequate opportunity to demonstrate compliance with their obligations.
334. To demonstrate compliance, a worker may have to attend an occupational rehabilitation appointment, participate in a retraining course or return to work, for example.
335. Under the WIRC Act, agents must provide a worker at least 14 days to demonstrate compliance. The Claims Manual states that if the notice is sent by mail, agents should also allow for two postal days.
336. The case study below is an example of a complex claim reviewed during the investigation, where an agent required a worker to demonstrate compliance only six days after issuing the warning. It then suspended the worker’s weekly payments prior to the review date specified in the warning, and ultimately issued a termination.

Notices issued for failure to contact case manager

337. Workers are required by legislation to participate and cooperate with assessments or interviews when requested. It is also important that workers are contactable by their agent throughout the life of their claim. However, there is no express obligation for workers to respond to routine phone calls or emails from agent staff, and agents do not have the power to sanction them for failing to respond.
338. The investigation found examples of agents issuing return to work non-compliance warning notices in these circumstances. While these did not immediately affect workers’ entitlements (as they were only warnings), they had no legislative basis and could have been used to issue further sanctions against them in the future.
339. The following case study is an example of this practice, where a worker was issued a warning notice after his agent could not get in contact with him over the course of a few months. The worker claimed he had provided CGU updated contact details, which were not properly recorded by CGU and so the worker was unaware of the attempted contact.

Notices issued under incorrect section of legislation

340. The investigation identified three instances where agents incorrectly used the return to work non-compliance provisions to sanction other worker behaviour, particularly failure to attend independent medical examinations.
341. Under section 27 of the WIRC Act, injured workers have an obligation to attend independent medical examinations. Like return to work obligations, an agent may suspend a worker’s entitlements if they unreasonably refuse to attend or obstruct an independent medical examination. However, the ability to suspend a worker’s entitlements for non-attendance at an IME is contained in a separate section of the Act to return to work non-compliance notices. The Claims Manual confirms this distinction.
342. In light of the three instances identified by the investigation, WorkSafe said it would ‘provide further clarification and guidance to all agents’ regarding the use of these sanctions. It also confirmed that the notices incorrectly issued in the three cases identified by the investigation would be withdrawn.
343. In response to the draft report, Xchanging, the agent responsible for two of the notices, maintained it was ‘satisfied’ the notices were issued correctly and highlighted that in one of these instances:
     
     ...Reliance on s27 [relating to IME non-compliance] would have resulted in a harsher financial impact for the worker. Had the notice been issued under s27, all entitlements to compensation including all medical treatment, would have been immediately suspended. ...
     
     
344. The investigation remains of the view that the notices were issued under the incorrect section of the Act as they related to worker’s non-compliance with their obligations to attend independent medical examinations.

Non-compliance notices issued with a focus on liability management

345. While it is appropriate for agents to issue return to work non-compliance notices where a worker is unreasonably refusing to comply with their obligations, the investigation received evidence that in some cases, agents have used them primarily as a mechanism to cease a worker’s payments and reduce their liabilities. This is contrary to the objective of non-compliance activity, which WorkSafe said is to ‘influence the worker to comply’.
346. Conciliation Officer B raised concerns at interview about this practice, stating:
     
     ... I do think they are being used a bit … by the agents when they can’t find another way of terminating a claim. And especially when they’ve got an employer who is riding the worker quite a lot because they either don’t like them, they’re jacked off that they put in a claim in the first place, so the employer can often be the one who’s driving it too. Not the agent. ...
347. Conciliation Officers also raised concerns about agents ‘forcing’ workers to attend occupational rehabilitation to facilitate the termination of their entitlements, instead of genuinely attempting to facilitate a return to work.
348. Conciliation Officer A said at interview that agents look at non-compliance as a ‘tool’ available to them, particularly for workers who are unable to return to their original employment. They said:
     
     ... [The agent is] attempting to get a person out into the workforce and the OR [occupational rehabilitation] service provider is attempting to engage them in that process and on some occasions a dispute arises because the agent is wanting more to get them off the books. In other words, they want to terminate their payments and the best way to do that, regardless of what their doctor’s certificate is … but an independent doctor says that they can do X, Y and Z in terms of suitable jobs and so they … force a worker to attend OR service providers and when they don’t they start the non-compliance process. ..
349. Conciliation Officer A described agents’ use of the return to work process as a ‘stick rather than a carrot’, stating that return to work was meant to be about ‘encouraging people back to work because it’s good not only for them, for their injury but also for the mental wellbeing as well’. The Conciliation Officer said ‘the converse applies’ and ‘[t]hey end up with stress cases as a result of it’.
350. In response to the draft report, CGU said:
     
     ...Opinions in IME reports which identify a capacity for work may be used to consider a change in the direction of a claim, and to discuss a new strategy.
     Widely published statistics make it very clear that a return to health and a return to work are in the best interests of an injured worker, and in cases of the longer term injured, breaking the cycle of not being at work is often complex and difficult.
     
     The description of ‘stick rather than carrot’ is emotive, however the responsibility of an agent is to manage claims within the spirit of the legislation, which may mean using the opinion of a specialist to make decisions on claims that will interrupt the claims cycle but are ultimately in the best interests of an injured worker. ...
351. Conciliation Officer D described the use of return to work non-compliance notices as ‘strategic’, and said they should be used ‘extremely sparingly’ as it was ‘[m]uch better to get people back to work in suitable employment by a particular time without using the sledgehammer approach’.
352. Conciliation Officer G said:
     
     ... [N]othing has the flavour of being genuine. It’s not about a genuine return to work. It’s about looking at a capacity to do something and the reality of that translating into genuine suitable employment for a person to go back to work, I think, is fairly slim. ...
353. WorkSafe informed the investigation that it has, on numerous occasions, reminded agents and occupational rehabilitation providers that:

• occupational rehabilitation is an ‘independent worker service’
• the occupational rehabilitation provider is ‘not to be used as an agent RTW [return to work] compliance tool’.

354. A 2017 review into occupational rehabilitation commissioned by WorkSafe identified issues regarding occupational rehabilitation being used as a compliance tool. Occupational rehabilitation consultants told the review they perceived, in some cases, that referrals to occupational rehabilitation services were ‘not in the interest of the injured worker and were being used as a tool to cut benefits’. One occupational rehabilitation consultant said:
     
     ...Sometimes they [case managers] can use job seeking services … as a compliance tool … so the worker may not be ready to go into job seeking services, but because the case manager wants to go down a compliance track and cut their payments, they put them into job seeking knowing that they won’t attend and that they will hopefully be able to cut their payments and that can be frustrating because then we end up with a start and fail outcome … because we’ve been used as a compliance tool, rather than a … [job seeking service]. ...
355. Another occupational rehabilitation consultant referred to the low return to work rate of workers involved in new employer occupational rehabilitation services, and said agents ‘use up more [services] for compliance than actually thinking that we might actually get someone back to work’ which they said is ‘frustrating’.
356. The sample of agent staff emails also highlighted issues with agents’ use of the non-compliance process.

357. CGU also noted in its response to the draft report that the report cited ‘several examples of inappropriate use of non-compliance letters’. It said that given the ‘extremely small sample of claims’ reviewed by the investigation, it was ‘difficult to conclude that this is a systemic issue for the scheme’. Although the investigation’s review was confined to 25 non-compliance notices issued on complex claims in 2017-18, 15 of these were randomly selected. Additionally, the sample reviewed made up about a quarter of the total notices issued on complex claims that year where a worker had been receiving weekly payments for more than 130 weeks.
358. CGU also said:
     
     ... Issuing a letter of non-compliance is not taken lightly and is sometimes used because we are unable to contact the injured worker to discuss their claim, or failure of the injured worker to participate in the process. It’s important to note that CGU will issue a warning letter prior to consideration of a non-compliance notice.
     
     We strive for a cooperative relationship that doesn’t require the use of non-compliance letters in these situations, however when an injured worker does not attend appointments, fails to participate in rehabilitation or job seeking/career re-training programs, or return phone calls, there are limited options to ensure a claim is kept on track to ultimately, help the injured worker recover as best as possible. ...
359. In one of the claims reviewed by the investigation, Xchanging and the worker’s employer planned to pursue a ‘cease and determine’ notice in order to ‘cease’ the worker’s claim. At the time this strategy was agreed upon, the worker had not demonstrated unreasonable non-compliance with her return to work obligations, nor repeated non-compliance over a 12-month period which is required to issue a ‘cease and determine’ notice.

Consideration of ‘suitable employment’ options for workers

360. Witnesses interviewed during the investigation raised concerns about agents terminating workers’ weekly payments because they can return to ‘suitable employment’, without properly considering what constitutes ‘suitable employment’ under the WIRC Act.
361. As outlined earlier, agents must take into account a range of factors when considering whether there is ‘suitable employment’ for a worker, including their age, education, work experience, place of residence and nature of their incapacity resulting from their work injury.
362. Various Conciliation Officers said job options agents used to suggest a worker could return to work and terminate their weekly payments were often ‘offensive’, ‘disingenuous’, and ‘fanciful’. Conciliation Officer D said:
     
     ... My only wish is that when people get assessed vocationally, they get assessed genuinely. The jobs – and the Courts have criticised many of these – but jobs in the past, car park attendant, light process worker – what the hell does that even mean? There are probably about 2,000 jobs out there that are light process work. Some of them would be quite light and others would be quite complex. School crossing attendant – somebody with a back injury, you’re saying they can stand all day, you know, stand for 2 hours in the morning and come back 2 hours in the afternoon – rain, hail or shine? So … they are fanciful jobs, they are not real jobs. ..
363. Conciliation Officer D further said:
     
     ... [T]his scheme is not about getting a doctor or a vocational assessor or an assessment generally to say the worker has an entitlement, it is designed in many cases to say they have no entitlement. Because they [the agent] want to get them off the scheme, because they want to make money, it comes back to what I said in the beginning – it’s a private business. And the best way for a private business is get people who are on compensation, off compensation. ...
     
364. Injured workers surveyed as part of the 2017 review of occupational rehabilitation commissioned by WorkSafe provided feedback about their experience with these services.
365. In some cases, the surveyed workers reported that occupational rehabilitation services were not suitable for their needs and experiences. Examples included proposed jobs that were two hours away from where the worker lived, and inappropriate training courses. The review said that ‘[o]verall, there was a belief that OR [occupational rehabilitation] providers were more focused on finding the worker any work, rather than jobs that are commensurate with their skills and previous experience’. Examples of feedback provided during this review are outlined on the following page.
366. Stakeholders and long term injured workers surveyed as part of a separate review finalised in 2018²⁷ also said proposed job options were ‘inappropriate or would not provide a living wage’. Examples provided included a school crossing attendant and pamphlet deliverer.

Comments from injured workers, in a 2017 review commissioned by WorkSafeThey don’t find jobs that are suitable, just ones they think are alright.

They don’t find jobs that are suitable, just ones they think are alright.

The selection of jobs that they replied with was a waitress job and they based that on my experience of being a waitress when I was 15. They should apply an aptitude test and assist with the career paths; not look at out-dated résumé and go on them.

I’ve done kitchen and cleaning jobs throughout my life and they are sending me to bank jobs. So they don’t live in the same world as I’m in.

I don’t see the point – she’s picking out the most ridiculous jobs I can’t even do. My back is buggered and my neck is very sore, I’m always in pain. At the moment, there’s none that I am capable of.

If I offered an employment service to people on WorkCover, I would be realistic as to what the person can and can’t do. I would look at what they like to do. I’m 57 years old and I have numerous ailments and they suggested that I apply as a corporate secretary. They are not realistic in their expectations. It was 15 years ago since I was in the workforce.

367. Witnesses interviewed during the investigation raised concerns about agents’ reliance on IME opinions about a worker’s capacity to return to work, which they believed did not adequately address the suitable employment criteria. Conciliation Officer G stated at interview:
     
     ... [T]hey don’t want to have their IMEs really looking at the definition of ‘suitable employment’, because everyone would stay on payments almost, if they’re still on payments at 130 weeks. I mean that’s a bit of a stretch but, it’s a really important juncture, 130 weeks.
     …
     No one wants to see someone still on comp[ensation], two and a half years after they’ve injured themselves. It’s not good for anybody, but there are some people that should remain on payments for very good reason. And when you’re having a lengthy discussion about that, but you have these particular doctors that are just too ready to say ‘oh yeah, capacity to do that’. It’s very frustrating because the reality is, the panel will overturn it anyway. ...
368. The then Convenor of Medical Panels said at interview that Panels ‘pretty consistently’ saw the suitable employment ‘test’ not being ‘applied appropriately’. He said it was ‘a very difficult test to apply’ which IMEs did not understand ‘very well’. He said WorkSafe told him IMEs were given training about interpreting questions about ‘suitable employment’, but that ‘obviously the training is not working’ as Panels saw IMEs consistently misapplying the test. The then Convenor also said:
     
     ... [I]t seems obvious that in many cases they [the agent] haven’t gone back [to the IME] and clarified. So … they [the IME] don’t appear to have applied the test, or … they haven’t given enough information for someone reading the report to understand whether they’ve applied it. And … the agent hasn’t gone back and said ‘Well, look, can you just clarify whether you’ve taken in to consideration these things?’ and so that then I think reinforces sloppy behaviour. ...
369. When queried why agents do not seek clarification from IMEs regarding their consideration of the definition of ‘suitable employment’, the then Convenor said:
     
     ... [I]t could be that they themselves don’t understand the test and that they therefore … don’t understand that what they’re getting back isn’t … a rigorous analysis. It may be that they’ve got an answer. The fact that … it hasn’t been validated by adequate reasoning is something that they believe isn’t something that they need to take up. So they have a definitive answer, the person has a work capacity or the person does not have a work capacity, and that’s all that they were really interested in because it answers their question. And … in a way that’s a fundamental flaw in the process because the way we [Medical Panels] approach things is to say ‘That’s the question. That’s our answer. And here is our reason for the answer’. But the way the IME process works leaves out really the third stage to some extent. So it asks the question, it asks for an answer, but … it doesn’t rigorously look at asking for the reasons. And so, how do you know whether the answer is an appropriate answer to a question if you don’t really know what the reasons were … ...
370. A WorkSafe Clinical Panel Advisor also raised concerns at interview about IMEs and agents failing to give realistic consideration to suitable employment for injured workers and said there needed to be greater ‘push-back’ by agents on IMEs to ‘explain their opinions better’.

No one wants to see someone still on comp[ensation], two and a half years after they’ve injured themselves. It’s not good for anybody, but there are some people that should remain on payments for very good reason.

Conciliation Officer

Unreasonable termination of payments to workers who have returned to part-time work

371. The investigation identified issues regarding decision making on complex claims where workers had successfully returned to work part-time. These workers were unable to return to work full-time as a result of their injury and so were in receipt of ‘top up’ weekly payments to supplement their income. The evidence of this issue related to one of the five agents, Gallagher Bassett.
372. To be eligible to receive ‘top up’ weekly payments, a worker’s entitlement to weekly compensation must have ceased at 130 weeks and they must:

• have returned to work working at least 15 hours and earning at least $205 per week and
• be indefinitely incapable of undertaking further additional employment or work which would increase their earnings, because of their injury.

373. In the complex claims reviewed, workers receiving ‘top up’ payments returned to work, but Gallagher Bassett terminated their payments by arguing that the workers:

• could increase their hours or do more work than the worker claimed they could
• could leave the job they had returned to and retrain or get a new job, which would enable them to increase their hours
• no longer met the criteria to receive ‘top up’ payments.

375. The terminations were overturned or withdrawn through the dispute process because there was insufficient evidence to support them.
376. In one complex claim, Gallagher Bassett terminated a worker’s payments twice and attempted a third termination. This was despite two separate Medical Panels finding he had ‘severe spinal dysfunction’ from a work injury and was indefinitely incapable of undertaking further work as a result. This case is outlined on the following page.

376. In another complex claim, Gallagher Bassett terminated the ‘top up’ weekly payments of a worker with a mental injury, despite a Medical Panel opinion that she was indefinitely incapable of working more than 15 hours per week. The worker had returned to work part-time working for her family member’s business and reported struggling with the hours she was working, despite the support of her family member to remain at work.

377. The following case study is another example of an unreasonable termination of a worker’s ‘top up’ weekly payments by Gallagher Bassett, this time relying on a technical argument that the worker was no longer meeting the criteria to receive payments under the Act.

The behaviour of the insurer has been entirely focussed on minimising their costs rather than assisting … [Brian] back to as much health and activity as possible ...

Treating doctor

Agents acting unreasonably during conciliation

378. The investigation examined agents’ actions with respect to claim decisions disputed at conciliation. The purpose was to establish whether, since the Ombudsman’s 2016 investigation, cases of agents maintaining unreasonable decisions during conciliation, that they knew would not hold up in court, had continued to arise.
379. When a worker requests conciliation, agents are required to:

• review the decision to ensure it is ‘technically sound’, ‘based on reasonable evidence’ and appropriate in light of any new evidence received after the decision was made
• withdraw the decision before conciliation if it would not have a reasonable prospect of success at court (ie not be ‘sustainable’) or was not made in accordance with the WIRC Act
• take all reasonable steps to resolve the dispute.²⁸

380. Agents have dedicated dispute resolution staff who are responsible for reviewing decisions and attending conciliation. WorkSafe requires these staff to have:

• the ‘appropriate experience and knowledge’ and be ‘fully equipped’ to deal with the conciliation process
• the ‘authority to resolve the dispute’ and the ‘willingness to do so’
• a ‘thorough knowledge of the file’ and be ‘willing and able to discuss issues in dispute in a meaningful and constructive way’.²⁹

381. 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.
382. Witnesses interviewed during the current investigation said some changes were initially observed after the Ombudsman’s 2016 report, including a reduction in disputes and agents being ‘more readily prepared to try and resolve matters at conciliation’. However, they said as time went on ‘old habits came back’.
383. The evidence obtained by this investigation showed that in some complex claims, agents:

• maintained unreasonable decisions during conciliation
• were unwilling to resolve disputes at conciliation.

384. These claims highlighted the impact of these practices on already vulnerable injured workers, in addition to the financial implications to the scheme. In 2017-18, the average cost to the scheme per conciliation was over $2,000; a Medical Panel referral cost nearly $4,000; and the average court case amounted to nearly $35,000.

Unreasonable decisions maintained during conciliation

385. Under the Ministerial Guidelines³⁰ and WorkSafe Claims Manual, agents are required to only maintain ‘sustainable’ decisions during conciliation. 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. The WIRC Act does not define what constitutes an ‘arguable case’; however, WorkSafe said it considers this to mean:
     
     ... [T]hat there is either a legitimate legal dispute between the parties and/or evidence supporting the decision in dispute. The courts have held that there is an ‘arguable case’ as long as the denial of liability is not frivolous or without adequate enquiry and consideration.³¹ ...
     
386. The effect of this is that an agent only needs to have an ‘arguable case’ to successfully maintain a decision at conciliation and avoid being directed to overturn their decision, even if the decision would not hold up in court.
387. The Ombudsman’s 2016 investigation identified cases where agents maintained decisions during conciliation which were ‘arguable’, but not necessarily sustainable. As a result, the Ombudsman recommended that the State Government amend the WIRC Act to empower Conciliation Officers to issue a direction to an agent where a decision is ‘unsustainable’ – ie it has no reasonable prospect of success were it to proceed to court.
388. WorkSafe said it did not support this recommendation because:
     
     ... The aim of conciliation is for the parties to negotiate an agreed outcome. The role of the conciliator is to facilitate frank and open discussion, not evaluate the strengths and weaknesses of each parties’ position and make a decision on the merits. The only qualification under the current system is that a conciliator may issue a direction if the conciliator forms the view that that the arguments advanced by the agent are essentially hopeless. It would fundamentally and detrimentally affect the conciliator’s capacity to mediate negotiated outcomes if the conciliator’s role included assessing whether a position was ‘sustainable’ as opposed to ‘arguable’.
     
