Audit questions $3.1M in workers' compensation claims paid to Ky. volunteer firefighters

10/24/2017 01:19 PM

In August 2013, a volunteer firefighter was installing a radio on a tanker truck but slipped and fell on the truck’s running board.

The man had been performing the task as a contractor, and as his claim for workers’ compensation was being reviewed about two weeks later, an attorney looking into the matter referred the adjuster to Mary Hook, the former executive director who oversaw the state’s worker’s compensation program in the Office of Employee Relations.

Hook consulted with the head of the Kentucky Fire Commission, who advised her that the claim could be compensated. Days later, a $22,299 check was cut for the injured man.

That’s just one example noted by auditors in the Finance and Administration Cabinet, which reviewed the state’s workers compensation program at the behest of the Personnel Cabinet shortly after Gov. Matt Bevin took office, in what they say are questionable claims awarded to volunteer firefighters totaling $3.1 million dating back to 2005.

The report, released Tuesday, says Hook was often at the center of the disputed claim awards, at times overriding decisions by the cabinet’s third-party administrator hired to oversee the program, which had a $28 million balance as of July 24 and regularly brings in $20 million to $25 million annually, primarily from premiums paid by various governmental agencies covered for workers’ compensation.

Hook declined an interview request on the audit’s findings when reached by phone last week.

Bevin cited potential irregularities in the workers’ compensation program’s handling of volunteer firefighters’ claims and the selection of legal firms connected to the program last April when he announced that his office would request an investigation into practices within the previous administration of former Gov. Steve Beshear.

For Personnel Cabinet Secretary Thomas Stephens, the unilateral decisions by Hook, at times within 24 hours of reported deaths or injuries sustained by volunteer firefighters without reviewing claimants’ medical histories, raise questions that he thinks should be scrutinized further by federal law enforcement agencies, particularly in light of his predecessor’s conviction on bribery charges related to another cabinet program overseen by a third-party administrator, the Kentucky Employees Health Plan.

He also noted that James Sullivan — a lobbyist for Cannon Cochran Management Services Inc., the third-party administrator for the Workers’ Compensation Program, and a former member of the Kentucky Board of Claims — was recently indicted by federal prosecutors on similar charges. He has pleaded not guilty.

“Now I’ve got another place within the Personnel Cabinet where I’ve got another department where it seems like they were overriding the recommendations of a third-party administrator doing something very similar, and then I go and see where federal law enforcement has indicted someone else and there’s a causal nexus back to the Personnel Cabinet, back to Longmeyer,” Stephens said in a recent interview with Pure Politics. “That causes me a great deal of concern.”

“I’m optimistic that law enforcement will give this report a great deal of deference and that they will fully investigate it, and I have concerns that hasn’t always been the case,” he added.

He noted that former U.S. Attorney Kerry Harvey’s wife, Dana Harvey, served as Hook’s deputy executive director, although he stressed that the cabinet found nothing to suggest that she was involved in any potential wrongdoing.

Kerry Harvey, reached by phone last week, declined to comment when asked about Stephens’ concerns, saying he had no knowledge of any alleged wrongdoing associated with the Workers’ Compensation Program.

However, his office had CCMSI, Sullivan and former Personnel Cabinet Secretary Tim Longmeyer on its radar.

The Personnel Cabinet received a federal grand jury subpoena, requested by Assistant U.S. Attorney Andrew Boone, for contracts, invoices and payments associated with CCMSI as well as a list of those involved with awarding and handling such contracts and communications involving Longmeyer and Sullivan, according to records provided by the cabinet through the Open Records Act.

Finding irregularities

Thomas, whose agency requested the audit April 7, 2016, said the agency first noticed irregularities in the administration of the Workers’ Compensation Program shortly after the Bevin administration took office.

“The biggest thing that we identified were inconsistencies in the administration of how certain classifications of claimant were being handled,” he told Pure Politics. “Volunteer firemen were the first thing that we locked onto, and we found a lot of inconsistencies.

“We also were receiving inquiries from third parties about how certain things were going to be handled. One in particular was law firms. We were getting interesting questions about how this was going to be handled that we found inconsistent.”

The audit found that the assignment of legal cases associated with workers’ compensation claims prior to 2013 were handled solely by claims professionals, according to the cabinet’s policies on the matter.

However, those instructions were amended in January 2013 to include the executive director overseeing workers’ compensation claims — Hook at the time — in determining legal assignments and granting settlement authority as well as making that position the point of contact for investigative information on volunteer firefighters and medical fee disputes.

Auditors also say Hook amended the cabinet’s Special Adjuster Handling and Legal Instructions to give the executive director additional duties related to responding to inquiries from agencies and employees on the program; working as the liaison between the state-administered benefit programs, third-party administrators and employees; responding to workers’ compensation claims and questions; and researching questions and issues on employee benefits, among other responsibilities.

