Optimizing Federal Workers Compensation Claims Approval

The Challenge

The U.S. Department of Labor’s Federal Employees’ Compensation Act (FECA) is a highly cost-effective self-insurance system that provides workers’ compensation coverage to three million Federal and Postal workers. The Short Form Closure (SFC) process is used to electronically filter claims for either automatic acceptance or routing to a claims examiner for review. The process seeks to reduce claims examiner workload while minimizing improper claim behavior. Because there is no human review of claims that remain in SFC, there is a risk of improper payments, acceptance, or management of these claims. Elder Research was engaged to amend the set of SFC rules to increase efficiency in the claims examination process and minimize risk from claims left in SFC.

The Solution

The current SFC claim routing is determined by a rules-based filter that captures about 44% of claims. To improve upon the rules-based system, Elder Research combined some of the rules with a risk scoring and minimization algorithm to predict the outcome of each case based on the characteristics of a case known at the time a claim was submitted. A routing determination is then made for each case, based on the risk established by the predictions. Each claim is assigned a medical amount cap between $500 and $3,000 based on the denial probability and evaluated for its propensity to exceed that threshold or claim wage loss benefits. If the cap amount is exceeded or wage loss is claimed, then the case is adjudicated manually. The solution includes configurable metrics to allow FECA to make tradeoffs in the expected risk outcomes.


Elder Research outlined the expected outcome based on all of the metrics considered. A dynamic application was created allowing users to input their own parameters and view the expected outcome. An example of expected outcomes is shown in the table below (where better results are green and worse are red).

The expected outcomes are a considerable performance improvement over the previous routing system. This system will reduce improper payments for a known reason and will allow examiners to spend more time managing more complex claims to reduce other types of improper payments. Claims examiners can use the risk models to prioritize complex cases and distribute case load more effectively.

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