     Conciliation is a non-adversarial process, in respect of which the parties are not legally represented. It would become considerably more adversarial if, at the end of a conciliation which did not reach a compromise, the conciliator then abruptly changed roles and became the judge of which party’s arguments were preferred. ...
     
389. WorkSafe’s position is acknowledged; however, this investigation identified continuing issues regarding agents maintaining decisions during conciliation which were ‘arguable’, but not ‘sustainable’.
390. Conciliation Officers interviewed during the investigation said it was still ‘very common’ for agents to maintain decisions on ‘one word’ to build an argument, or to gather whatever ‘pieces’ of information they could to support a rejection or termination. Conciliation Officer E said agents would do everything they could to ensure a decision was maintained, and that their approach in some cases was:
     
     ... ‘[L]et’s get it over the line, let’s put something in there, let’s cover all bases, so that we can hold our line and deny a claim’ … put in a technical ground or something like that, that’s not … in [a] common sense world, and even in terms of a sustainable world, that wouldn’t count, but they chuck everything in, to cover all bases. ...
391. Conciliation Officer E also said:
     
     ... [T]he genuine dispute, is such a low bar … It’s so rare that you [as a Conciliation Officer] can actually use your powers of direction, because you can only direct if there’s no arguable case. So I probably do one direction a year, and I probably tell them I’m going to do about ten, and then they cave, but that’s not a lot … out of all of the ones [disputes] I do a year that’s not many … [agents could have] one flimsy piece of information, I wouldn’t even call it evidence, or it’s not even information, sometimes it’s an argument, or a view, or an opinion from somebody, somewhere.
     
392. Conciliation Officer C said agents were ‘very keen to get over the arguable case line’ because they think ‘that’s all … [they] really need[ed] to do’.
393. Conciliation Officer A said disputes were sometimes difficult to resolve because agents were ‘clinging on to the barest of arguments’ despite only having ‘a slither of an argument’. They said for these matters, Conciliation Officers had no option but to issue a genuine dispute certificate because an ‘argument’ existed; and if a worker wanted to dispute the decision further, they had to take it to court.
394. A worker representative said this was unfair to workers because:
     
     ... In effect agents know they can make a very poor decision, it doesn’t get scrutinised because a conciliation officer can’t say who’s right or wrong … they merely try and get the parties to an agreement. It’s not [un]til it gets to court that the facts are determined and there’s a decision based on the merits of the argument … I think agents can make any decision they like. ...
395. The Police Association Victoria also raised concerns about the number of disputes that cannot be resolved at conciliation due to Conciliation Officers’ limited powers to direct agents. It stated:
     
     ... A high proportion of our members’ claims that reach conciliation are not resolved … There is a perceived reluctance of the ACCS to issue a direction at conciliation, despite the insurer rarely presenting an ‘arguable’ case. The threshold for an ‘arguable case,’ as evaluated by the ACCS, is seemingly very low. This lack of direction on the part of the ACCS leads to lengthy and ultimately futile delays for our members, as claims inevitably resolve prior to a court hearing. Our injured members are therefore spending an increased length of time in the system, without access to treatment. ...
     
396. The Police Association suggested agents maintained unsustainable decisions at conciliation knowing few workers, particularly those with mental injuries, would take the matter further to court. It said:
     
     ...The litigation process related to psychological injury claims has been suggested by our members to be equally or more stressful than the injury itself. Many claimants outside of the force who are involved in psychological injury claims will accept less compensation or abandon their claim to avoid these stressors. The Association believes that the process of rejecting these cases is in the hope that members run out of leave, benefits, or money, so that they give-up, resign, or return to work and forget about the claim.
397. In the following case study, Allianz rejected a worker’s claim on the basis that it was not work-related, despite contrary evidence and ‘risks’ identified regarding the decision. It took Allianz six weeks after the worker requested conciliation and five months after the worker submitted their claim to withdraw the decision and accept the claim.

398. The following case study is another example. Gallagher Basset maintained its termination of a worker’s weekly payments at conciliation despite identifying multiple deficiencies in the decision and concluding it did not have a ‘strong case’.

399. The sample of agent staff emails obtained by the investigation also highlighted examples of agents maintaining decisions they apparently knew were unsustainable.

Rate at which decisions were changed or overturned in 2017-18

400. While the number of requests for conciliation fell by 28 per cent from 2014-15 to 2017-18³², the rate at which decisions are withdrawn or changed through the dispute process has remained high, with about half of the decisions disputed at conciliation in 2017-18 changed.
401. Decisions disputed in court³³ were varied or overturned at an even higher rate, with 70 per cent of decisions that proceeded to court in 2017-18 (and resolved by 31 August 2019)³⁴ being varied or overturned.
402. Decisions referred to a Medical Panel for a binding opinion had a similarly high overturn rate in 2017-18, with:

• 66 per cent of decisions referred to a panel at conciliation varied or overturned³⁵
• 70 per cent of decisions referred to a panel by a court varied or overturned.³⁶

403. At interview, Conciliation Officer F said the high number of agent decisions overturned by Medical Panels ‘underline[d] the poor decision making of the agent’ and that agents ‘hated’ Medical Panel referrals ‘because they usually lose’. Several Conciliation Officers also said they knew when they referred a dispute to a Medical Panel that it was likely to come back in favour of the worker.
404. In some complex claims reviewed by the investigation, such as case studies 13 and 32, there was evidence agents attempted to avoid a Medical Panel referral, because they knew their decision was based on insufficient evidence and would likely be overturned.
405. The sample of agent staff emails obtained by the investigation also showed examples of agents attempting to avoid a Medical Panel referral, including cases where:

• Xchanging attempted to establish a ‘factual dispute to keep us out of the med panel’
• Gallagher Bassett proposed to offer a worker one month of payments at conciliation ‘to avoid med panel’.

406. Conciliation Officer C said at interview that agents sometimes maintained unreasonable decisions at conciliation even under threat of a Medical Panel referral because they were willing to ‘take a punt’ - knowing that ‘maybe one in five comes back from the Panel and actually supports them [the agent] and the person’s gone and off [compensation]’.
407. In response to the draft report, Gallagher Bassett said:
     
     The analysis in the draft report … and the inference that changes to decisions through the dispute resolution process means that the original decision was flawed:

• Fails to acknowledge that the reduction in disputes is directly attributable to improved decision making, and that this reduction is sustained;
• Ignores that a change in decision at conciliation, is most often the result of a genuine attempt to resolve matters, which is the purpose of conciliation;
• Fails to acknowledge that a decision taken to court is accompanied by significant further information such that the parties are in the best position to assess the merits of the decision;
• Fails to acknowledge that a decision to settle prior to a Court case, a matter where a genuine dispute was found at Conciliation, does not necessarily confirm the original decision was unsound, but instead reflect other factors such as the cost of continuing to Court even when a decision may be felt to be appropriate.
• Fails to acknowledge that Medical Panels make independent assessments and changes to decisions arise from a difference of medical opinion, not adequacy of decision making.

Agents’ unwillingness to resolve disputes at conciliation

408. Conciliation Officers interviewed during the investigation raised concerns about the willingness and authority of agent dispute resolution staff to resolve disputes at conciliation. Conciliation Officer A said that they were not ‘truly coming with the true authority to make a decision without fear or favour’. Conciliation Officer A said:
     
     ...One of the big issues that is always [a] frustration for conciliation is that although agents are required to come to a conciliation to meaningfully conciliate and come to an agreement … the individual reps [of the agents] often do not have the authority to make decisions. They have to defer back to the claims management teams to run it by them … which is very frustrating because … one it goes against … what conciliation is about. And two, it stymies the process quite considerably. ...
409. Conciliation Officer A said that in some cases, agent representatives had told them that they needed to ‘ring up work and just run it by them before … [making] a decision’. The Conciliation Officer said that this was ‘absolutely inappropriate’:
     
     ... [T]he people back there that are making the decision haven’t seen the new information and haven’t heard the discussions that have been around the table and so, that’s one of the difficulties … the other issue is that the person from the agent has to be mindful of their own job. So if they’re offering things that [they] think … the claims teams don’t agree with, well they can only do that so many times before they end up having their own job at risk. ...
410. Conciliation Officer H said:
     
     ... Just last week I had quite a battle with a DRO [Dispute Resolution Officer] who took a decision ‘back to the team’ resulting in a firming-up of a barely arguable and certainly unsustainable decision. I get the impression that a number of DROs are equally frustrated with their lack of authority to make decisions on these matters. ...
411. Conciliation Officer C said that the ‘inability of DRO[s] to make fair and proper decisions at conciliation’ sometimes led to matters being referred to a Medical Panel because the Conciliation Officer thought the worker had an entitlement, but the ‘DRO won’t move’. They further said:
     
     ... If people came in good faith to conciliate on both sides of the table, we wouldn’t need to worry about arguable case. We would be able to deal with the material in front of us and the parties could consider the merits of the argument. And if DROs had more flexibility to resolve disputes, I think we could do our job better. ...
412. In the below case study, a Gallagher Bassett Dispute Resolution Officer reviewed a termination for conciliation and concluded it was ‘not arguable’ and based on a ‘confusing’ IME opinion. The officer recommended the termination be withdrawn, but it was ultimately maintained at conciliation.

413. Witnesses interviewed also raised concerns about agent dispute resolution officers at times presenting ‘offensive’ offers to a worker in an attempt to resolve matters they knew would likely be overturned should they proceed further. A worker representative said sometimes agents made ‘disingenuous’ offers so that it looked like they had made ‘reasonable efforts to resolve the dispute’. They said:
     
     ... What I found in recent times, is they’ll make an offer they know is not going to be accepted, to be able to say ‘we made reasonable efforts to resolve the dispute and we actually made an offer that was rejected by the worker and the worker’s assistant’. I’ve had one where they offered two weeks, and I said ‘well that’s not a real offer, at all’. And the Conciliation Officer said ‘well I’ve got to put it [to you], because they’ve put it to me’. I said ‘well you need to go back to them because … that’s disingenuous’ … Now, if you’ve been off work with a mental injury for three or four months, then that two weeks’ pay … it’s just not genuine. It’s absolutely an insult to the worker. ...
414. Conciliation Officer F also said:
     
     ... For the injured worker, it’s like a court. They’re traumatised, they’re stressed, they don’t know how it’s going to work, they’re the only person in the room not paid to be there, everyone else is a paid professional. And, so they often come away saying ‘I still didn’t feel heard’ or ‘they didn’t listen’ because they already had made up their mind’ and that comes across and so that defeats the purpose of conciliation … I think a large part of the role of myself as a Conciliation Officer is to manage those human elements in the room – to make sure the injured worker has a say, gets across their emotion and the impact. But when you’ve got someone sitting there [an agent representative] saying ‘no, no offers’, they say ‘well what was the point of coming’, which is fair enough. ...

Difficulties resolving factual disputes at conciliation

415. When a matter proceeds to conciliation, there may be a range of issues in dispute, including:

• factual issues, such as the circumstances in which a worker injured themselves or whether a worker has made reasonable attempts to return to work
• medical issues, such as the diagnosis of a worker’s injury, whether they have a work capacity or whether certain treatment is appropriate for their injury.

416. Where the dispute centres on medical questions, a Conciliation Officer may refer the questions to a Medical Panel for a binding opinion. However, this cannot occur where there are factual issues in dispute. Often these matters need to go to court as a Conciliation Officer cannot make a binding determination on factual issues like a court can.
417. Conciliation Officers interviewed during the investigation raised concerns about the difficulties they face resolving disputes about agent decisions which rely on factual grounds. Particular concerns were raised in relation to disputes about:

• return to work non-compliance notices³⁷
• mental injury claims rejected on the ground they were caused ‘wholly or predominantly’ by reasonable management action. ³⁸

Disputes about return to work non-compliance notices

418. Conciliation Officers interviewed during the investigation said that due to difficulties resolving disputes about return to work non-compliance notices, workers often have to go to court if they wish to have them overturned. While many workers may not be in a position to take legal action, Conciliation Officers said that when these notices did proceed to court, it was difficult for agents to defend them and they would likely be overturned.
419. Conciliation Officer F said trying to resolve disputes at conciliation about these notices was ‘particularly ineffective’, and stated:
     
     ... The agent issues the notice to the worker saying you’re not making reasonable efforts to return to work. There’s a warning, a suspension and a termination, so there’s the trifecta of decisions. They’re all based around, ‘we’ve sent you to an IME that says you’ve got a capacity’. The worker’s doctor invariably is certifying them unfit, so the worker is following their doctor’s medical advice. They come to conciliation; and because they’ve used the ground you haven’t made reasonable efforts, it’s not actually a medical dispute, it’s a factual dispute. So as soon as we get the trifecta of return to work notices, three genuine disputes. Zero potential to resolve. Because it’s not medical, can’t refer it to the Panel. The worker’s saying ‘I’m sticking by my doctor’s advice’. If it goes to court, clearly a Magistrate will say ‘of course you’re being reasonable, you’re following your doctor’s advice’.
420. Conciliation Officer B similarly said disputes of these notices were ‘very difficult’ to resolve at conciliation:
     
     ... [W]here a worker says ‘well my doctor says I shouldn’t be going back to work because I’m still too ill’, the agents are ignoring the doctor’s opinion and saying ‘well, you’re not participating’. So even though the worker is complying with what their treating health practitioner is saying, the agent’s ignoring that and saying ‘well, you’re not participating in your own return to work’. And those ones we’re not able to send to a Medical Panel, because they’re about behaviour not a medical dispute. ...
421. Conciliation Officer B further said:
     
     ... [T]he Act is written in such a way that it’s about the worker’s participation. So it’s not about the medical opinion. So what the agents get the worker on is, even though the worker is saying ‘I’m just doing what my doctor says’, the agents say ‘well, bad luck, we don’t care what your doctor says, you didn’t come back to work’
     …
     And it’s awful. It’s an appalling abuse, I think, of the system, in the sense that it’s … punishing the worker for taking the advice from their treating health practitioner.
422. Conciliation Officer D highlighted the difficulties agents have maintaining these decisions if they go to court, stating:
     
     ... They are very hard for the agents to win … because … the burden of proof is the opposite, they must prove that the worker unreasonably refused to comply. And that’s not easy, and they have never been easy to win, because if you’ve got a doctor who says ‘I am issuing you certificates that say you cannot do any work, I see you on a regular basis, and you are not to go back to work’, how can a worker then be said to unreasonably refuse to comply to the return to work plan if his or her doctor is saying ‘you can’t work’. So they are notoriously difficult to win … very rarely I suspect they ever would [go to court], because they would be negotiated. ...
423. The disputed return to work non-compliance notices reviewed by the investigation confirmed the Conciliation Officers’ views, as a number of the notices resulted in a genuine dispute certificate at conciliation. Yet, upon reviewing these notices during the investigation, for example the notices issued in case studies 18, 20, 23 and 38 in this report, WorkSafe concluded that the notices should be withdrawn.
424. The investigation’s review of non-compliance notices also showed that many warning notices were not disputed by injured workers, presumably because they have no immediate impact on their entitlements.

Disputes about claims rejected on reasonable management action ground

425. Conciliation Officers also raised concerns about their inability to resolve disputes at conciliation about mental injury claims rejected by agents on the ‘reasonable management’ ground because they involve questions of fact. Under the WIRC Act, a worker is not entitled to compensation if their mental injury was caused ‘wholly or predominantly’ by ‘reasonable management action’ by the worker’s employer. Such action includes performance management, disciplinary action, dismissal and position reclassification.³⁹
426. Conciliation Officer B said agents rarely made an offer to resolve disputes about claims rejected on this basis:
     
     ... [Y]ou talk to the employer and the agent and you say ‘you guys rarely win them, so you’re better off trying to resolve them here, managing them at this level rather than having them go to court where you’re going to lose’. And the employers, because they see it as a personal affront to them … they tend to just say, no, not making any offers. Or they might make what I would consider as a really offensive offer. So they’ll offer no weekly payments. They’ll offer a little bit of medical and like treatment, as though that’s going to make them go away. And it doesn’t obviously. So, a lot of the time those matters end up in court because we can’t refer them off into a Medical Panel. ...
427. Conciliation Officer B said of those that proceed to court, most of them are settled at the ‘doorsteps of the court’ or if they end up in court ‘the worker gets up’ and the decision is overturned.
428. Conciliation Officer D said:
     
     ... There are plenty of matters that come to conciliation [where] you know they’re going to go nowhere … matters where there’s factual disputes … [claims rejected because the injury was caused by] management action taken in a reasonable manner. That’s a legal determination. So many … [of these] matters we can’t resolve because it’s a) a factual dispute and b) on the merits of what the management did was it reasonable action, now that is almost always evidentiary. ...
429. Conciliation Officer G similarly said they were generally not able to resolve disputes about claims rejected on this ground and that it was ‘almost impossible to issue a direction’ on them.

Decisions contrary to binding Medical Panel opinions

430. Medical Panels are a key part of the dispute process and can be used by the ACCS or a court to resolve a dispute where there is a medical question regarding a worker’s work-related injuries. Under section 313 of the WIRC Act, the opinion of a Medical Panel on a medical question referred to it must be adopted, applied and accepted as ‘final and conclusive’ by all parties.
431. WorkSafe informed the investigation that the impact of a previous Medical Panel opinion on a claim decision differs depending on whether the Panel previously provided an opinion on the same issue.
432. WorkSafe stated that where an agent seeks to revisit the same issue considered by a Panel (for example, whether a worker has an indefinite incapacity for all work), it expects the agent to demonstrate there has been a ‘material change’ in the worker’s situation since the Panel’s opinion. WorkSafe said examples of a material change included improvement in symptoms as a result of further treatment or an increase in the worker’s skills as a result of retraining.
433. However, there is no guidance for agents in the WorkSafe Claims Manual about this. A WorkSafe Clinical Panel Advisor interviewed during the investigation suggested greater guidance to IMEs was needed about what constitutes ‘material change’ and the evidence needed to support this.
434. The Ombudsman’s 2016 investigation identified that in some complex claims, agents unreasonably terminated workers’ entitlements contrary to a binding Medical Panel opinion, including in cases where there was insufficient evidence of a ‘material change’ in the worker’s circumstances. In some instances, such terminations were issued only a few months after the Panel provided the opinion.
435. Witnesses interviewed during the current investigation variously said it is ‘not as common as it used to be’ for agents to terminate entitlements contrary to recent Panel opinions, and that ‘as a general rule’ agents were ‘pretty good’ at complying with Medical Panel opinions.
436. Conciliation Officer A said at interview:
     
     ... [W]hen it comes to issues post [Medical Panel] opinion, how long do agents wait until they have another crack? Because that’s often a vexed issue. I haven’t seen as many attempts over the last few years as what there used to be … they don’t rush to try and terminate like they used to. ...
437. In the complex claims involving a Medical Panel opinion reviewed during this investigation, it was rare for agents to terminate entitlements soon after a Medical Panel opinion. Generally, agents waited at least 12 months before re-assessing a worker’s capacity.
438. 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. All of these claims involved workers who had been receiving weekly payments for more than 130 weeks and had been found by a Medical Panel to have indefinite incapacity for work.
439. The following case study is one example. EML terminated a worker’s weekly payments without evidence that there had been a material change in his condition since a Medical Panel opinion. It relied on an IME opinion that the worker could return to work, but did not provide the IME a copy of the previous Panel opinion.

440. Conciliation Officer A said at interview that they had seen instances where agents had attempted to obtain further information to support a material change, even where an IME had already concluded there had been no change. They stated:
     
     ... [S]ometimes they will push IMEs to – to make that statement. You know, they’ll get an IME opinion which doesn’t suggest anything has changed. So they’ll seek a supplementary report asking again can you give us further information of whether anything’s changed. If the IME doesn’t give enough information they might have another go at it again. That still does happen … I can’t say that it happens frequently. But it still does happen. ...
441. The following case study is an example of this practice. Gallagher Bassett terminated a worker’s entitlements contrary to a Medical Panel opinion, without sufficient evidence of a material change. Gallagher Bassett relied on an IME opinion, which initially said there had been ‘little change’ in the worker’s condition since the Medical Panel.