That additional oversight diluted the third-party administrator’s role in workers’ compensation claims, according to the audit, which recommends separating those duties and ensuring that the executive director doesn’t handle two or more major responsibilities in the cabinet’s handling and legal instructions.

Auditors also found that law firms involved in workers’ compensation cases offered basketball tickets at least three times, with Hook soliciting lower-arena seats at a University of Kentucky basketball game from a national firm providing workers’ compensation services on one occasion.

Emails cited in the audit show that Hook offered to pay for the tickets, which is allowed under the state’s ethics code, but auditors said even buying tickets at face value from firms doing business with the state “creates a potential conflict of interest, especially if the tickets are not available to the public.” They recommended that the Personnel Cabinet and CCMSI not accept tickets to sporting events from vendors, “even when paying face value,” to avoid potential conflicts.

Input from state fire commission

Stephens said he was concerned that many of the $3.1 million in disputed claims were awarded after Hook overrode determinations by CCMSI that the state might not be on the hook for death and medical benefits or before medical evaluations could be completed, sometimes as soon as 24 hours after the initial report of injury.

“These weren’t injuries that were obvious,” he said.

“It wasn’t somebody killed battling a fire. These would be things like a cardiac event that would take place 24 hours after a ‘run’ that someone would have been on, and as we began to dig through these records what we found is that it was basically just a set procedure where within a very short amount of time with no medical investigation that these claims were being processed and a death benefit was being paid out.”

Records obtained by Pure Politics through the Open Records Act show that Hook relied on the Hometown Heroes Survivors’ Act, which extends workers’ compensation coverage administered by the Public Safety Officers’ Benefit program for police and firefighters who suffer fatal heart attacks and strokes within 24 hours of a line-of-duty activity, as the basis for the quick turnaround in claim awards.

“We have a ‘program’ where we voluntarily cover chest pain/heart attack which gets the idea from the hometown hero’s act,” Hook wrote in an email Sept. 13, 2013.

Auditors also found that the executive director of the Kentucky Fire Commission offered input in eight claims to volunteer firefighters that they questioned, totaling $444,971.

For instance, a volunteer firefighter received $6,696 for an emergency-room visit after choking on food during lunch at a fast food restaurant in January 2015 after Hook consulted with Ronnie Day, the fire commission’s executive director. Legal counsel had advised the claim adjuster to deny the claim, according to the audit.

The two decided that the claim was compensable because the firefighters had taken a fire truck to lunch in case a call came in during their break.

In an email on the incident obtained through the Open Records Act, Hook initially questioned whether the claim should be compensated but reversed her thinking after emailing Day.

“I would say yes,” wrote Day, who did not return a request for comment on the audit. “Due to him working and on an engine.”

Auditors also raised concerns with 19 claims related to junior volunteer firefighters, some of whom were under the age of 16.

In one example, a 14-year-old participant was injured in a car crash and paid $355 before the claim was ultimately denied because of his age.

The Junior Volunteer Firefighter Program has since been changed to disallow participants from engaging in potentially dangerous activities, with the program open to those 15 to 17 years old except for 14-year-olds already participating, according to the audit.

Moving forward

Auditors recommended that the Personnel Cabinet adopt a number of new policies to better monitor workers’ compensation claims and payouts, such as segregating duties within the cabinet, requiring the completion of certain examinations and forms when examining claims, conducting regular audits and reconciliations of the program, rebidding the third-party administrator’s contract once it expires and capping medical payouts prior to determining eligibility under workers’ compensation, among others.

Stephens says his cabinet has already taken steps to improve oversight of the program, especially in ensuring CCMSI and future third-party administrators have greater control of the claims process.

“It’s your job to tell us what’s compensable and what’s not, and if there is going to be something that’s going to be changed, it’s a decision that we’re going to have collectively,” Stephens said.

“The Personnel Cabinet’s also added some auditing function internally,” he added. “That’s a combination of what happened with the workers’ compensation program and what happened with the health insurance plan.”

While $3.1 million in questionable claims for volunteer firefighters from 2005 through 2016 may not seem like much compared to the overall size of the Workers’ Compensation Program, Stephens says that amount could have been better utilized elsewhere. Premiums for volunteer firefighters are based on the average of the previous three years of claims history, according to the audit.

“It costs the taxpayers more money,” Stephens said. “It costs the volunteer firemen, specifically, more money. These are funds that are being drawn away that could be used for firetrucks and training and additional opportunities, and it’s not there.”

A copy of the audit can be downloaded here: Workers compensation audit.pdf


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