442. The then Convenor of Medical Panels said at interview that, due to the inherent complexity of some claims, they are likely to involve a medical dispute at some stage and end up being referred to a Medical Panel for a binding opinion. The investigation observed that this particularly occurred in cases where a worker had a primary physical injury and secondary mental injury, as well as sometimes a chronic pain syndrome.⁴⁰
443. The then Convenor highlighted the benefits of a Medical Panel assessing such cases, as they comprise ‘a group of doctors hopefully with all of the skills necessary to answer all of the questions together’ and reach ‘a unified … consensus view on all of those answers’. He described the ‘luxury’ of being able to put together a Panel containing practitioners of different specialties, which together will probably come up with a much better approach than the IME process. He said this is a ‘very powerful part of the [Medical Panel] process’.
444. Where a worker has more than one injury, they are sent to IMEs of different specialities who are only able to provide their opinion on the worker’s capacity based on the injury that falls within their area of expertise. The investigation observed that in some cases, the assessment of a worker’s capacity by IMEs who were each only considering part of the worker’s injuries in isolation produced a very different outcome to a Medical Panel considering a worker’s capacity holistically, based on all of their injuries. This sometimes led to Medical Panels overturning the unreasonable termination of a worker’s entitlements.
445. In the following case study, Xchanging terminated the weekly payments of a worker with a primary physical injury and secondary mental injury despite a previous Medical Panel concluding that collectively, his injuries rendered him indefinitely incapacitated for work.

Agents allowing employers to influence claims management

446. Employers play an important role in the return to work process, but their role in decision making on claims is limited. They are not able to object to a decision, except at the initial stage of claim acceptance or rejection in very limited circumstances set out in the Act.⁴¹
447. Evidence provided to the investigation suggested some agent staff effectively see employers as their ‘clients’, as employers choose which agent they want to manage their premium and claims when registering for WorkCover insurance. An employer may also choose a different agent once every 12 months if dissatisfied with an agent’s service.
448. The Ombudsman’s 2016 investigation found that this sometimes created a tension between an agent’s obligations to manage injured workers’ claims and their desire to ‘keep an employer happy’ to prevent them taking their business elsewhere. This was particularly so for large employers who paid significant premiums.
449. As the relationship between an agent and employer remains unchanged, this investigation found that this tension continues and identified instances where employers had attempted to influence agents’ management of claims. In some of these cases, agents accommodated employer’s requests and sought their opinion regarding the management of a claim.
450. The sample of agent staff emails obtained by the investigation provided examples of this, three of which are outlined on the following pages.

451. Witnesses interviewed during the investigation also discussed the relationship between agents and employers, describing the employer as an agent’s ‘client’ and outlined the influence they sometimes have over a claim.
452. A former agent employee interviewed during the investigation said she was aware of instances where an employer had attempted to influence the agent’s selection of an IME to examine a worker. The former employee said:
     
     ... I haven’t observed a lot of positive change in that area, unfortunately. There’s still a lot of influence placed by employers on to case managers to select a doctor where they think they’re going to get an outcome that they’re looking for to terminate a claim or to influence an outcome. ...
453. The former employee said together agents and employers were ‘absolutely always looking for different ways to terminate a claim’ and that poor work practices occurred at the agent to ‘keep the client happy so they don’t move somewhere else’.
454. A worker representative interviewed by the investigation also said they were aware that some employers requested that agents send workers to certain IMEs. When asked whether agents have accommodated such requests, they said the agent ‘certainly wouldn’t say no’.
455. Conciliation Officer B also told the investigation that:
     
     ... [I]f they [an agent] have got an employer involved, and the employer’s got their back up about accepting a claim, they won’t accept it. It’s supposed to be their decision. But they’re so highly influenced by the employers because, particularly big ones, they’re getting a lot of money out of big employers. ...
456. Conciliation Officer B highlighted the particular influence of employers in disputes about mental injury claims rejected on the grounds of reasonable management action.⁴² They stated:
     
     ... [The agent representative] just won’t make any offers. You try and get them and you talk to the employer and the agent and you say, look, these matters when they go to court, you guys rarely win them. So you’re better off trying to resolve them here; managing them at this level rather than having them go to court where you’re going to lose. And the employers, because they see it as, like, a personal affront to them … they tend to just say, ‘no, not making any offers’. Or they might make what I would consider as a really offensive offer. ...
457. By contrast, an example was identified in an Xchanging email where it resisted an employer’s attempts to influence the management of a claim, despite attempts and strong dissatisfaction expressed by the employer. The employer sent Xchanging copies of social media posts by the worker which they believed showed she was ‘clearly manipulating’ the situation and ‘treating it as a holiday’. Xchanging provided the employer updates on the activities it was undertaking, to which the employer responded with dissatisfaction and said they were ‘amazed’ Xchanging was comfortable with the evidence it had presented, which it believed showed the worker was engaging in insurance fraud. Xchanging responded:
     
     ... We are not ‘comfortable’ with this, but social media posts and travels overseas don’t always mean the person is without a mental injury, or the mental injury has resolved. Lots of injured workers with depression or anxiety can and do go overseas, we can’t assume anything and must leave this to an independent medical examiner to comment on. Social media info can’t be used by us to cease someone’s claim, what we can do is present this information to an independent Dr, and we can base our decisions on the medical opinions. ...

Part Two: The effect of financial rewards and penalties on agent decisions

458. In addition to looking at whether agents have continued to make unreasonable decisions on complex claims, this investigation revisited the way WorkSafe pays agents and the effect this has on agent decisions.
459. Although the investigation identified less documentary evidence that the financial rewards and penalties continue to influence agent decisions, when compared with the 2016 investigation, it still found some evidence showing:

• agents’ continued focus on terminating claims and maximising profit
• the influence of the rewards and penalties on agents’ offers at conciliation
• potential claims manipulation by one agent, which appeared to delay weekly payments to maximise its rewards.

The financial rewards and penalties

460. WorkSafe pays agents for acting on its behalf in issuing WorkCover insurance, collecting employer premiums and managing claims. This includes an annual fee which covers the costs of agents’ core functions, as well as financial rewards and penalties⁴³ tied to agents’ performance against key measures.
461. WorkSafe states these measures aim to:
     
     ... Align agent performance with WorkSafe’s goals of delivering improvements in return to work and service, while driving quality case management and ensuring the overall sustainability of the Scheme. ...
462. WorkSafe adjusts the measures each year, but they broadly fall within the categories of:

• return to work
• sustainability (ie the financial sustainability of the scheme)
• service/quality (ie the service provided to injured workers and the quality of agent decision making).⁴⁴

463. Each measure includes a target base performance level the agents are required to meet. If an agent does not meet the target, WorkSafe may financially penalise them. Conversely, where an agent exceeds the target, WorkSafe may financially reward them. Some measures carry greater rewards and penalties than others.

Changes since the Ombudsman’s 2016 investigation

464. The Ombudsman’s 2016 investigation found the measures in place at the time rewarded agents for terminating workers’ entitlements, without adequate incentives to encourage:

• good quality decision making
• long term sustainable return to work.

465. The investigation found, for complex claims, the measures encouraged agents to focus on terminations to achieve the financial rewards and maximise their profit. This was evidenced by a strong emphasis on terminations in claim files and agent staff emails, examples of which included agent staff:

• documenting ‘termination strategies’ in internal file notes on claims
• referring to terminated claims that achieved a financial reward as ‘winners’ or ‘wins’
• referring to the importance of achieving the financial rewards and the amount of money the agent could make for terminating claims.

466. The investigation identified that in some cases, agents made unreasonable decisions to achieve financial rewards. There was also evidence that agent staff manipulated, or considered manipulating, claims to achieve a financial reward or avoid a penalty.
467. Since 2016, WorkSafe has made a number of changes to the measures, including:

• reducing the rewards and penalties for terminating claims
• increasing the rewards and penalties for quality decisions
• introducing a long term return to work measure⁴⁵, which rewards agents for getting workers back to work after being incapacitated for more than six months but less than two years
• changing the scope of the existing return to work measure so agents are only rewarded for claims where the worker returned to work and stayed at work for a minimum amount of time.

468. WorkSafe now publishes information about the financial reward and penalty measures in its Annual Report each year.
469. WorkSafe also developed training for agent staff which is updated and delivered annually. The training covers the intent behind the measures, their relationship to good administrative decision making and ‘how this translates into daily decision making on workers’ entitlements’.

2017-18 financial reward and penalty measures

470. The financial reward and penalty measures for 2017-18 relevant to this investigation are outlined below. ⁴⁶

Table 1: 2017-18 financial reward and penalty measures

Return to work measures

Sustainability measures

Sustainability measures

* Includes workers who return to work part-time.

** Includes workers who return to work part-time.

^ For example, the target for primary mental injury claims where the worker was injured between July 1985 and June 1993 is for agents to reduce the number of these claims by 5 per cent

471. In Table 1 the ‘return to work measures’ and ‘weekly payments measures’ only include claims where a worker received more than 10 days of weekly payments. The ‘base performance level’ figures in Table 1 have been rounded to the nearest whole number.
472. The 2018-19 measures remained mostly the same, but WorkSafe removed:

• the 52-week weekly payments measure, further reducing the rewards available to agents to terminate claims
• the quality decision measure, instead making this a ‘minimum compliance standard’ in WorkSafe’s contracts with the agents, which is subject to sanctions if the minimum requirements are not met.⁴⁷

Are the financial rewards and penalties still influencing agent decisions?

473. In most of the claim files reviewed, the investigation found limited or no references to the financial reward and penalty measures. This differed from the claim files reviewed during the 2016 investigation, which included documented ‘termination strategies’ and references to the dates financial reward and penalty measures applied to a claim.
474. Like the 2016 investigation, this investigation reviewed a sample of agent staff emails. A review of these also provided limited overt evidence of the financial rewards and penalties influencing agent decisions.
475. However, a former agent employee interviewed during this investigation said that after the Ombudsman’s 2016 investigation, agent staff were told to be ‘careful’ about what they wrote in emails. They said:
     
     ... The terminology used in emails would be very carefully considered. So, for example, the word ‘termination’ would almost never be used, for fear that somehow somebody would be looking for that … Records that were kept on claims, would not be complete records. Emails sent about claims would not necessarily be complete.
     …
     It was a very frequent discussion within the office about ‘well, you can’t put that in email, because somebody might see it’. ...
476. The former agent employee said staff were instructed to refer to ‘terminations’ as ‘entitlement reviews’.
477. A CGU email showed CGU staff were also told:
     
     ...Ombudsman
     
     There is another review expected … just a reminder to be careful of what you put in writing as last time the … [Ombudsman] got access to emails sent. The message is write as if the worker was reading it.
     
     Management understands that of course we discuss things like entitlement reviews but it’s all in the wording. ...
478. In reality, the former agent employee said agents ‘absolutely’ remained focussed on managing liabilities. They said they thought it was ‘incredibly disappointing’ to see ‘a huge amount of resources’ focussed on the financial rewards and penalties, rather than claims management. They further said:
     
     ...[A]t each and every agent that I’ve worked at there is a very strong focus on the … [financial reward and penalty] measures. They are discussed every day. It’s an incredibly strong focus of case management in WorkSafe agents … Claim strategies to influence an outcome is part of daily work. ...
479. The former agent employee said agents put ‘very little effort’ into helping someone and ‘doing the best to help them recover and get back into work’. They said instead:
     
     ... [T]he attention to profitability is incredibly high and you know profitability means achieving the best possible outcome on the WorkSafe … [financial rewards and penalties] and retaining the most … clients … Genuinely helping someone is the least of their concerns. ...
480. In response to the draft report, WorkSafe said it was ‘unable to agree with this comment on the basis that performance incentives and resources are underpinned by a focus on the provision of assistance to workers to recover and return to work’.
481. Conciliation Officer D also said at interview that workers compensation is ‘a very difficult area’ which is ‘financially driven’. They described it as a ‘huge bureaucracy of a multibillion-dollar industry on an annual basis’ and said:
     
     ... [A]lthough I don’t agree … I understand the reasoning behind the remuneration process. These five companies are all private companies; they have shareholders and they have people they have to be responsible to and the maximisation of profits is their primary aim. Their secondary aim of course is fair and just compensation to injured workers in the state of Victoria, which sounds really easy but it’s an extremely complex process. ...

These five companies are all private companies ... and the maximisation of profits is their primary aim. Their secondary aim of course is fair and just compensation to injured workers in the state of Victoria

Concilliation Officer

482. Although the investigation identified limited documentary evidence that the financial rewards and penalties continue to influence agent decisions, compared with the 2016 investigation, it still found some evidence showing:

• agents’ continued focus on terminating claims and maximising profit
• the influence of the rewards and penalties on agents’ offers at conciliation.

Focus on terminations and maximising profit

483. Agent emails showed that since 2016, agents have on some occasions continued to refer to claims which had achieved a positive result for a financial reward and penalty measure as ‘wins’ or ‘winners’. For example, one EML email referred to claims which needed to be reviewed ‘URGENTLY’ to determine a ‘strategy for wins or losses’.
484. An Allianz email also referred to claims which had achieved a positive result as ‘wins’. In response to the draft report, Allianz said:
     
     ... Allianz regrets the terminology used in the email referenced, and actions have been taken to ensure this terminology will not be repeated.
     
     … Our aim is to see all workers under our care obtain appropriate treatments and support throughout their recovery. ...
485. The investigation also identified examples of agents referring to the amount of money the business could make from the financial reward and penalty measures. An EML email said that once the performance target for the 26-week return to work measure had been met ‘every claim thereafter is worth $54,285.00 to the business’. The email also said that the measure was worth $684,000 and had a ‘downside’ of $456,000 (ie the maximum penalty).
486. Another EML email showed it held a competition where staff were quizzed on the maximum amount of money EML could make from the 52-week weekly payment measure. The staff members who responded the quickest received free double passes to an AFL football game. EML told staff its performance against the measure was ‘currently on track’, but said ‘we cannot take our foot off the accelerator as Maximum Reward for this measure is currently worth $687,000!’.
487. In response to the draft report, EML said:
     
     ... EML supports families via the Western Bulldogs’ Community Foundation, which runs the free Sons of the West and Daughters of the West programs to improve the physical and mental health of people living and working in the west and give them a better sense of social connection.
     
     You have made comment in your Draft Report … concerning football tickets. These general seating tickets were awarded to staff who had undertaken volunteering in that program as a way of saying thank you for giving up their personal time for those communities. We feel that this context is important to highlight and acknowledge, and that the logical fallacy of identifying one – or a handful of questions casts an unfair light on what is a positive aspect of our corporate culture. ...
488. However, the email offering the tickets was sent to ‘ALL EML MELBOURNE’, suggesting the tickets were made available to all staff, not just those who had volunteered.
489. EML also highlighted that the tickets were the ‘cheapest seats at the ground’ and that it had ‘provided other similar email engagement campaigns allocating tickets to staff’. EML outlined a few examples, which included emails where staff were quizzed about:

• EML’s values
• key characteristics of communication ‘that can really make a difference in a worker’s experience with us’
• EML’s Injured Worker Survey score.

490. In a different email, an EML Case Manager said ‘here is another win’ to a Return to Work Specialist, referring to a return to work outcome achieved on a claim. In response, the Return to Work Specialist said:
     
     
     
491. Further emails were then exchanged as follows:
     
     
     
     
     
492. The sample of emails also showed agents’ focus on terminating claims. For example, a Gallagher Bassett Technical Manager sent an email to a Team Manager congratulating a Senior Case Manager (also copied into the email) for terminating a claim. The email said:
     
     
     
493. In response to the draft report, Gallagher Bassett said:
     
     ...The selective interpretation of an email to support a conclusion of a “focus on terminating claims” … without inquiring further to ascertain the context of the email, is disappointing. Had an inquiry been made, the investigator will have ascertained that the email is a celebration of a claim action that was made on time. The context is that Gallagher Bassett was, in the first half of 2018 (and still is), subject to formal WorkSafe warning regarding its systems that ensure 130 week entitlement assessments and decisions are made in accordance with legislation. The fact that the decision comprised a termination of entitlement is irrelevant. It was the completion of the assessment on time that was the point of the email. ...
494. An email from a CGU manager referred to weekly ‘entitlement review’ targets for staff and said they would be ‘checking in’ each week to confirm whether the target was met. The listed targets differed depending on the type of claims staff were managing. For example, Case Managers responsible for long term claims were required to review three claims each week and issue four terminations per month. The email also provided staff tips on ‘where to look’ for claims that could potentially be terminated.
495. In response to the draft report, CGU said:
     
     ... The full context of that strategy is that CGU’s rate of termination comparative to the scheme is much lower than others, and in fact is the lowest of all agents. To better understand this particular statistical nuance, we developed a strategy whereby all long-term claims were to be systematically reviewed over a defined time period. Targets were set for the number of reviews to be completed on a weekly basis.
     
     Termination targets do not exist at CGU, and do not form part of performance discussions. What does exist is a regular review of claims to ensure appropriate entitlements for injured workers.
     
     Staff were advised that the outcomes of their reviews should be determined as either:

• Maintain;
• Vary; or
• Termination of entitlements, in accordance with the legislation.
  
  The email also references a guide given to staff about the rate of termination. This guide was to provide an insight into the rate of termination to ensure we were meeting the reporting requirements under the scheme if we were to bring our termination rate up to scheme average.
  
  In relation to the identified email, it outlines that the goal is to assist the injured worker’s return to work and further states that if the injured worker is entitled they will continue to be entitled, however our role is to conduct a review to ensure that entitlement still exists.

496. The former agent employee interviewed during this investigation said the agent they worked for included termination targets as part of staff performance reviews. They said:
     
     ... [W]hen that was introduced I raised with my manager that I don’t feel that that’s what we should be doing, this is not the way that we should work. The feedback that I got was well … [the agent’s] termination numbers are too low and we need to improve them and this is the way that we’re going to do it. ...
497. In response to the draft report, WorkSafe said it ‘is not aware of “termination targets” being in performance plans for agent staff’.

Influence of rewards and penalties on offers at conciliation

498. Witnesses interviewed during the investigation gave evidence that the financial rewards and penalties influence agents’ offers to resolve disputes at conciliation.
499. Conciliation Officer B said:
     
     ... [W]e’re still getting agents saying to us ‘we can’t offer more than two weeks’. And they’ve worked that out based on nothing but their rewards. Because if they weren’t basing it on rewards, they could offer more than two weeks … I’ve had workers say ‘look, give us another 10 weeks and I’ll go away’, and they won’t do it.
     …
     They ring back to the office, the … [Dispute Resolution Officers], and then they say ‘we can’t offer more than two weeks’. And when you ask them why, they’re very cagey. They don’t say ‘because our medical evidence suggests that she has a work capacity’. They don’t go near there. They just get very cagey and … say ‘well that’s all we’re prepared to offer’. And that’s all you get out of them. ...
500. Conciliation Officer A said there was still a ‘culture’ within the agents of sometimes ‘putting the financial benefits of decisions before the merits of an actual decision’. They said this was ‘still particularly relevant at the 130-week decision mark’ and that Conciliation Officers still had difficulty resolving disputes about these decisions.
501. Conciliation Officer F said the financial reward and penalty measures gave agents ‘no flexibility to move or to make offers’ at conciliation and that:
     
     ... They’ll say ‘that’s a measure that we can’t go over’ or ‘this is the 13 week[s]’ or ‘this is the critical thing we can’t make an offer on’. It restricts the genuine conciliation process. ...
502. The former agent employee interviewed during the investigation also said that the financial reward and penalty measures still influenced agents’ offers at conciliation:
     
     ... [T]here would be conversations about what’s the next measurement date for that claim and can we make a limited offer that would achieve … [the agent’s] goals too … It’s as simple as the person who was attending conciliation would come over to the technical specialist and say ‘what do you need on this claim for it to be a win?’, ‘well I need it to be this many weeks’, ‘okay great, I’ll make an offer’. ...
503. The sample of agent emails obtained also provided evidence of this, two examples of which are outlined below.

Example 2

CGU emails referred to a dispute resolved at conciliation by CGU agreeing to provide the worker weekly payments for about three months. A CGU Technical Advisor raised concerns that the claims team was not consulted prior to agreeing to this offer, because the Dispute Resolution Officer believed the relevant measures had already been ‘breached’. The Technical Advisor said this was incorrect; the worker in this case had received about 45 weeks of weekly payments and the claim was eligible for a reward under the 52-week weekly payments measure. The Technical Advisor said the claim had been ‘predicted as a potential save’ and because of the agreement reached at conciliation, the claim would now ‘breach’ 52 weeks. A manager responded stating this fell short of their expectations, which was that consultation would occur prior to agreeing to any outcome at conciliation. The Technical Advisor responded stating:

504. CGU said in response to the draft report:
     
     ... The example implies that CGU allowed financial targets to adversely impact offers at Conciliation. CGU disagrees with these findings and submits the emails have been taken out of context. CGU has in place a standard procedure whereby Dispute Resolution Officers are required to first discuss any proposed offers with the claims team responsible for the long-term management of the worker’s claim.
     
     Dispute Resolution Officers do not have oversight of the worker’s claim and may not have an in-depth understanding of the intricacies and nuances of the worker’s individual circumstances.
     
     These consultations are intended to discuss the worker’s condition and review any additional information that may not have been considered prior to attending at the Conciliation Conference and/or prior to any offer being made. This ensures that Dispute Resolution Officers make reasonable and appropriate offers.
     
     CGU acknowledges the wording of the emails suggest performance measures were a driver behind consultations taking place but submit this is not correct. ...
505. In response to the draft report, WorkSafe said it made changes in 2018-19 to the only remaining financial reward and penalty measure relating to terminations and introduced a ‘second measurement point’ to mitigate this issue.

Manipulation of claims to maximise financial rewards

506. This investigation also looked at whether since 2016, any of the agents have manipulated claims to maximise the financial rewards and avoid penalties.
507. The Ombudsman’s 2016 report noted a number of examples between 2002 and 2016 of claim manipulations (or attempted manipulations), which included agent staff:

• recording false and inaccurate information on claims
• falsifying records
• paying more or less compensation on claims so that they would be eligible for financial rewards
• delaying the payment of compensation.

508. WorkSafe identified most of the manipulations through audits or monitoring of agent performance against the financial reward and penalty measures.
509. WorkSafe told the current investigation that it had not identified any instances of claims manipulation in 2017-18. However, it provided information about suspected manipulation it identified in August 2018 from its annual end of year verification process for the 2017-18 financial reward and penalty measures. This included a review of the 52-week weekly payments measure, which focussed on delays in weekly compensation payments due in June and July 2018.
510. From this review, WorkSafe identified a large number of claims where one of the agents, EML, had delayed making weekly compensation payments. WorkSafe also identified that EML had applied a payment ‘block’ to many of these claims in its payment system, which was not removed until just before the start of the new financial year. This gave the appearance that weekly payments on the claims stopped before 52 weeks, which would have improved EML’s performance for the 52-week weekly payments measure.
511. WorkSafe raised concerns with EML about this practice and sought further information about the delayed payments. In response, EML maintained that there was no ‘evidence of an orchestrated attempt’ to manipulate the 52-week weekly payments measure. Instead, it said the ‘block’ was applied to stop staff making payments in error, which had been a significant problem at EML.
512. Based on EML’s responses, WorkSafe said it was satisfied ‘the concerns raised were understood and would be addressed appropriately’. WorkSafe said it also adjusted EML’s performance outcome for the 52-week weekly payment measure by removing the claims to which the ‘block’ had been applied inappropriately through the verification process.
513. Although WorkSafe ultimately did not substantiate claims manipulation based on its review of the matter, this investigation received further information, including internal staff emails, which raised questions about EML’s responses to WorkSafe about this matter and the reason the payment block was implemented.
514. The investigation provided this further information to WorkSafe for review in July 2019 and it subsequently decided to conduct a further investigation into the matter. WorkSafe said:
     
     ... These alleged matters concerning EML are taken very seriously by WorkSafe, given the potential impact on the delivery of benefits to injured workers, and the possible work practices involved. However, WorkSafe also wishes to pursue a further investigation before determining whether additional action is warranted or not. We are also required by … [WorkSafe’s contract with the agents] to give EML procedural fairness and the opportunity to make formal representations before determining whether to take certain types of formal action under the … [contract]. ...
515. WorkSafe requested EML provide a range of documentation and provide ‘written representations’ in response to a number of questions. Upon receiving the requested information from EML, which included details of an internal investigation it had undertaken, WorkSafe told EML it was ‘not satisfied as to the rigour and independence of EML’s investigation’. WorkSafe requested EML cease any further internal action and engaged an external legal representative to conduct an independent investigation of the matter. This investigation had not been finalised at the time this report was prepared.
516. In response to the draft report, EML said:
     
     ... EML takes any allegations concerning claims manipulation very seriously and we are well advanced in the process of investigating the matters alleged fully and completely. This includes forensic internal investigation by our risk and fraud consultants and comprehensive external forensic reviews of emails.
     
     We note with concern [the] paragraphs … of your Report regarding the use of the WorkSafe … [payment] System claims block as a management control which we commenced investigating internally in mid-August 2019 in response to the WorkSafe request. EML provided the documents and responses to the best of our ability in the timeframe designated by WorkSafe. To satisfy our own internal processes however, we continue to undertake the investigation internally ourselves. We anticipate that this will be finalised shortly, and the report submitted to our Board directly. We advise that the claims block was used during a period of change and the 52-week blocks were removed prior to 30 June 2018 at the request of WorkSafe … EML received no financial reward whatsoever for the 52-week measure for the year ending 30 June 2018. ...

Part Three: WorkSafe’s oversight

517. This investigation considered the effectiveness of WorkSafe’s oversight of the scheme and whether this has improved since the Ombudsman’s 2016 investigation.
518. The investigation focussed on WorkSafe’s oversight of:

• agents’ management of claims
• the IME system.

519. The investigation also examined the outcomes of reviews WorkSafe commissioned to identify opportunities for improving the management of the scheme.

Oversight of agents’ management of claims

520. Although WorkSafe delegates the management of claims to the agents, the WIRC Act states:

• WorkSafe is directly liable to an injured worker to pay compensation in accordance with the Act (section 70).
• A function or power performed or exercised by an agent is taken to have been performed or exercised by WorkSafe (section 500(4)).
• Agents must act in accordance with the terms and conditions of their contract and any written directions by WorkSafe (section 501(2)). WorkSafe may terminate an agent’s appointment if they fail to comply with any of these (section 501(4)).

521. This means WorkSafe has a role in overseeing agents’ management of claims to ensure agents compensate injured workers appropriately.
522. The investigation re-examined the ways in which WorkSafe does this, which include:

• auditing the quality of agent decisions
• handling complaints about agents
• surveying injured workers about agent service delivery
• undertaking targeted ‘health checks’ of claims management issues.

523. WorkSafe has the power to direct an agent where it identifies an agent’s decision ‘wrongfully disentitled’ a worker⁴⁸. This may be prompted by an audit or complaint, for example.
524. WorkSafe said agents maintain authority on ‘the vast majority of decisions’, so it only escalates matters where an agent has ‘clearly incorrectly disentitled a worker’ and the agent is unwilling to alter its decision.

Quality decision audits

525. WorkSafe audits a sample of agents’ claim decisions every year to ‘ensure the quality of decision making and that injured workers receive their legal entitlement’. The audits aim to ensure that decisions are:

• made based on the merits of the claim
• supported by ‘reasonable and appropriate’ evidence
• made and communicated in a timely manner.

526. WorkSafe scores each decision as a ‘pass’ or ‘fail’ based on whether:

• the decision and ground(s) were supported by ‘reasons’ that were based on ‘reasonable and appropriate evidence at the time of the decision’
• the decision was made in accordance with the WIRC Act.

527. WorkSafe also specifies ‘work practices’ agents must follow, which WorkSafe said ‘assist auditors when assessing compliance’. These include that agents must:

• take all reasonable steps to obtain and ‘fairly and properly consider all relevant information prior to making a decision’
• provide reasons if any relevant evidence or information is ‘disregarded or discounted’
• ensure that ‘all relevant matters are considered’
• demonstrate that the evidence relied upon is ‘appropriate given the circumstances of the claim’ and that the evidence has been ‘appropriately assessed to make a sound and fair decision’.

Changes since the Ombudsman’s 2016 investigation

528. Since the Ombudsman’s 2016 investigation, WorkSafe has made several changes to the audit process, including:

• expanding the types of decisions audited
• increasing the sample size from less than 700 in 2014-15 to over 1,700 in 2017-18
• increasing the frequency of the audits from twice yearly to monthly
• increasing the required pass rate from 80 per cent in 2014-15 to 85 per cent in 2017-18.⁴⁹

529. WorkSafe financially penalises an agent if too many decisions fail the audits. Up until the end of 2017-18, agents could also get a financial reward if the number of decisions which passed the audits exceeded the minimum requirement. This occurred through the quality decision financial reward and penalty measure.⁵⁰
530. This changed from July 2018 onwards, when WorkSafe introduced ‘quality decision making’ as a ‘minimum compliance standard’ in its contract with the agents. WorkSafe said it:
     
     ... [B]elieves this establishes quality decision making as a core and fundamental contractual requirement across all entitlement decisions. Rather than an agent achieving a positive incentive under the … [financial reward and penalty measure] for meeting the required standard they instead incur a remuneration reduction for failing to achieve minimum standards. ...

2017-18 audits

531. In 2017-18, WorkSafe audited a total of 1,760 agent decisions, which included 440 decisions (88 per agent) in each of the following categories in the diagram below.
532. The investigation focused on WorkSafe’s audits of weekly payment terminations, which comprised half of the audits WorkSafe conducted in 2017-18. Worksafe gave 98.5 per cent of the 880 audited decisions a pass, failing only 13 decisions (1.5 per cent).
533. To gauge how effectively WorkSafe oversees agent decisions through these audits, the investigation:

• examined the outcomes of the 880 weekly payments terminations WorkSafe audited in 2017-18
• sought further information from WorkSafe about 49 of the audit outcomes
• reviewed the claim files of 20 of the decisions audited.

534. Although the investigation only conducted in-depth reviews of a small proportion of the total claim decisions audited, these indicated some potentially concerning trends.

Questionable passes

535. WorkSafe requires agents to make ‘sustainable’ decisions, which are those that would have a reasonable prospect of success at court. However, the investigation identified that WorkSafe gave some agent decisions a ‘pass’, despite identifying issues regarding the strength of the decision or evidence relied upon by the agent.
536. In response to the draft report, WorkSafe said:
     
     ... We confirm the audits are conducted based on the information available at a point in time and findings are made within the parameters of the documented business rules (some of which are listed in … the draft Report) and audit protocols. In the context of the complex matters examined in the Draft Report, medical conditions may change over time and/or further information may become available resulting in decisions being varied or changed. ...

Types of decisions subject to WorkSafe’s audits in 2017-18

*This includes terminations because a worker’s injury is no longer considered work-related or return to work non-compliance terminations, for example.

537. The case study below is one example, where WorkSafe passed a Gallagher Bassett decision to terminate a worker’s weekly payments, despite concerns about a ‘perception of opinion shopping’.

538. In another case, Gallagher Bassett terminated a worker’s weekly payments because she failed to comply with her return to work obligations. The decision passed WorkSafe’s audit, despite concerns about the ‘adversarial pathway’ Gallagher Bassett took.

539. The case study below is another example identified by the investigation, where Gallagher Bassett terminated a worker’s weekly payments based on a contradictory IME opinion. The decision passed WorkSafe’s audit, despite identifying that Gallagher Bassett should have clarified the IME’s opinion.

540. In another case, Allianz terminated a worker’s entitlements without assessing her secondary mental injury. The decision passed WorkSafe’s audit, despite acknowledging that Allianz’s failure to have the worker examined by a psychiatrist IME may ‘impact on the sustainability of the decision’.

Questionable decisions to change audit outcomes

541. Agents may dispute WorkSafe’s audit findings through a review process if they can provide additional information supporting their decision. The review process consists of an initial ‘peer review’ by a WorkSafe ‘subject matter expert’, which can be escalated to a review panel and then an appeal panel for a final determination.
542. Of the 880 weekly payments terminations WorkSafe audited in 2017-18, it initially failed 37 decisions. In 33 of these cases, the agent requested a peer review, which resulted in WorkSafe reassessing 24 of these decisions (nearly three quarters) as passes.
543. In some of these cases, it was unclear why WorkSafe overturned the fail, as the issues WorkSafe initially identified through the audit had not been fully resolved or addressed.
544. One example is outlined below, where CGU terminated a worker’s weekly payments based on an IME’s opinion that the worker would regain a work capacity with continued treatment, despite also recommending the worker’s treatment cease. The decision initially failed WorkSafe’s audit because the evidence did not support the decision. WorkSafe reassessed the decision as a pass upon peer review, despite acknowledging the quality of the decision remained ‘questionable’.

545. In another case outlined below, Gallagher Bassett terminated a worker’s weekly payments for failing to comply with his return to work obligations. Gallagher Bassett relied on an IME’s opinion that the worker could return to work, despite all three of the worker’s treating doctors stating he could not return until he completed a pain management program. The decision initially failed WorkSafe’s audit, but was reassessed as a pass upon peer review, despite WorkSafe acknowledging the decision would ‘unlikely be sustained should it ultimately proceed before court’.

Failure to reinstate worker entitlements following audit

546. Where an agent decision fails an audit, WorkSafe said it reviews the decision to determine if the worker has been ‘wrongly disentitled’. It said it does not automatically change the agent’s decision because:
     
     ... WorkSafe may decide that the correct decision has been made to reject or terminate a worker’s entitlements, but the decision may fail [the] audit on the basis of the incorrect ground being relied upon or the notice period provided to a worker not meeting legislative requirements … WorkSafe would not consider a worker to be wrongfully disentitled in these circumstances.
     
     In addition, the wrongful disentitlement review also takes into account all available information at the time of the review (eg the information available to the agent at the time the decision was made and any further information obtained following the agent’s decision), where[as] the … Audit criteria is specific to the information available and relied upon at the time of the decision....
547. Of the 13 weekly payment terminations which failed an audit in 2017-18, WorkSafe only concluded the worker had been ‘wrongfully disentitled’ in four cases.⁵² This meant that in the remaining nine cases, WorkSafe did not require the agent to overturn its decision.⁵³
548. In some of these cases, it was unclear why WorkSafe did not conclude the worker had been ‘wrongfully disentitled’ and require the agent to overturn its decision based on the issues identified during the audit. In the three case studies on the following pages, two workers were required to contest their matters at conciliation or court to regain their entitlements; the entitlements of one other worker were reinstated only after the investigation’s intervention.
549. In the following case study below, Allianz terminated a worker’s weekly payments on the basis that his incapacity was unlikely to continue indefinitely, despite an IME’s uncertainty about when he could return to work. The decision failed WorkSafe’s audit because it was not supported by ‘reasonable and appropriate’ evidence. WorkSafe concluded the worker had not been ‘wrongfully disentitled’ based on an IME supplementary report, despite the IME stating that the duration of the worker’s incapacity was ‘still far from certain’.

550. In another case, EML terminated a worker’s entitlements for his back injury without assessing his neurological conditions. The decision failed WorkSafe’s audit because without a neurological IME opinion, the impact of these conditions on the worker’s capacity for work was unclear. WorkSafe did not require EML to overturn the decision despite acknowledging there was a ‘material defect’.

551. The case study below is another example, where Allianz terminated a worker’s weekly payments for failing to comply with his return to work obligations. The decision failed WorkSafe’s audit because there was insufficient evidence the worker’s non-compliance was unreasonable. However, WorkSafe did not require Allianz to overturn the decision.

Failure to follow up actions identified through audits

552. WorkSafe sometimes identifies other action agents should take to address issues identified during audits, for example obtaining an additional IME opinion. However, prior to August 2019, WorkSafe had no formal process to check agents were complying with those requests.
553. The investigation identified that, as a result, agents sometimes did not take these actions and WorkSafe did not follow up on their implementation in a timely manner. Six examples identified by the investigation are outlined below.

554. WorkSafe told the investigation that it has changed its audit processes, and WorkSafe now follows up recommended actions identified during an audit. It said that as part of this process, agents will be required to respond to WorkSafe confirming recommended actions have been completed, or if they will not be completed, the reason(s) why.
555. WorkSafe said this process formally started as part of the 2019-20 audit program in August 2019.

Complaints about agent decisions

556. Complaints and stakeholder feedback also offer WorkSafe opportunities to check agents’ performance and identify areas for improvement.
557. WorkSafe receives complaints from injured workers and other parties about claims management issues, but considers it has a limited role in complaints about agent decisions. This is because there is a dispute process available to injured workers to contest these decisions.
558. However, WorkSafe has a role in ensuring agents do not ‘wrongfully disentitle’ workers. WorkSafe may review whether this has occurred after receiving a complaint and can direct an agent to change a decision if appropriate.
559. In response to the draft report, WorkSafe said:
     
     ... WorkSafe considers the comment … that WorkSafe considers its role is limited is unclear and not accurate. WorkSafe’s role is to ensure that decisions are made in accordance with the legislation and WorkSafe’s policies. If decisions are made within these parameters and the agent has appropriately used its discretion to make a decision then it is appropriate that WorkSafe advise workers of their appeal rights. ...
560. The Ombudsman’s 2016 investigation identified issues with WorkSafe’s response to complaints and feedback, including:

• ineffective use of complaints data to identify potential systemic issues
• reluctance from WorkSafe to direct agents in response to a complaint
• a perception by some stakeholders that WorkSafe did not take adequate action regarding their concerns.

561. This investigation considered whether anything has changed.

Changes since the Ombudsman’s 2016 investigation

562. Following the Ombudsman’s 2016 investigation, WorkSafe redeveloped its complaints management framework. This included:

• revising its complaint policies
• commencing regular reporting of complaints data to WorkSafe’s executive leadership team to identify and monitor trends
• improving the information on WorkSafe’s website about how workers can complain to WorkSafe and other bodies.

WorkSafe’s handling of complaints in 2017-18

563. In 2017-18, WorkSafe recorded 1,200 complaints in its Complaints Tracking System about claims management issues, of which 196 were categorised as complaints about claim decisions. However, when the investigation reviewed these, many did not relate to claim decisions and appeared to have been incorrectly categorised.
564. Only two complaints WorkSafe received in 2017-18 led it to conclude that a worker had been ‘wrongfully disentitled’. In these cases, WorkSafe raised concerns with the relevant agent, which withdrew the decision.
565. This investigation reviewed 27 complaints about claim decisions WorkSafe received in 2017-18, about half of which were randomly selected.
566. The review identified continuing issues with WorkSafe’s handling of complaints, including:

• referring workers to conciliation, when WorkSafe could have resolved the complaint itself
• accepting agent responses without questioning whether they are correct or reasonable.

Referring workers to conciliation

567. The investigation accepts that in many cases, it is appropriate for WorkSafe to refer workers with a complaint about an agent decision to conciliation. This may be appropriate in cases where, for example:

• a worker is unhappy with a decision but cannot provide evidence about why it was wrong
• there is a clear factual or medical dispute.

568. However, WorkSafe has a role in ensuring workers are not ‘wrongfully disentitled’, and it reached such a conclusion in two complaints in 2017-18. This suggests WorkSafe assesses each complaint it receives to determine whether it has a role in resolving the complaint or whether conciliation is the appropriate forum for the dispute. WorkSafe’s assessment is important as its early intervention can mitigate the impacts of requiring a worker to proceed to conciliation or court, including a delay in any reinstatement of payments.
569. The investigation found that in some cases, WorkSafe initially reviewed the complaint and identified concerns with the agent’s decision, but ultimately referred the worker to conciliation. It was unclear why WorkSafe did not take further action regarding these complaints in light of its concerns.
570. In the following case, a worker complained to WorkSafe about Gallagher Bassett’s decision to terminate her ‘top up’ weekly payments based on an IME opinion, which was contrary to a previous binding Medical Panel opinion. Despite identifying multiple issues with the decision, WorkSafe told the worker to go to conciliation.

571. In another case, a worker complained to WorkSafe about Gallagher Bassett’s termination of his payments, contrary to evidence he had no work capacity. WorkSafe told the worker to dispute the decision at conciliation, despite identifying the claim had not been ‘managed properly’.

I am now at the tail end of my accrued annual leave and will be left without income over the Christmas period. I do not understand how a brief visit with an IME [carries] more weight than my 3 treating physicians, one who claims ‘the likelihood of a [cardiovascular] event such as a stroke and or death is imminent’ yet somehow I can return to a hostile work environment without any resolution, for normal hours and normal duties.

Injured worker

572. Witnesses interviewed during the investigation also raised concerns about WorkSafe’s failure to take adequate action regarding complaints. Conciliation Officer B said:
     
     ...[Y]ou sort of give up [raising issues with WorkSafe] after a while because you think you’re not going to get anywhere with them. So, I tend to take very few things to WorkSafe … I encourage the workers’ reps [representatives] to take it to WorkSafe because they sometimes have … a better result than what I do … I think they [WorkSafe] rely on their policy and guidelines, rather than looking at things on their merits for individuals. I think that’s a big problem … they take an ‘across the board’ view of everything, rather than assessing the merits of each case. ...
573. Conciliation Officer D said:
     
     ... WorkSafe … [doesn’t] want to know a lot of … things. It suits them not to know, because they don’t want to know the bad news – they don’t want to know that at conciliation an agent can’t make an offer beyond X number of weeks because of a policy that they made. Because it doesn’t make them look good. ...

Acceptance of agent responses

574. Witnesses interviewed by the investigation also raised concerns about WorkSafe’s willingness to accept agent explanations.
575. At interview, Conciliation Officer B said WorkSafe tended to ‘back the agent’ rather than take steps to resolve complaints. Conciliation Officer G said WorkSafe ‘protect[s] the agents more than they should’ instead of looking at it independently and saying ‘we’re not prepared to let you do this’.
576. Conciliation Officer C said they had raised concerns about individual claim decisions with WorkSafe in the past, and its response was that it was ‘up to the agent’. The Conciliation Officer said this type of response ‘makes you consider whether it is even worth contacting WorkSafe at all’.
577. A worker representative said in their experience, WorkSafe seemed more reluctant than previously to intervene in agent decision making. The representative said WorkSafe often defended agents’ decisions as ‘reasonable’ without looking at the merits of them. The worker representative said:
     
     ... Their mentality from my point of view is ‘oh if an agent says its right, it must be right’. And we say to them … ‘you need to look at everything, and yes, you might win at conciliation, you might have an arguable case at conciliation, but realistically, are you going to win at court?’ ...
578. In the following case, a worker complained to WorkSafe about Xchanging’s termination of their payments based on an unclear IME opinion. Despite identifying concerns about the strength of Xchanging’s decision, WorkSafe closed the worker’s complaint because Xchanging said they should let the dispute process ‘run its course’.

579. In another case, WorkSafe supported Gallagher Bassett’s decision to require a worker to attend occupational rehabilitation, despite having insufficient evidence about the worker’s capacity to participate. Gallagher Bassett’s advice to the worker and WorkSafe about the worker’s requirement to attend occupational rehabilitation was inconsistent with the Claims Manual, which WorkSafe failed to identify in its handling of the complaint.

580. In the following case, a worker complained to WorkSafe about Gallagher Bassett’s requirement that she attend occupational rehabilitation, as she believed she had no capacity to participate. Without assessing the reasonableness of Gallagher Bassett’s decision, WorkSafe closed the complaint.

581. In another case reviewed by the investigation, a worker complained to WorkSafe about Gallagher Bassett’s termination of her entitlements based on a contradictory IME opinion. WorkSafe closed the complaint because it was ‘satisfied’ Gallagher Bassett had ‘followed correct procedures’ in making the decision, despite Gallagher Bassett providing no specific response to the concerns raised.

Injured worker survey

582. WorkSafe also receives feedback about agents’ management of claims through its survey of injured workers.
583. Although the Ombudsman’s 2016 investigation did not examine the effectiveness of the survey, some WorkSafe and agent executives said it was a key mechanism to ensure the quality of agent decision making.
584. The survey measures workers’ perception of their agent’s service delivery based on ‘key events’ across six areas.
585. The survey is linked to a financial reward and penalty measure, which means that WorkSafe may financially reward an agent if more than a minimum percentage of workers surveyed were happy with its service. WorkSafe may also financially penalise an agent if too many workers were unhappy with the service they received. In 2017-18, all five agents met or exceeded the minimum target of 81 per cent, with results ranging from 81 to 83 per cent.
586. WorkSafe surveys about 5,000 workers each year. However, the survey primarily focuses on workers who have received less than 130 weeks of weekly payments, because these make up the majority of claims in the scheme.

Table 2: Injured worker survey questions

Table 3: Injured worker survey weightings

*Refers to claims where an agent has paid at least $20,000 in hospital expenses, as well as paying for attendant care, external case management or car/home modifications

587. As this investigation focussed on complex claims where workers received weekly payments for 130 weeks or more, the value of the survey in understanding whether agent decision making on these claims has improved since 2016 is limited.

Health checks

588. ‘Health checks’ are another way WorkSafe oversees agent decision making and claims management. WorkSafe defines a ‘health check’ as a ‘high level review of a sample population of claims’, which can be initiated for a number of reasons. For example, it may be prompted by issues identified from data reporting, complaints, or as part of an ‘ongoing program review’. WorkSafe said that once it completes a health check, ‘a view is formed on any future action required’.
589. Although the Ombudsman’s 2016 investigation did not examine the effectiveness of WorkSafe’s health checks, this investigation looked at recent health checks to see whether they have strengthened WorkSafe’s oversight of agent decisions.

2017-18 health checks

590. In 2017-18, WorkSafe undertook 17 health checks related to claims management, which included a review of agents’ acceptance and rejection of claims, terminations of weekly payments, medical treatment decisions and agents’ use of occupational rehabilitation.
591. The investigation focussed on the two health checks most relevant to the scope of this investigation. These related to WorkSafe’s review of:

• claims likely to exceed 130 weeks
• long term claims, where the worker was injured more than five years prior.

Effectiveness of health checks

592. It is positive that WorkSafe proactively undertakes targeted health checks of different claims management issues; however, the investigation’s ability to examine their effectiveness or the validity of their findings was limited by WorkSafe’s poor record keeping.
593. WorkSafe was unable to provide the investigation basic information about the two selected health checks, such as the specific claims reviewed, when they were reviewed, how the claims were selected, and the outcomes of the reviews.
594. WorkSafe told the investigation this was ‘due to the unavailability of documentation’. The only documentation it could provide the investigation were copies of internal presentations it delivered on learnings from the health checks.
595. Although the investigation focussed on two health checks, WorkSafe acknowledged record keeping had been a larger problem. WorkSafe said it had identified that historically, ‘its approach to capturing, recording and reporting on the outcomes of health checks relating to claims has not been consistent’. WorkSafe told the investigation that from 2018-19 onwards, all health checks would be ‘captured, recorded and reported’ in the same way as its audits through its audit system.
596. The two health checks the investigation reviewed are summarised below based on the limited information WorkSafe could provide the investigation.

Oversight of the IME system

597. WorkSafe is responsible for appointing IMEs to examine injured workers and provide an opinion about their condition, work capacity and treatment. IMEs can be medical practitioners, dentists, physiotherapists, chiropractors, osteopaths and psychologists.
598. WorkSafe has quality assurance processes to ensure its IMEs and their reports meet required standards. WorkSafe also handles complaints from injured workers and other parties about IMEs, and manages part of the IME booking system.
599. This investigation re-examined the effectiveness of WorkSafe’s oversight of the IME system and whether this has improved since the Ombudsman’s 2016 investigation.

IME appointment

600. Any medical practitioner or allied health professional wanting to become an IME must complete an application and induction process managed by WorkSafe.
601. At the time of the Ombudsman’s 2016 investigation, WorkSafe’s selection criteria had been in place since 2003. The investigation identified that although WorkSafe strengthened the selection criteria over time, it failed to protect the system from inappropriate appointments. In one case, WorkSafe reappointed an IME using the criteria, even though the IME had been found guilty of previous professional misconduct.

Changes since the Ombudsman’s 2016 investigation

602. In June 2018, WorkSafe implemented a new appointment process for IMEs, which requires them to:

• submit an application and written submission to WorkSafe
• undergo a series of phone interviews to ensure they meet WorkSafe’s selection criteria and have ‘exceptional behavioural and communication skills’.

603. A WorkSafe panel reviews each application to assess whether the prospective IME meets WorkSafe’s requirements.
604. WorkSafe also introduced new selection criteria, tailored to suit each medical and allied health discipline. Among other things, the new criteria require a prospective IME to:

• perform a minimum of eight hours ‘direct clinical care’ each week aligned to the IME’s chosen specialty
• have a minimum of five years full-time work experience as a practitioner in that specialty
• have the necessary insurance
• be registered with the Australian Health Practitioner Regulation Agency (AHPRA) without conditions.

605. Successful applicants must participate in an induction process that covers their legislative obligations, reporting expectations and WorkSafe’s policies. IMEs must also complete training in relation to conduct and agree to meet service standards at the end of the induction process.
606. As at May 2019, WorkSafe had 269 IMEs under its new criteria.
607. WorkSafe can suspend or revoke an IME’s registration if they fail to meet WorkSafe’s IME Service Standards (the Standards), which have been updated since the Ombudsman’s 2016 investigation. The Standards set out WorkSafe’s expectations about matters such as conduct during examinations and the content and structure of IME reports. They require IMEs to notify WorkSafe of significant matters such as formal complaints and changes to their AHPRA registration.
608. In 2017-18, WorkSafe took action against five IMEs following investigations into misconduct, breaches of the Standards and recurring complaints. This resulted in:

• the resignation of two IMEs
• a decision to take no further action regarding one IME
• a warning for one IME
• a one-month suspension for one IME.

609. An external review WorkSafe commissioned in early 2019⁵⁵ identified a potential gap in WorkSafe’s oversight of IMEs once appointed, as WorkSafe did not proactively check if IMEs continued to meet the new criteria throughout their three-year appointment term. The review found this created a risk that IMEs who no longer met the criteria would continue conducting examinations. For example, IMEs might stop performing the minimum of eight hours direct clinical care per week or have conditions imposed on their registration by AHPRA.
610. WorkSafe told the investigation that it has since gained access to AHPRA’s medical practitioner registration system so it can identify any changes to an IME’s registration status.

Stakeholder feedback regarding new selection criteria

611. Some witnesses raised concerns with the investigation about the new requirement that IMEs engage in eight hours of direct clinical care each week.
612. One IME representative interviewed during the investigation said this had resulted in some experienced medical practitioners not being re-appointed as IMEs because they could not demonstrate eight hours of clinical practice per week. The representative said in introducing this change, WorkSafe ‘threw the baby out with the bath water’ and there was ‘a great skill level lost’. The representative said this change also resulted in WorkSafe ‘under-appointing’ the number of IMEs required to meet the demand of appointments requested by agents.
613. A representative from the Australian Medical Association said there was a ‘level of artificiality’ in the changes to WorkSafe’s IME criteria. They said there had been a lack of explanation and ‘openness’ from WorkSafe about why eight hours of clinical practice was considered the appropriate measure for medical practitioners to be considered suitable as an IME, and that it had ‘got a lot of people upset’. They further said that:
     
     ... The number of doctors who are falling off the system or out of the system simply because they are not meeting the eight hours, but they’re not necessarily doctors who don’t have the capacity to do the work … the result is a lot of doctors who might have incredible skill sets but are not practicing in a clinical sense of treating patients are locked out. ...
     
614. By contrast, a WorkSafe Clinical Advisor told the investigation that they believed the new criteria was an ‘improvement’ because it had caused a lot of IMEs with ‘outdated’ opinions to ‘drop out’. They said in the past some IMEs were ‘semi-retired’ and not as ‘up-to-date in their clinical practice’, but that the new criteria had changed this.
615. In response to the draft report, WorkSafe said:
     
     ... WorkSafe notes that it did undertake significant external consultation including through the IME Clinical Reference Group, a presentation to the AMA [Australian Medical Association] WorkCover/TAC committee, the establishment of a working group with representative from the College of Surgeons and consultation with various medical faculties and peak bodies in relation to the IME criteria. ...

Quality assurance

616. Once IMEs are appointed, WorkSafe oversees the quality of reports they produce through quality assurance processes. Reports are assessed against the IME Service Standards which, among other things, set out requirements for the content and structure of reports.

Changes since the Ombudsman’s 2016 investigation

New IME Quality Assurance Framework

617. Since 2016, WorkSafe has introduced a new IME Quality Assurance Framework which, according to WorkSafe, provides:
     
     ... [A] connected approach focusing on building capability and supporting IMEs and claims staff in providing independent and non biased opinions. Ensuring that supports are in place and of the highest quality, will be important to help drive improved quality reports and detailed information and opinions that support the management of an injured worker’s return to health. ...
     
618. In response to the draft report, WorkSafe said:
     
     ... We confirm that the IME Quality Assurance Framework also includes recruitment, induction, [and] taking appropriate action in relation to IMEs who do not meet performance standards. We also note that further improvements arising from the review of the IME Quality Assurance Program are being implemented. ...

Peer reviews

619. At the time of the Ombudsman’s 2016 investigation, WorkSafe’s quality assurance process consisted of peer reviews of IME reports. WorkSafe describes these as a ‘proactive management practice that is used to assess the level of quality of IME reports through the structured program that engages peers to review and comment against a set of standard criteria’.
620. Since 2016, WorkSafe has made changes to its peer review process so that:

• Its selection of IMEs for review is informed by the frequency and nature of IME complaints.
• There is a documented process to ensure claims are reviewed where an IME report is found to be ‘significantly deficient’.

621. WorkSafe only completed 11 peer reviews in 2017-18, to allow it to prioritise the redevelopment of its IME Quality Assurance Framework. In 2018-19, WorkSafe conducted ten peer reviews, with another 14 in progress as at May 2019.

New clinical desktop reviews

622. WorkSafe also introduced a second IME quality assurance process in October 2018, involving ‘clinical desktop reviews’ of IME reports. WorkSafe states that these reviews ‘provide another quality layer’ and allow WorkSafe to conduct a ‘more agile, responsive review and in greater numbers’.
623. As distinct from peer reviews, WorkSafe states clinical desktop reviews are designed for ‘quick resolution of one-off issues that require feedback to IMEs, in particular quality of reports, suggested improvements and education’. The reviews are conducted by one of WorkSafe’s Clinical Advisors.
624. WorkSafe may conduct a clinical desktop review based on a complaint from an injured worker or agent about the quality of the IME report or where an IME is new to the scheme, for example. WorkSafe states an IME report is considered ‘suitable’ for this type of review in circumstances where:

• there are factual inaccuracies in the IME’s report which are evident from supporting documents provided to the IME
• the IME failed to adequately or appropriately answer the agent’s questions
• the content and/or format of the IME’s report does not meet the IME Service Standards
• the IME’s opinion does not accurately reflect the assessment findings reported
• WorkSafe has received more than two complaints about the IME within four weeks that directly relate to the IME report.

625. WorkSafe completed 39 clinical desktop reviews between October 2018 and May 2019.

New IME Performance Management Framework

626. In addition to expanding the quality assurance processes, WorkSafe also introduced an overarching IME Performance Management Framework. The framework outlines specific actions WorkSafe will take when IME report deficiencies are identified, to ensure performance management of IMEs is handled in a consistent way.
627. The framework was developed in response to an external review which identified that WorkSafe had no formal policies, guidelines or other documentation outlining remedial action where an IME’s performance is considered unsatisfactory because of peer and desktop reviews and/or complaints. The review highlighted that a lack of clarity about this ‘increases the risk of IMEs who may be underperforming continuing to provide services to injured workers’.⁵⁶

Limitations of quality assurance processes

628. While WorkSafe has expanded and improved its IME quality assurance processes since 2016, the investigation found that their value has been limited because WorkSafe does not give reviewers complete information when they undertake a peer or clinical desktop review of an IME report.
629. WorkSafe gives the reviewer the IME’s report and the agent’s referral letter to the IME. WorkSafe does not give the reviewer copies of other documents the IME received to inform their opinion, including previous IME reports, Medical Panel opinions, reports from the worker’s treating doctor(s) and occupational rehabilitation reports. For complex claims, this documentation provides crucial background information about the worker’s history.
630. The limitations of the approach became evident when WorkSafe arranged a clinical desktop review of one IME’s reports as a result of issues identified during this investigation. The investigation read a number of the IME’s reports when reviewing cases and observed that they sometimes contained similar, if not identical, comments and conclusions. This included statements that:

• The worker presented with a significantly disproportionate emotional response to their physical injury.⁵⁷
• The worker could return to work, despite a history of incapacity.
• There had been a ‘significant change’ in the worker’s condition since a previous Medical Panel opinion.

631. Agents used the IME’s reports to terminate workers’ entitlements. In two thirds of these cases, the agent’s termination was withdrawn or overturned through the dispute process.
632. WorkSafe arranged for one of its Clinical Advisors to undertake clinical desktop reviews of 10 of the IME’s reports. The Clinical Advisor is a leader in their field and has been involved in the WorkCover scheme for about 15 years.
633. From these reviews, WorkSafe concluded that the IME’s opinions were ‘appropriate’ but identified opportunities for improvement. It said:
     
     ... The review of a sample of … [the IME’s] reports highlights that … [they] had used similar wording or repetitive language within some of … [their] reports. While it was noted that the ultimate opinion was seen to be appropriate based on the context and body of each report … [the IME’s] opinions were in general seen to be brief in nature. It was flagged that … [their] opinions were often not well explained or supported by examples from the history and the examination taken. To ensure that further quality improvements are seen within … [the IME’s] reports, WorkSafe will provide feedback to … [the IME] about these findings and will conduct further quality reviews on a sample of … [the IME’s] reports. ...
     
634. The investigation looked at the Clinical Advisor’s written feedback for the 10 reports. While WorkSafe had stated that the IME’s opinion in each case was ‘appropriate based on the context and body of each report’, the Clinical Advisor concluded that:

• There was some evidence of bias in four of the reports. The Clinical Advisor said one report was not free from bias and three reports were potentially not free from bias.
• There was an incomplete explanation in nine reports, which left the opinions open to interpretation by agent staff.

• There was possibly a ‘discrepancy between the reported assessment findings and the outcome, opinion or recommendations of the report’ in four reports.
• It was ‘difficult to comment specifically’ on six reports where the IME concluded there had been a ‘material change’ in the workers’ condition since a Medical Panel examination, without reviewing the Panel’s opinion. WorkSafe did not give the Clinical Advisor a copy of the Medical Panel opinion.

635. The investigation interviewed the Clinical Advisor and gave them an opportunity to review all of the documentation considered by the IME. After reviewing these documents, the Clinical Advisor expanded on their original criticisms and said:

• The IME’s opinions were often ‘unclear’ and ‘inadequately explained’.
• In most of the cases where there was a previous Medical Panel opinion, there was insufficient evidence to support the IME’s view that the worker’s condition had materially changed. The Clinical Advisor formed a different view to the IME and, in some cases, said the worker’s condition appeared to have actually worsened.
• Instead of basing opinions on ‘objective clinical science’, the IME referred to subjective information in their assessment of workers’ conditions. For example, the IME often commented that workers had a disproportionate emotional response to their physical injuries. The Clinical Advisor disagreed with these comments and indicated they had limited bearing on a worker’s capacity for work. However, the Clinical Advisor noted that agent claims staff sometimes interpreted the comments as meaning workers were not being ‘truthful’ and ‘therefore there’s nothing there’.

636. In response to the draft report, the IME said they had been subject to three peer reviews over a six-year period. The IME said one of these reviews recommended some improvements to their reports, but that the most recent review concluded their reports met WorkSafe’s requirements.
637. The IME said that the 10 cases the Clinical Advisor reviewed generally involved ‘complex injuries’, with ‘both a physical and psychological component’ and that the IME’s reports ‘concentrated on the physical assessment’.
638. The IME said that their reports were ‘usually submitted in a standard format, using standardised headings’ and the injuries reviewed were a similar type. The IME said this ‘may explain the commonality of the language used in the reports’.
639. The IME acknowledged that:

• They made references to work restrictions, but in some cases did not expand on these.
• Their explanations in some reports were ‘brief’ and ‘would have benefitted from greater detail’.
• Where they identified emotional responses to physical symptoms, this should have been more thoroughly outlined.
• Where they commented on changes since a previous Medical Panel, the IME ‘relied heavily on changes in examination findings’ and it would have been beneficial to support these with other changes.

640. The IME said they ‘take on board the reviewer’s comments that without detailed explanation, the report submitted could be subject to interpretation’.
641. Three examples of complex claims involving a report by this IME (whom we call ‘IME Y’), which was reviewed by WorkSafe’s Clinical Advisor, are outlined on the following pages. In each case, the Clinical Advisor provided negative feedback about the IME’s report.

642. In addition to commenting on the three individual cases, IME Y said in response to the draft report:
     
     ... I have had the opportunity to reflect on my practice, my report writing and also the manner in which the reports are received. I have also had the opportunity to reflect on the emphasis that is placed on the various components of the assessment; in particular, assessing the emotional response of workers to the evaluation. Whilst I note the absence of such features is a useful clinical finding, the presence of such features should be presented in a way which the reader can attribute the appropriate weight to the information. In addition your report has caused me to reflect on the importance of such findings in isolation of other validity test results.
     
     I have also considered the issue of changes in the interval since the Panel last convened and will be carefully reviewing my recommendations in such cases. I have also considered further how to quantify a material change. This is likely to require further discussion and I have already raised this at a Peer Review.
     
     Since I received your letter, I have already made changes as to how I present reports

• I am ensuring that the evidence to support my conclusions is fully disclosed
• That I explicitly address the findings within my responses to the questions posed
• That the balance of the evidence is addressed whilst presenting and summarising my findings.
  
  I would stress that the observation of potential bias is particularly concerning as I have always taken an independent role and will now reflect very carefully to ensure that not only my reports are independent, but are also seen to be independent.

Other sources of information about IMEs

643. Noting the proportion of claims reviewed where a termination based on IME Y’s opinion was later overturned or withdrawn through the dispute process, the investigation asked WorkSafe if it captures data regarding:

• the proportion of individual IME opinions which have led to adverse decisions by agents
• the proportion of those decisions that are subsequently overturned through the dispute process (either at conciliation, court or by a Medical Panel).

644. WorkSafe said it does not have regular reporting on adverse decisions that are as a result of an individual IME opinion, although it has reported on this in the past on an ‘ad-hoc basis’. WorkSafe said there were ‘certain complexities’ which meant it could not accurately report on this.
645. WorkSafe also said Medical Panel outcomes could not ‘necessarily be directly linked to an IME opinion’ because:

• A Medical Panel may consider further information which was not available to the IME at the time of their examination of the worker.
• An injured worker’s presentation may change from the time of their examination by the IME to that of the Panel, as the worker may have had ‘further medical appointments, diagnostics or treatment in that time’.

Complaints about IMEs

646. WorkSafe handles complaints about IMEs, which provide another source of feedback about IMEs and the quality of their reports. In 2017-18, WorkSafe received 276 complaints about IMEs.
647. WorkSafe has a dedicated team to handle IME complaints, which is separate from the team that handles complaints about agents.

Changes since the Ombudsman’s 2016 investigation

648. In response to the Ombudsman’s 2016 investigation, WorkSafe made changes to its IME complaints policies and procedures so:

• Workers are not required to put their complaint in writing.
• WorkSafe shares complaints about IMEs with the team that oversees the IME quality assurance processes.

Effectiveness of complaint handling in 2017-18

649. To examine the effectiveness of WorkSafe’s handling of IME complaints, this investigation reviewed:

• WorkSafe’s policies and procedures for IME complaints
• WorkSafe’s records for 24 IME complaints in 2017-18, about half of which were randomly selected.

650. Although WorkSafe has made some changes to its handling of IME complaints since 2016, this investigation identified that:

• There is a lack of clarity around WorkSafe’s role in IME complaints.
• In some cases, WorkSafe has accepted IMEs’ responses to complaints without considering whether they were reasonable.
• There is no clear process for referring complaints between WorkSafe’s IME complaints and agent complaints teams.

Lack of clarity around WorkSafe’s role in IME complaints

651. WorkSafe has three policies and procedures dealing with IME complaints.
652. Firstly, it has an IME complaints procedure which outlines the steps WorkSafe takes upon receipt of an IME complaint. However, the procedure does not define the types of IME complaints WorkSafe can handle.
653. The procedure says WorkSafe:

• obtains the worker’s consent for WorkSafe to contact the IME about their concerns
• writes to the IME about the worker’s concerns and seeks their response
• provides the outcome to the worker and IME.

654. The procedure sets out detailed advice about administrative steps such as where to save documents in WorkSafe’s system, but it is silent on whether WorkSafe reviews the IME report that is the subject of the complaint to form its own views on the issues raised by the worker.
655. Secondly, the WorkSafe Claims Manual provides further advice about IME complaints. It states that ‘the nature of the IME complaint determines how the complaint will be handled’ and that WorkSafe only investigates ‘administrative complaints’. However, the Claims Manual does not define an ‘administrative complaint’ or provide examples.
656. The Claims Manual further states that ‘other complaints about the professional and ethical conduct of IMEs’ may be referred to more appropriate bodies, such as the Medical Practitioners Board of Victoria or the Health Services Commissioner. WorkSafe also does not define these terms or provide examples.
657. WorkSafe introduced a third policy dealing with IME complaints in June 2019, in the form of its new IME Performance Management Framework. It outlines ‘issues’ relating to IMEs and the relevant ‘performance management actions’ WorkSafe should take. This framework is not confined to complaints; it also covers concerns identified through the IME quality assurance processes.

• The Performance Management Framework states that WorkSafe may write to an IME and seek their response where a worker raises concerns such as:
• an IME causing the worker pain during the examination
• excessive appointment wait times
• an IME recording the examination without the worker’s consent
• factual errors in the IME’s report.

659. The Performance Management Framework states that where a worker disagrees with an IME opinion, WorkSafe should refer them to conciliation. While the conciliation process can resolve disputes about agent decisions, it cannot address deficient IME opinions.
660. In the sample of IME complaints the investigation reviewed, there were cases where WorkSafe did not take any action regarding complaints about IME opinions despite the opinions potentially breaching the IME Service Standards. These include requirements that an IME report:

• contain reasons for all opinions expressed
• be consistent in that opinions should accord with examination findings
• be free of advocacy or bias for any party
• contain ‘clear and unambiguous’ professional opinions
  

661. While WorkSafe considers these issues in its quality assurance reviews of IME reports, it does not appear to consider complaints about the same issues.
662. In response to the draft report, WorkSafe said:
     
     ... We confirm that WorkSafe has developed a new work practice on the complaints process and have recruited a specialist to oversee all IME complaints. It categorises all complaints and will investigate further if the issue raised is factual, an agent issue, behavioural, a breach of service standards or a conflict of interest issue. ...
     
663. The following is an example of a complaint about an IME opinion, which WorkSafe declined despite the worker’s concerns that it had no basis.

664. In another case, WorkSafe told an injured worker’s daughter it was unable to look into her complaint about an IME’s opinion, despite the IME relying on incorrect information.

665. The following case is another example, where WorkSafe took no action regarding a worker’s complaint about an IME opinion, despite the worker identifying several inaccuracies and missing information in the report.

666. In another case reviewed by the investigation, WorkSafe declined a complaint about an IME opinion because the IME had not breached the IME Service Standards. However, it is unclear how WorkSafe formed this view.

IME responses not assessed by WorkSafe

667. WorkSafe’s policies and procedures say it can deal with ‘administrative’ complaints about IMEs. However, where WorkSafe decides to write to an IME about a worker’s complaint, it is unclear whether WorkSafe assesses the adequacy and reasonableness of the IME’s response. There is no information in WorkSafe’s IME complaint procedure about this step. The procedure states:
     
     ... Once you have received a response from the IME, you will need to then send an outcome letter to both the IME and the worker. … Once this has been completed, you can then close the complaint. ...
     
668. WorkSafe told the investigation that the IME’s response is ‘always’ reviewed before the complaint is finalised. However, the sample of IME complaints the investigation reviewed suggested this does not always occur, as WorkSafe finalised some of the complaints based on IME responses which did not address the worker’s concerns.

669. The following case study is one example, where a worker complained to WorkSafe that an IME told her at the examination she did not have a work capacity, but stated the opposite in his report.

670. In another case, WorkSafe closed a worker’s complaint based on the IME’s response, without considering whether factual inaccuracies in the IME’s report affected the overall opinion of the IME.

Miscommunication between complaints teams

671. Sometimes complaints to WorkSafe raise concerns about an IME report as well as action taken by an agent.
672. The IME complaints team cannot handle concerns relating to an agent, as these are dealt with by a separate team. However, there is no documented process for referring these matters between the two teams.
673. The investigation found that in some cases, this led to inefficient handling of complaints, an example of which is set out below. In this case, a worker complained to WorkSafe about an IME report, as well as Gallagher Bassett’s management of his claim. A lack of communication between WorkSafe’s two complaints teams meant the worker’s concerns about Gallagher Bassett’s claim decisions were overlooked.

674. In another case, a worker’s partner complained to WorkSafe about three IMEs, as well as Xchanging’s management of the claim. WorkSafe’s IME complaints team told the worker and her partner that it was unable to assist with their concerns about Xchanging and that they needed to make a separate complaint to the agent complaints team.

Booking of IME appointments

675. Historically, agents have been responsible for booking all IME appointments, which allowed them to choose the IME that examines an injured worker. However, this changed following the Ombudsman’s 2016 investigation.

Changes since Ombudsman’s 2016 investigation

676. To prevent agents’ selective use of IMEs, WorkSafe took over responsibility for booking all psychiatrist IME appointments in mid-2017. Under the new process, an agent must contact WorkSafe when it needs a psychiatrist IME to examine an injured worker, and WorkSafe books an appointment with an available IME.
677. WorkSafe said it targeted psychiatrist IME bookings as ‘the highest priority’ because injured workers with mental injuries (whether primary and secondary) have the ‘highest risk of becoming complex and having long term work absence’.

Effectiveness of new booking process

678. WorkSafe told the investigation there had been a range of improvements since this change in practice, which included:

• ‘Elimination of the possibility of agent selection bias by WorkSafe making over 16,000 IME appointments centrally’
• ‘Improved transparency over service delivery, particularly around timeliness and requests to reschedule appointments’
• ‘Development of clear service delivery standards for booking appointments’
• ‘Minor improvements to service delivery to improve client experience; for example if a worker has already attended a psychiatric IME, any subsequent IMEs should be scheduled with the same examiner’
• ‘Improved engagement with IMEs resulting from the single point of contact for scheduling appointments. Clear, positive feedback was received from many IMEs reporting that having a single booking contact for the scheme as a whole was beneficial’.⁵⁹

679. WorkSafe also reported a range of negative outcomes from this centralised process, including increased wait times of up to 30 calendar days for non-urgent appointment bookings. This is contrary to WorkSafe’s IME Service Standards which require non-urgent appointments to be booked within seven days.
680. In response to the draft report, WorkSafe said:
     
     ... While weekly payments should not be adversely affected by this, there have been instances where treatment approvals have been impacted. The delays also impact the client experience and the timeliness of entitlement decision-making. ..
     
681. WorkSafe told the investigation that the ‘root cause’ of the delays was ‘ultimately a mismatch between supply and demand’. WorkSafe highlighted:

• higher demand for IMEs because of ‘excessive levels of cancellations’ of IME bookings, and higher volume of primary and secondary mental injury claims
• lower supply in psychiatrist and psychologist IMEs because they are paid far less than through other medical work
• an increase in workload based on ‘poor administrative practices by agents’ such as late delivery and large volumes of material before examinations.

682. WorkSafe reported that some issues which the new process sought to address have remained the same, for example:

• the selection of IMEs based on availability instead of proximity to the worker or ensuring an adequate spread of IMEs used
• instances of agents providing IMEs voluminous and unnecessary documentation prior to examinations
• limited change in the volume of requests for supplementary reports.

683. In 2018, WorkSafe surveyed psychiatrist IMEs who had participated in the new centralised booking process. The IMEs provided mixed responses, which included:

• ‘Booking process is streamlined and efficient. Staff are very supportive and responsive’.
• ‘I am now getting steady referrals, and the system is transparent and straightforward’.
• ‘I think it is much fairer to the workers. Generally it works ok but there are a lot of cancellations’.
• ‘Because the appt isn’t made by the person actually requesting the IME there is sometimes confusion around length of appointment and report delivery times’.
• ‘The agents are not always sending documents and often need to be reminded’.

684. Witnesses interviewed in the investigation echoed the issues WorkSafe identified regarding its new IME booking process. A former agent employee stated that in their experience, the wait times for psychiatric IME appointments were ‘astronomical’. The former employee said they had seen examples where the timeframe between a claim being identified as needing an IME examination and the actual examination taking place was ‘greater than six months’. They said:
     
     ... It will often sit at WorkSafe for an extraordinary amount of time before WorkSafe are able to book in an appointment … For the claims where a liability decision needs to be made they’ll make that booking pretty quickly. That’s the focus of their attention and then for others they seem to sit there for a really long time. ...
     
685. A worker representative raised similar concerns at interview about delays in psychiatric IME appointments being booked, noting the impact this often had on a worker’s ability to receive treatment.
686. Conciliation Officer G said at interview that the new booking process was ‘worse than it ever was’. They said the booking delays sometimes affected the timely resolution of disputes at conciliation, because they were reliant on the worker being examined by an IME. The Conciliation Officer said:
     
     ...There’s so many steps to the process and there’s so much delay around it now. It seems to take three or four weeks to get an appointment and before if it was recognised that we needed a psych appointment straightaway, I could get that information from the agent rep[resentative] that afternoon, and I could put it in a progress certificate and say ‘Here’s your appointment coming up. So we’re going to have a follow up two weeks later once we have the report’. You were able to keep the momentum up, which is what injured workers in that space really need. I was so hamstrung … [for] the last two that I’ve had to organise, and I thought ‘gosh, if this is progress, we’re really in strife’. And it’s mental health … it’s the last thing that people need delay on. ...
     
687. An IME representative interviewed by the investigation said:
     
     ...What was a flawed process with the agents, they [WorkSafe] lifted it up, created another layer of bureaucracy and gave it to that other layer of bureaucracy to do [the] same process. ...
     
688. WorkSafe told the investigation that its new booking process would remain as a ‘business as usual’ practice until a new service model is developed as part of WorkSafe 2030. WorkSafe also said it was making a number of further changes to the booking process to address the issues identified during the pilot.

689. In response to the draft report, WorkSafe also said:
     
     ... To address critical issues in the short to medium term, the following changes have been made to address the imbalance in supply and demand:

• WorkSafe has commenced work to reduce over-reliance on IMEs and reduce the level of cancellations.
• WorkSafe reviewed its fee schedule for IMEs. In April 2019, WorkSafe increased the fee for psychiatric IMEs by 25% and made other changes to the fee structure, such as providing a higher fee if there were more than 200 pages of reading material. Anecdotal evidence suggests the fee structure increase has had an overall positive impact of psychiatry IMEs engagement, with a small increase in [the] number of appointments being made available for WorkSafe claims.

Reviews commissioned by WorkSafe

690. Over the last few years, WorkSafe has commissioned a number of reviews to identify opportunities for improving the management of the scheme. This investigation considered three reviews, which looked at:

• factors that lead to long term claims and the consequences for injured workers
• how occupational rehabilitation services are used and the barriers for workers returning to work
• the application of restorative justice principles to the scheme.

691. The issues identified by these reviews echo those identified by the Ombudsman’s 2016 investigation and this follow-up investigation, particularly in relation to the management of complex claims.

Victorian Injured Worker Outcomes Study (VIWOS)

692. In July 2015, WorkSafe engaged the Institute for Safety, Compensation and Recovery Research (ISCRR)⁶⁰ to examine:

• factors influencing the development of ‘long term’ claims⁶¹
• the impact of long term claims on injured workers
• ways to reduce claim duration and improve return to work outcomes for injured workers with long term claims.

693. The review was conducted in three phases, which included:

• interviewing long term injured workers and key stakeholders
• analysing WorkSafe data for long term claims
• research into other Australian and international workers compensation schemes.

694. The review was finalised in late 2018 and found that long term work-related injury resulted in ‘numerous negative outcomes’ and was characterised by ‘ongoing poor health and financial hardship’. The review identified a range of barriers long term injured workers face in returning to work, which included:

• delays across all stages of the claims process
• disputes about agent decisions, which were ‘characterised by complicated dispute resolution processes’
• frequent changes in claims management staff, which required workers to repeat themselves, resulted in ‘loss of case history’, increased the likelihood of disputes and delayed workers’ recovery and return to work
• difficulty finding healthcare providers to offer treatment under the WorkCover system
• agents’ requirement that workers attend frequent IME appointments and ‘re-tell’ their story to different examiners
• the delivery of occupational rehabilitation services with a ‘one size fits all’ approach, rather than tailoring their services to individuals’ needs
• employers’ ‘avoidance’ of their return to work obligations, which, combined with workers’ difficulty in finding new employment, prolonged the length of some claims.

695. The study concluded:
     
     ... Australian and international practice evidence suggested that client screening based on the risk factors for long-term injury that were identified, combined with early and targeted vocational rehabilitation appears the most effective strategy for preventing longer-term claims ...
     
     To enable this, the workers’ compensation system needs to be capable of facilitating early contact and referral and sharing of information in a way that reduces administrative delays. Effective communication and relationship building between WorkSafe Agents, service providers, employers and injured workers was identified as one of most critical enablers for recovery and return to work.
     
696. Based on the outcomes of the review, WorkSafe developed a range of initiatives to ‘improve services’ to injured workers and employers by making services more ‘client-focused and prevention-led’. Some of these initiatives have formed part of WorkSafe’s 2030 strategy, detailed later in this report.

Occupational Rehabilitation Quality Improvement Review

697. In 2017, WorkSafe engaged ISCRR to examine the effectiveness of occupational rehabilitation services in assisting injured workers to return to work, and the experiences of those involved in these services.
698. The review was prompted by a decline in the number of workers returning to work, despite the increased investment in occupational rehabilitation services from 2007 to 2016. The last major review of occupational rehabilitation services was conducted in 1987. WorkSafe stated the goal of the review was:
699. In line with WorkSafe’s Strategy 2030 focus on offering tailored products, services and support, the proposed OR [occupational rehabilitation] strategic review aims to ensure the best OR services are available for Victorian workers for generations to come.
700. The review was finalised in December 2017 and identified ‘both positive and negative experiences’ with occupational rehabilitation services. Workers’ ‘negative experiences’ were associated with perceptions of ‘unrealistic expectations’ of return to work, ‘communication challenges’ and services that did not match the needs or expectations of the worker. In contrast, workers’ ‘positive experiences’ were associated with perceptions that occupational rehabilitation providers were ‘helpful, supportive, listened to them and provided services tailored to their needs’.

• Occupational rehabilitation providers reported barriers to providing services to injured workers, which included:
• late referrals from agents
• disagreement with treating doctors about workers’ ability to engage in occupational rehabilitation
• employers’ inability to offer suitable duties
• inadequate funding towards training for injured workers
• challenges with workers who were often ‘angry and frustrated’ with the claims process and had ‘issues’ with their employers.

701. Some occupational rehabilitation providers reported agents were using occupational rehabilitation ‘as a means to measure compliance’ and in some cases, a ‘tool to cut benefits’. They also raised concerns that agents did not consider the impact of psychosocial issues in return to work and placed ‘unrealistic expectations on how long it took to support the injured worker back to work’.
702. The review made a number of recommendations to WorkSafe, which included that it:

• facilitate early and targeted referral of injured workers to occupational rehabilitation services
• promote information sharing between stakeholders
• explore opportunities to involve the injured worker through ‘channels other than formal letters’
• invest in ‘activities and programs’ aimed at ‘reducing stigma’ associated with accessing workers compensation.

703. In response to the review, WorkSafe said it provided ‘few new insights’ and repeated ‘historical issues’. However, WorkSafe said it was liaising with occupational rehabilitation providers to ‘address key areas’, including referral approaches.

Restorative Justice Project

704. In an effort to reduce disputes and look at alternative dispute resolution methods, WorkSafe engaged RMIT’s Centre for Innovative Justice⁶² to undertake a project to:
     
     ...[E]xplore opportunities to apply restorative justice processes and principles in both the enforcement and claims processes, with the aim of meeting the needs of injured workers and their families, repairing or healing harm already caused to them and avoiding potential harm that might arise as a result of the claims or enforcement processes.⁶³ ...
     
705. The review, which was finalised in June 2018, describes ‘restorative justice’ as:
     
     ... [A] broad range of practices that seek to repair the harm caused by a crime (or other wrong), by collectively including those with a stake in the wrongdoing in its resolution. Such practices facilitate the exploration of what happened, how people were affected, and what needs to happen to repair or make amends for the harm, to make sure it does not happen again, and to bring about positive changes for all those concerned.
     
706. Among other things, the review aimed to inform WorkSafe’s and the State Government’s response to issues identified by the Ombudsman’s 2016 investigation.
707. The review concluded there were ‘clear opportunities’ for restorative justice practices in the WorkCover scheme and stated:
     
     ... Critically, existing processes do not provide people with the opportunity to explain to employers the impact the incident has had on their lives, to receive apologies from employers, or to have input into prevention measures that might ensure no one else has to go through what they have endured. ...
     
708. However, the review noted concerns about the application of restorative justice practices in a ‘no fault’ scheme, which included that:

• restorative justice practices could ‘expose injured workers to the risk of further harm’ given the power imbalance between employers and employees
• employers would ‘rarely if ever agree to participate in a process that involved expressing regret, apologising, or admitting responsibility’ if it could be used against them in potential legal proceedings
  

709. The review acknowledged that in some cases ‘parties may regard the practical risks of participating in the process as too significant’. The review also noted that restorative justice practices were not designed to replace the scheme’s ‘formal legal frameworks’ or to address ‘shortcomings or limitations’ in those frameworks.
710. The report recommended, among other things, that WorkSafe:

• establish a pilot restorative justice conferencing program
• explore opportunities for other improvements to the enforcement and claims processes.

711. In response to the review, WorkSafe said it was considering:

• how to progress the establishment of a model for restorative justice conferencing pilot
• which of the ‘numerous opportunities and strategies’ offered in the review should be progressed; were already progressed as part of WorkSafe’s ‘Strategy 2030’; and which were ‘not practical for WorkSafe to implement’.

WorkSafe 2030

712. In considering what further changes to the scheme are needed, the investigation took into account considerable work already underway as part of WorkSafe’s 2030 strategy.
713. WorkSafe announced the strategy in 2017, describing it as a ‘long term strategic response’ to address ‘immediate problems’. WorkSafe states these problems include:

• The WorkCover scheme is ‘complex and, for some, difficult to access and navigate’.
• ‘WorkSafe is heavily paper-based, which makes response times slow and cumbersome’.
• ‘WorkSafe’s IT systems are fragmented and antiquated, and are not able to share data and information’.
• ‘WorkSafe’s lack of digital technology puts unnecessary cost burdens on the scheme’.

714. WorkSafe states the strategy has two main goals:

• ‘for WorkSafe to be a stronger, proactive, “prevention-led” health and safety regulator’
• for WorkSafe to design its services ‘with the needs of people at the very heart of everything we do’.

715. WorkSafe’s strategy involves a range of changes to the way it manages the WorkCover scheme and regulates the health and safety of Victorian workplaces. Some of these changes are in response to the Ombudsman’s recommendations from her 2016 investigation.
716. WorkSafe told the current investigation:
     
     ... [W]e believe our WorkSafe 2030 transformation, including our adoption of a specific customer experience strategy and our technology upgrades enable us to continually improve and evolve to meet our clients’ changing needs, contributing to our objective of being a prevention-led health and safety regulator. ...
     
717. Key initiatives and changes under WorkSafe’s Strategy 2030 include:

• an ‘Innovation Centre’
• technology changes
• changes to its complaints management
• a multidisciplinary IME pilot
• a psychiatric hospital substitute pilot
• a ‘WorkWell’ campaign.

Innovation Centre

718. As part of WorkSafe 2030, WorkSafe created an ‘Innovation Centre’ to ‘test and develop small-scale pilot projects’ and ‘create or improve products, processes or services to enhance the experience of all workers and employers who come into contact with WorkSafe’.
719. These projects have included the:

• recovery assistance pilot
• recovery hub
• mobile case management program
• transition support program.

Recovery assistance pilot

720. WorkSafe established a ‘recovery assistance pilot’ in 2017 in collaboration with one of WorkSafe’s agents, EML. The pilot adopted a ‘human-centred approach’ and delivered intensive case management support to nine injured workers with long term claims.
721. The pilot was run by a full-time Recovery Support Officer, who conducted ‘detailed forensic case file reviews’ and undertook regular face-to-face discussions with each worker to ‘understand what they needed to improve the quality of their day to day lives’.
722. WorkSafe reported that the benefits of this tailored approach to case management for workers with complex claims was ‘clear’, stating:
723. We found that by focusing on injured workers’ function, in other words ‘what they can do’ the … [Recovery Support Officer] was able to provide more intensive support that aimed to achieve recovery goals that were more centred on return to life and community reintegration.
724. WorkSafe said that:

• Following completion and evaluation of the pilot, the program had now been implemented across all agents for 2019-20.
• The program focusses on long term injured workers who have been receiving weekly payments for more than four years as at December 2018.
• Each agent is required to identify workers who may be suitable for the program using a range of criteria, but WorkSafe endorses each case to ensure suitability.

Recovery hub

724. The recovery hub is a program focussed on offering a greater level of support to injured workers during rehabilitation and return to work. The program includes:

• a phone-based support service to assist workers to fill out a claim form
• a text message based service to provide treatment information and recovery advice for workers with a lower back injury
• a ‘digital tool’ for workers to provide feedback during their return to work experience.

725. WorkSafe told the investigation that these supports had been positively received by workers involved in the program and it was looking to develop the program further.

Mobile case management program

726. WorkSafe introduced a mobile case management program in 2017 which offers face-to-face case management at the early stage of a complex claim to ensure ‘recovery and RTW programs are tailored to the individual worker’s needs’.
727. In 2017-18, WorkSafe introduced a financial reward and penalty measure to encourage agents’ use of the program.

Transition support program

728. WorkSafe introduced a transition support program in 2017 to support workers approaching the 130-week review of their entitlements. The program was initially piloted through Gallagher Bassett and included a ‘dedicated transition support officer’. Their role was to tell injured workers about external services that could support them in managing their finances, health and social needs ‘independently of the scheme’.
729. In July 2019, WorkSafe said it had extended this program ‘across the scheme’.

Technology change

730. As part of its ‘Strategy 2030’, WorkSafe is creating a ‘Customer Relationship Management’ system. WorkSafe states the new system will provide employers and injured workers access to an online portal, ‘myWorkSafe’ to ‘assist clients to manage their interactions with WorkSafe online, and enable WorkSafe to deliver tailored advice and guidance’.
731. WorkSafe said it is also investing in improved ‘data and analytics’, through better software and additional staff resources. WorkSafe states these changes will ‘allow WorkSafe to identify emerging health and safety trends and return to work issues, and tailor the services provided for those who need support’.

Complaints management

732. In mid-2017, WorkSafe redeveloped its website to include information about how workers can complain to WorkSafe and other bodies. It also introduced an online complaint form. These changes were made in response to the Ombudsman’s 2016 recommendations.
733. WorkSafe states it is also:

• conducting training to ‘improve the capability of agents, providers and staff in the areas of quality decision making and person-centred approaches’
• conducting monthly and quarterly reports of complaints to identify trends
• upgrading its complaints management system to facilitate more timely complaint handling
  

Multidisciplinary IME examination pilot

734. In July 2017, WorkSafe introduced a multidisciplinary IME examination pilot program for workers requesting spinal surgery to provide ‘a more holistic approach to treatment for spinal complaints’. The program ‘fast-tracks’ workers for a review by a spinal surgeon and pain management specialist who:

• examine the worker at the same time
• offer less invasive, alternative treatment options in cases where surgery is not considered appropriate.

735. WorkSafe said that as at 1 February 2019, almost 400 multidisciplinary IME examinations had been conducted as part of the program and of these, more than half of the workers selected the alternative treatment proposed. WorkSafe stated this program has also led to a ‘significant reduction’ in disputed claims proceeding to conciliation.

Psychiatric hospital substitute pilot

736. During the investigation, WorkSafe said it was implementing a trial to examine alternatives to hospital bed-based services for workers with mental injuries likely to be at risk of re-admission.
737. WorkSafe said this was designed to ‘reduce, if not prevent, unnecessary and inappropriate hospitalisations’ and included ‘comprehensive clinical assessment, ongoing clinical interventions, collaboration with the worker’s wider health-care team and links with other services as needed’.
738. WorkSafe told the investigation:
     
     ... WorkSafe will be implementing an evaluation framework across mental services to assess the impacts of these types of initiatives, the effectiveness of community mental health treatment and the best recovery pathways that result in positive outcomes for our workers. ...

WorkSafe WorkWell

739. In 2018, WorkSafe announced a ‘WorkWell’ campaign, designed to ‘improve the mental health and wellbeing of every Victorian worker’. The $50 million program includes WorkSafe offering funding to employers for programs and initiatives focussed on worker mental health and wellbeing.
740. WorkSafe states:
     
     ... The WorkWell model is an integrated approach to workplace mental health and wellbeing and combines the strengths of disciplines such as OHS, health promotion, and psychology. It has the potential to optimise both the prevention and management of mental injury and illness in the workplace. ...

Conclusions

741. Most WorkCover claims are neither complex nor contentious. Many injured workers require only medical treatment for their injury; and of those who have time off work, about three quarters return within six months. More than 80 per cent of injured workers surveyed by WorkSafe in 2017-18 were satisfied with the management of their claim.
742. This investigation focussed on ‘complex claims’, which primarily involved workers who had not worked and had been receiving weekly payments for 130 weeks or more. At the end of 2017-18, there were 4,544 of these claims, making up about a quarter of the 18,519 active weekly payments claims in the scheme, or about seven per cent of the total 63,085 active claims (including those involving medical treatment only). This investigation reviewed 102 complex claims files in depth, in addition to considering a range of other evidence.
743. Although complex claims do not represent the majority, these workers are likely to have more challenging health conditions and represent a substantial and disproportionately high cost to the WorkCover scheme and broader society.
744. The investigation revisited issues the Ombudsman identified in 2016, to establish whether the Ombudsman’s recommendations had improved agent decision making and the effectiveness of WorkSafe’s oversight of complex claims.
745. While these recommendations resulted in some changes to policies, procedures and practices, the evidence suggests that they were not enough to change agent behaviour and stop unreasonable decision making on complex claims.
746. After two investigations by the Ombudsman and a number of reviews commissioned by WorkSafe, the evidence points to this being a systemic problem. In too many complex claims, the system is failing to achieve one of the scheme’s objectives under the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic), which is to ensure appropriate compensation be paid to injured workers ‘in the most socially and economically appropriate manner, as expeditiously as possible’.
747. As piecemeal changes have proven unsuccessful in tackling these problems, more significant changes to the way complex claims are managed are needed to ensure better outcomes for these most vulnerable injured workers.

Unreasonable decision making by agents

748. The investigation identified that unreasonable decision making by agents on complex claims has continued. It found evidence of the same issues the Ombudsman identified in 2016, including agents:

• ‘cherry picking’ evidence to terminate or reject a worker’s entitlements, even where the opinion relied upon was unclear, contradictory or inconclusive
• ‘doctor shopping’ and sending workers to ‘preferred’ or ‘agent-friendly’ IMEs, based on a belief they would provide an opinion that was unfavourable to the worker
• maintaining decisions at conciliation which were ‘arguable’, but had no reasonable prospect of success at court
• terminating workers’ entitlements without sufficient evidence of ‘material change’ since a previous Medical Panel opinion.

749. The investigation also uncovered new issues relating to agents’ use of surveillance and return to work non-compliance notices on complex claims. While agents may legitimately use these as claims management tools, the investigation identified some instances where agents misused them to try to terminate workers’ entitlements.
750. These issues, combined with the continuing high rate at which decisions are withdrawn or changed through the dispute process, suggest agent decision making on complex claims has not improved. Rather, the evidence obtained by the investigation, which included randomly selected claims, suggests that the Ombudsman’s 2016 investigation only scratched the surface regarding the extent of unreasonable decision making on complex claims, and that it is greater than first realised.
751. Such unreasonable decision making is at odds with the scheme’s objectives and contributes to negative outcomes for already vulnerable injured workers. As illustrated by many of the case studies in this report, these include financial hardship, secondary mental injuries or psychological symptoms, and delayed recovery and return to work.
752. The dispute process should provide a ‘safety net’ to ensure injured workers receive their legal entitlements, but unreasonable decisions are slipping through the cracks. Agents continue to defend ‘arguable’ decisions during conciliation, even if they have no reasonable prospect of success 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.

The effect of financial rewards and penalties on agent decisions

753. As commercial organisations, it is not unreasonable for agents to expect to profit from managing WorkCover claims. One way they achieve this is through the financial reward and penalty performance measures set by WorkSafe. The measures also contribute to WorkSafe’s objective of maintaining a financially viable scheme.
754. WorkSafe has made a number of positive changes to these measures since 2016 to provide a stronger focus on quality decision making and sustainable return to work outcomes.
755. Although the investigation found less documentary evidence that the financial rewards and penalties continue to influence agent decisions, compared to the Ombudsman’s 2016 investigation, it still found some evidence showing:

• agents’ continued focus on terminating claims and maximising profit
• the influence of the rewards and penalties on agents’ offers at conciliation.

756. This evidence 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. Examples were also identified where agents’ offers of compensation at conciliation were motivated by the impact the offer would have on the financial reward and penalty measures.
757. Additionally, 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.
758. This evidence, when combined with the extent of continued unreasonable decision making by agents on complex claims identified by this investigation, raises questions about the suitability of commercial organisations to manage these claims. As distinct from WorkSafe as the statutory authority charged with managing the scheme, agents have a vested interest in the outcome of individual claims arising from the commercial nature of their organisations, as well as the financial reward and penalty measures.

WorkSafe’s oversight

759. Although WorkSafe delegates its claims management functions to the agents, it retains a role in overseeing agents’ performance to ensure injured workers receive their legal entitlements.
760. WorkSafe has made a number of changes to its oversight mechanisms since 2016 but is still not optimally using them to address unreasonable agent decision making on individual complex claims and to identify and respond to systemic issues.
761. Following the Ombudsman’s 2016 investigation, WorkSafe increased the financial rewards and penalties agents may receive through its quality decision audits, to further encourage good decision making. While this was a positive change, it was of limited benefit because WorkSafe has not 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
• readily 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.

762. In light of the above, the extent to which the audits enforce WorkSafe’s quality decision making expectations is questionable. The upshot of this is that only the courts - in the very small portion of cases that end up at court – are holding agents accountable for making sustainable decisions.
763. Complaints and stakeholder feedback provide WorkSafe opportunities to check agents’ performance; however, its role in complaints about agent decisions is ill-defined and 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’.
764. This has led to inconsistent approaches in the way WorkSafe handles complaints and missed opportunities for WorkSafe to rectify poor decisions.
765. The injured worker survey also provides WorkSafe valuable feedback about agent performance, but it does not concentrate on workers with complex claims. Given the risks and complexities of these claims, there is scope for WorkSafe to increase its focus on complex claims through the survey and other oversight mechanisms.
766. WorkSafe has expanded its quality assurance mechanisms for IME reports since 2016; however, their value has been limited by the cursory nature of the review process. This, combined with the superficiality of the IME complaints process, where WorkSafe’s role appears to be confined to that of a ‘post box’, has restricted WorkSafe’s ability to identify potential concerning trends regarding individual IMEs and agents’ use of them.
767. WorkSafe’s handling of complaints about IMEs and agent decisions by two separate teams has also created inefficiencies and meant injured workers’ concerns have sometimes been overlooked or considered in isolation, without a holistic look at their claim.
768. WorkSafe has implemented a number of initiatives to improve workers’ experience of the scheme since the 2016 investigation, and this work will continue with the delivery of its 2030 strategy. However, the investigation has shown that workers’ experience of the scheme is most significantly affected by unreasonable agent decision making. WorkSafe appears reluctant to adequately deal with this when it is brought to their attention, based on its view that agents have delegated authority to manage claims and that conciliation and the courts are the appropriate mechanisms to ensure workers are appropriately compensated. It begs the question whether WorkSafe feels beholden to the agents, dependent on their participation to deliver a financially viable scheme.
769. The investigation has revealed that too often agents are making unreasonable decisions which have a detrimental impact on the injured worker, and the dispute process is not an adequate ‘safety net’ for these workers. It is time consuming, stressful and costly (in the case of the court), and the way agents act during the process can be adversarial and driven by questionable motives. 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.

Opinion

770. Pursuant to section 23(1)(b) of the Ombudsman Act, the Ombudsman is of the opinion that in the complex claims featured in this report, Allianz, CGU, EML, Gallagher Bassett and Xchanging acted in a manner that was:

• unreasonable by terminating or rejecting workers’ entitlements without sufficient evidence; and issuing return to work non-compliance notices to workers in unreasonable circumstances
• unjust by failing to withdraw unsustainable decisions during conciliation; and conducting surveillance of injured workers without adequate justification.

771. Pursuant to section 23(1)(g) of the Ombudsman Act, the Ombudsman is of the opinion that in the complex claims featured in this report, the following agents’ termination of workers’ entitlements without sufficient evidence of ‘material change’ since a previous Medical Panel opinion, was wrong:

• Allianz
• EML
• Gallagher Bassett
• Xchanging.

772. Pursuant to section 23(1)(b) and (g) of the Ombudsman Act and based on the evidence obtained by the investigation, the Ombudsman is of the opinion WorkSafe acted in a manner that was unjust and wrong by:

• assessing the terminations in case studies 37 to 42 of this report as passing its quality decision audits
• not overturning the terminations which failed its quality decision audits in case studies 43 to 45 of this report
• failing to intervene in the injured workers’ complaints about agent decision making in case studies 46 to 48 of this report.

773. The Ombudsman recognises that subsequent to WorkSafe’s original handling of these matters, WorkSafe required the relevant agents to overturn the decisions in case studies 38, 41 and 43. In the remaining case studies mentioned at paragraph 772, with the exception of case studies 39 and 40, the decisions had already been remedied through the dispute process, either as a result of a Medical Panel opinion, the agent withdrawing the decision or the worker accepting an offer to resolve the dispute.

Recommendations

To the Victorian Government

Management of complex claims

A fundamental characteristic of Victoria’s workers compensation scheme is the outsourcing of claims management functions to claims agents. Although most other Australian state and territory workers compensation schemes outsource claims management to agents, many other international schemes do not; in these jurisdictions, claims are managed in-house by the relevant government authority.

The financial viability of the scheme is imperative; however, a balance must be struck so that the scheme can achieve both objectives of financial sustainability and appropriate compensation for injured workers. At present, the system is failing to achieve the latter in too many complex claims.

Dispute resolution process

The first stage of Victoria’s dispute resolution process is conciliation, which offers injured workers a free and informal avenue to dispute claims decisions. Although a considerable proportion of disputes are resolved at conciliation, the level of unreasonable decision making on complex claims remains unacceptably high and too many unreasonable decisions are ‘slipping through the cracks’.

There is evidence of agents maintaining unreasonable decisions during conciliation because they have an ‘arguable case’, despite the requirement that they only maintain decisions with a reasonable prospect of success at court. Where a dispute cannot be resolved at conciliation, injured workers may initiate legal proceedings, however, this option is expensive and protracted. As a result, many injured workers choose not to go to court and there are no other avenues available to them to dispute a decision after unsuccessful conciliation.

This contrasts with the workers compensation dispute resolution processes of most other Australian states and territories, which encompass a tribunal or arbitration, allowing a binding determination to be made on the merits of a decision, without requiring the injured worker to go to court.

Victorian Government response:

Accepted both recommendations.

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.

A letter from the Minister is included at Appendix 3.

Given the time it will take to implement these recommendations, the Ombudsman makes the following recommendations to WorkSafe to address the immediate issues identified by the investigation.

To WorkSafe Victoria

WorkSafe response:

Accepted all recommendations.

Colin Radford commenced in the role of WorkSafe Chief Executive in November 2019. On behalf of WorkSafe, he accepted all recommendations. A letter from the new Chief Executive is included at Appendix 4.

Appendix 1: WorkSafe’s response to the draft report

Appendix 2: Agents’ responses to the draft report

General comments each of the agents made in response to the draft report are outlined below. Comments in relation to specific issues or case studies have been incorporated in the relevant sections throughout the report.

Allianz

CGU

At CGU, we continue to develop our customer service strategy which focuses, not just on quality decision making, but also on developing employee capability to deliver the best possible experience for injured workers, employers and external stakeholders.

We acknowledge there can always be improvements made to the management of claims and we confirm that we have continuously worked to address any concerns made by the Ombudsman and/or WorkSafe, particularly around the quality of decision making.

In our letter to you of 19th April 2019 … we re-affirmed our action plan and commitments made following the first “own motion” investigation into claims management practices. In that letter, we provided extensive detail around:

1. Reinforcement of appropriate standards of behaviour and internal and external communications including mental health awareness and empathic, professional and timely communications;
2. Quality evidence-based reviews and decision making;
3. Quality adverse decision-making principles including legislative requirements, sound and proper decision-making processes and communicating with injured workers;
4. Training material developed in conjunction with WorkSafe on the key components of the agent remuneration package and how it links to quality decision making and service delivery;
5. Processes to undertake senior reviews of adverse decisions; and
6. Processes to review requests for conciliation including new evidence and appropriateness of initial decision.

In that same letter, we outlined the continuing challenges of establishing and continuing to build upon the technical capability of our employees. CGU understands the importance of investing in our employees, however we also recognise there are difficulties in locating and retaining talented individuals in a technically complex personal injury scheme. A quarter of CGU’s claims management and technical support personnel have been part of CGU for less than two years.

This is one of the reasons why improving decision making has been, and remains, CGU’s primary area of focus in management of workers compensation claims, highlighted by the resources we have put in place to educate and uplift the technical capability of our employees.

In addition to our learning and development program that offers continuous training opportunities to all employees, we have introduced a range of initiatives, including:

• Improving the management and awareness of claims with mental injuries to enhance support for injured workers;
• Training on evidence-based decision making;
• Quality training to ensure adverse decisions are communicated effectively;
• Embedding of a new senior review process;
• Embedding a quality review procedure to ensure only appropriate decisions proceed to a conciliation conference.

In the recently released draft report, the Ombudsman has expressed the opinion that claims agents across the scheme acted in a manner that was:

• Unreasonable ... by terminating or rejecting workers entitlements without sufficient evidence;
• Issuing return to work non-compliance notices to workers in unreasonable circumstances;
• Unjust by failing to withdraw unsustainable decisions at conciliation; and
• Conducting surveillance of injured workers without adequate justification.

In context, the review has focused on claims where a complaint had been made to the Ombudsman, or where there was a dispute on foot through referral to the Medical Panel. This means that the review isn’t a reflection of the overall management of all claims in our portfolio, but a narrow tranche of claims which are already in the process of some form of dispute.

CGU currently has 5,369 claims under management. Of those, 1,030 fall within the >130 week complex claim criteria used for the purposes of this review.

…

As a general profile, many of the claims highlighted in the draft report and CGU’s >130+ week portfolio identifies:

• Issues of workplace conflict prior to the claim being lodged;
• Low motivation to return to work during the life of the claim;
• Inactive participation in rehabilitation and job retraining programs;
• Non-compliance and non-attendance at appointments and organised programs to assist recovery and return to work;
• Disconnection from the workplace very early in the claim process; and
• Disconnection from community within 6 months and in some cases estrangement from family and friends within 12 months.

Prevailing research clearly articulates that return to health and return to work is the best outcome for an injured worker.

Our staff develop strategies to assist injured workers in their recovery, often with the assistance of rehabilitation and job retraining providers. However, critical to any recovery, is an injured worker’s motivation to recover and return to work; and without that motivation a recovery is highly unlikely.

The draft report highlights and criticises the actions taken by Claims Consultants in trying to break the cycle of compensation and attachment to compensation entitlements, and in some cases those actions are highlighted in the report as provocative, unreasonable or inappropriate.

However, the purpose of these actions is genuinely aimed to disrupt the compensation cycle and activate return to work opportunities.

There is also a contextual disconnect between a desktop review of activities in isolation of a discussion with those involved in day-to-day claim management activities. The sterile nature of a desktop review fails to reveal the day-in day-out semantics of claims activity and provides no opportunity for anecdotal information which would provide a much broader and realistic context to the issues. Conversations with Claims Consultants would provide a much wider lens to claims activities and behaviours, as information recorded on claims files can sometimes be marginalised for privacy reasons.

...

While it may be alleged that the effect of financial rewards drives an agent’s decision making, the reality is that decisions must be supported by evidence and facts – otherwise they will not be sustainable in the longer term with regard to review and audit procedures. At CGU, we believe our responsibility is to:

(1) Manage the scheme in accordance with the legislation;

(2) Ensure appropriate compensation is paid to those who are injured in the course of their employment; and

(3) Provide a satisfactory return to our shareholders

To achieve this outcome, there must be tension on all three aspects.

While the draft report focuses on the financial incentives offered to agents, there is little if any focus on or analysis of the financial penalties that are in place should we not achieve the desired scheme outcomes around service, sustainability and helping injured workers return to work …

In FY19, CGU received 53% of the available revenue which was 30% less than the prior year. This was due to changes in the target setting for … [financial reward and penalty] measures. The potential penalty to CGU for not achieving the … [measures] is approximately $6.1 million dollars.

…

[O]ur priority is the care and support we provide for injured workers to help them return to work at the appropriate time.

We consider it relevant to the draft report that customer satisfaction across the scheme is at its highest ever level – and would be ahead of all other schemes nationally. CGU’s most recent customer satisfaction score was 90.24%.

Satisfaction is monitored across six key events in the claim process:
1. Independent Medical Examination;
2. Adverse Decisions;
3. Return to Work;
4. Communication;
5. Treatment; and
6. Eligibility.

Satisfaction is assessed randomly across all cohorts of claims at various stages of claim development, and this is important to note in the context of service being provided to all injured workers by CGU, and other agents.

EML

We welcome your review and the insights it provides to help ensure that the Victorian workers compensation scheme continues to abide by its legislative obligations, reflects community expectations and standards, has sustainability and most importantly, addresses the needs of injured workers and their employers.

EML is committed to our continuous improvement journey. We have demonstrated an improvement trajectory in our three years in Victoria.

Our work is yielding dividends, with our latest worker satisfaction rating at 87%, which we believe is unprecedented. This reflects the commitment of our people to do the right thing, help our customers get better and back on with their lives and their vocation. However, we acknowledge that there are areas for improvement, and we will ensure we do so.

EML has subsidised the operations of EML Vic over the last three years, the entire period of operation. During this time the business has operated at a loss. EML remains committed to investing in workers compensation claims management in Victoria. Our objectives extend deep into ensuring the wellbeing of injured workers, their families and the community as evidenced above, well beyond pure profit motivation. We want to drive the best possible outcomes for the Victorian scheme under our remit.

Herein we have focussed on your Principal Conclusions. The unique intricacies of each of these very complex claims speaks to an overarching need to view the scheme in its entirety …

Decision making on complex claims

We recognise the tensions inherent in a multi-stakeholder insurance scheme, which requires the balancing of the needs of the customer and employer, requirements of the scheme operator and the claims agent, while ensuring the overall sustainability of the scheme now and into the future.

EML inherited its portfolio from QBE on 1 July 2016 and as part of that transition took on 48% of former QBE personnel. The first year of operations focussed on claims transition and rebuilding consistency and reliability of core claims hygiene. This included making all outstanding payments, particularly in superannuation. A critical part of this process included contacting customers and restoring, where necessary, faith in the process. We also began the first of many and ongoing reviews.

In late 2017 we identified a gap in the capability of our personnel, particularly in the complex claim area. This was slowing the speed of improvement. The EML Victoria General Manager restructured the operations in Q2 2018 to segment and ensure complex claims were placed with case managers with more experience in long tail claims. This commenced in the past 12 months. It shows demonstrated improvement and continues to do so in outcomes in terms of the fairness and reasonableness for all claims experiences.

The challenge for EML has been the volume of complex claims as injured workers have progressed through the relevant claim gateway as we took on the portfolio. Not unexpectedly it took time to identify the areas which required change and a further lead time to implement so as to address decision making quality, without adversely affecting customers. This was managed alongside BAU [business as usual]. We now believe that we have the right competency within this team to better manage complex claims and are well on our way to minimising the risks you have raised in your opinion … In taking on board the feedback you have provided we are also further bolstering line 2 review over these claims to address your concerns raised in … the Draft Report.

We acknowledge that there will be situational elements at play for each claim, which ultimately require a fair and reasonable judgement to be made on the claim continuance or discontinuance and that each scheme has its own nuances, which effect operations. We have also further segmented complex claims into specialist teams to provide the higher level of skill required to manage these claims, and recognise that the dispute resolution process should be a last resort mechanism rather than part of the process. We are investing to improve this.

We are committed to continuing to work with WorkSafe to improve how we manage our complex cases. EML operates a very strong front-end case management model focussed on providing a high level of care to our customers based on a human centred design. Whilst we have not had the opportunity to employ this strategy on the tail portfolio, we will seek to focus on this to assist longer-term claimants to find capacity, return to life and some form of work where this is possible. This is what we do well but due to the contextual matters outlined above have not been able to yet demonstrate within the data window selected for the external review.

EML is an insurance mutual owned by our members (the employers who arrange insurance through us). The EML Board has invested significant mutual funds coming to Victoria as part of our commitment to customer care. This is particularly, but not limited to, our mobile case management service which brings the case manager to the injured worker and their family ... We note that the focus of this initiative is on new complex claims where we are experiencing high customer engagement, better supporting people in the early stages of their recovery. We are also proud to have been selected to undertake the Recovery Assistance Pilot program with WorkSafe which you mention in … your Draft Report.

…

Remuneration

The current remuneration model covers around 80-85% of our operating costs. Some of the performance elements of the remuneration model can deliver variations in remuneration which ultimately impacts business sustainability. It is fair to say that there is an expectation in any business that it should be in a position where it covers its operating costs and makes a fair and reasonable margin. No remuneration model can be perfect.

We endorse the recent change that WorkSafe has made to the remuneration model which focusses on return to work, rather than discontinuance of payments. We understand that the model is under constant review and believe that some further refinement may be required to it in order to minimise the stressors in the overall economic model surrounding claim agent operations in Victoria and as identified in your Draft Report.

EML has operated in Australia as a mutual for 109 years. EML seeks to build long-standing relationships with all stakeholders in the markets which we enter with a view to a longer-term sustainability of the operations. From a cultural perspective, we do not believe that it is prudent for a person involved in the management of a claim to understand the financial impact to agent remuneration in cessation of an individual claim.

EML’s traditional approach is to take a whole of portfolio view and to employ strategies to improve overall liability management. We are bolstering the separation between front-end case management and the financial monitoring of the business to align to this whole of portfolio approach. We will have further dialogue with WorkSafe on the risks associated with the current remuneration model to achieve this approach and to operate the business sustainably.

…

We further note your comment regard[ing] WorkSafe systems in … your Draft Report. As a specialist personal injury claims manager EML understands the tools and technology requirements to support case managers and authorisation frameworks for claims decision making in addition to payment control functionality. In Victoria claims agents are required to use WorkSafe’s technology systems. We note that WorkSafe’s vision for 2030 is a new technology platform which is aimed at continuous improvement information technology case management capability. We are looking forward to working with WorkSafe in its future scheme design, in particular the expertise and knowledge that we bring from the work we already undertake within the scheme.

EML is driven to provide the best possible outcomes for customers and employers while marrying the responsibilities of ensuring the scheme is viable and the community has faith in it. We do not take this responsibility lightly. We are constantly innovating, reviewing and expanding our knowledge through research to better understand the needs of those who require workers compensation claims management. This is having real and tangible impact in the Victorian scheme with the unprecedented positive worker satisfaction rating. Every one of these represents a life improved as a result of this service.

Gallagher Bassett

Initial observations

Subject to the challenges to the findings detailed in the two attachments to this letter, I broadly accept the accuracy of the findings of fact contained in the majority of case studies.

However, I am deeply concerned about a number of aspects of the methodology of the investigation which has led to the draft report findings:

• Bias in the selected sample of claims – whilst some classes of claims incorporated random selection, the use of a significant number of disputed decisions and decisions arising from complaints skews the conclusions;
  …
• In a number of instances, the draft report seeks to attribute a claims management failure, evidenced by a single finding of fact, to scheme-wide attitudes and activities when evidence of a systemic failure simply does not exist.
• The report identifies the objectives of the WIRC Act … including the need for the Scheme to “ensure appropriate compensation is paid to injured workers in the most socially and economically appropriate manner” and “to ensure workers compensation costs are contained so as to minimise the burden on Victorian businesses”. The report also identifies … the standard for decisions being used across the Scheme (and supported by WorkSafe’s audit practice) being a decision made based on the merits of the claim and supported by “reasonable and appropriate” evidence. This has been the standard of audit and guidance to Agents for many years. A move to all decisions being made only if sustainable at Court introduces influences on decisions beyond the facts of the individual claim and the legislation, including other potential societal influences. The potential impact on the sustainability of the Scheme and the longer term viability of the current benefit structure with such a significant shift is not considered by the report and the risks of such a move are not called out for context despite this potentially challenging the overall objectives of the Act itself.

Concluding Comments

The draft report is disappointing in a number of aspects:

I. Firstly, it evidences ongoing inadequate and inappropriate claims management activities at Gallagher Bassett that we have worked hard at eradicating since 2016, and which we continue to address. For example the report highlights a number of decisions relating to the use of return to work non-compliance. However work to improve decision making in this area has continued since the timeframe reviewed by this report with the number of decisions issued in 2019 to date being significantly lower than prior years due to additional review processes being implemented. Thus some of the conclusions reached would appear to be counter to current practice.

II. Secondly, in concluding that the behaviours comprising “unreasonable decision making by agents” amount to a “slipping back to where it began” … and that “it is greater than first realized” … the draft report has:

• failed to appreciate, beyond a passing reference to “some changes” … the improvements brought about by changes put in place since 2016;
• improperly assumed that a failure to “stop” unreasonable decision making amounts to a failure to “change agent behaviour” … ;
• failed to consider whether the evidence is indicative of bad behaviour and poor culture, rather than inadequate training, experience or competence of those managing complex claims. An example is the use of pain specialists …

III. Thirdly, the imperfect path of reasoning and lack of supporting evidence makes the stated link between poor decision making and financial considerations difficult to justify. Specifically, the use of unverified, untested and anonymous opinion evidence as a bridge between findings of inadequate claims management activities in a small number of claims, and a conclusion that agents have a systemic culture of decision making for financial reward, should be undertaken with caution. The report notes that “the investigation found limited or no references to the financial reward and penalty measures on claim files” … and “limited overt evidence of the financial rewards and penalties influencing agent decisions” … and yet based on third party evidence from parties potentially biased towards Agents … concludes the focus on making unsupportable decisions for profit continues. Such a conclusion, in the noted absence of evidence, would seem counter to standard investigative practices. This need for caution before reaching such a significant finding is amplified by the inevitable brand damage that will be suffered by WorkSafe and its agents and their staff. It could also lead to a situation which magnifies the issues faced by the Scheme in attracting and retaining qualified and experienced employees to deliver the desired case management and exacerbate current challenges.

…

Response to the Draft Report

It is necessary to respectfully challenge a number of conclusions contained in the draft report:

…

To attribute the motive of termination of entitlement to agents’ activities around the use of surveillance and non-compliance notices … is improper.

The conclusion that outcome of the dispute processes are indicative of poor decision making … ignores the distinction between the basis upon which a decision is originally made (arguable case) and the higher test of “reasonable prospect of success at court” imposed by [the] Ministerial Direction.

The conclusion that agents continue to “focus” on financial outcomes … is based on unsupported evidence from an unidentified former agent employee, and one email out of many hundreds. The extrapolation of this evidence to all agents is simply not appropriate or permissible. The finding that the lack of documentary evidence of this focus is due to an agenda of hiding such evidence is outrageous.

Xchanging

As other reports and audits have found in recent years, the management of complex claims is challenging, whether it be the Commonwealth Government managing complex claims through Centrelink or the National Disability Insurance Scheme, or the States such as New South Wales or Queensland managing claims through their respective workers’ compensation schemes.

As a non-insurer specialist claims manager, Xchanging takes its role and responsibilities within the Victorian workers’ compensation scheme seriously.

Xchanging has endeavoured to steer a course which meets the legal requirements of the legislation, the contractual requirements of the agent agreement and the procedural requirements of the claims manual while ensuring we meet the needs of the injured workers.

Xchanging believes it is important to put the claims and complaints highlighted in your draft report into perspective. During the 2018/19 financial year Xchanging registered over 6,600 new claims and processed over 627,000 payments amounting to over $350m in weekly compensation and medical and like payments.

The case studies and examples selected as part of the draft report represent 15 cases out of 1,700 long term injured workers and 12,000 active injured worker claims managed by Xchanging, at any point in time.

The draft report focuses on the most complex claims, where agents often manage multiple issues within a challenging context. The application of the law is not always black and white, medical conditions are not always clear, and compliance with legislation or claims policy guidelines does not always align with injured worker expectations or the expectations of their legal advisers.

Xchanging has training, controls and improvement programs in place to ensure we properly manage claims and support injured workers. However, because the claims process relies on judgement, discretion and human input, it is possible for errors to occur. If errors do occur, Xchanging works hard to learn from them and reduce the risk of recurrence.

Having reviewed the cases in the draft report referencing Xchanging, it appears that some perspectives have been taken as fact, as opposed to subjective assertions. Additionally, on some claims, only part of the claims information has been included in the draft report. The subjective assertions and partial case histories do not provide all information relevant to many of the claims.

…

Xchanging continues to support independent reviews of any Xchanging practice or decision and is available to discuss any claim in more detail. Xchanging is also committed to working with WorkSafe on any matter.

…

The management of complex claims requires the balance of many factors. Any system that requires eligibility, discretion and judgement will inevitably produce some workers who are dissatisfied with their outcomes. The existence of complaints should not lead to an automatic assumption of fault or the improper conduct of the Agent’s handling of the claim and Xchanging requests the relevant feedback of Xchanging’s response be taken into consideration.

One of the objectives of the legislation is facilitating return to work. To meet this objective, Agents must pose questions to independent medical examiners (IMEs) and others about the capacity of injured workers to engage in work or work-related activities.

Despite the limited number of workers and the lack of input from Xchanging, the draft report makes findings of unreasonable and unjust conduct against Xchanging even before Xchanging’s response has been received. The draft report, and the opinions, has been distributed to others within the industry before Xchanging has had an opportunity to respond.

Appendix 3: Minister’s response to the recommendations

Appendix 4: WorkSafe’s response to the recommendations