Council Gives Privatization a Big Boost : Government: In a victory for Riordan, lawmakers hire two firms to run workers’ compensation program for the Police and Fire departments.

Los Angeles Mayor Richard Riordan on Friday won his biggest victory yet toward privatizing some aspects of city government when the Los Angeles City Council hired two firms to run a large chunk of the city’s hemorrhaging workers’ compensation system.

On an 11-1 vote, the council approved hiring the firms to manage the system of paying out workers’ compensation claims to injured uniformed staff of the Police and Fire departments. Claims from those workers represent about half the cost of the city’s $55-million workers’ compensation system.

Over the next three years, the new system is expected to save the city $40 million.

Recent studies commissioned by the mayor have found that the city’s system for handling job-related injury claims by its employees is out of control. On average, the city’s costs run four times higher than those of other government agencies, the studies have found.

Because city claims adjusters are given huge caseloads, they are often unable to quickly identify injured employees’ problems and get the workers into a rehabilitation program. The result: City employees linger far too long off the job, collecting workers’ compensation pay and receiving costly medical treatment when they should be working.

“The system is run by the [injured] employees, not the city,” said Faye Washington, head of the city’s Personnel Department.

The council hired Associated Claims Management to manage the workers’ compensation claims system for the Police Department, and Hertz Claim Management to run the Fire Department system. Both were operated by the Personnel Department. That department will continue to manage civilian workers’ compensation claims.

Deputy Mayor Mike Keeley called the council action the Riordan Administration’s “biggest win yet” on the politically sticky privatization front. Riordan’s efforts to privatize city services--most notably to hire a private firm to issue parking tickets on the Westside--have met with stiff resistance from the City Council.

Last year, eight lawmakers joined city labor union leaders to proclaim their steadfast opposition to Riordan Administration privatization initiatives.

But Friday, no lawmakers’ voices were raised against privatization in large part because the proposal would not eliminate city jobs and would improve working conditions for the city’s claims adjusters, according to Washington.

The action’s strongest council backer during discussion Friday was Councilman Joel Wachs. Councilman Richard Alaracon cast the only dissenting vote.

Under the plan, none of the city’s claims staff will lose their jobs. Instead, those now working on police and fire claims will be shifted to work on civilian claims--thus resulting in reduced caseloads.

“They are ecstatically happy about this. Who wouldn’t be if we reduced their caseload and improved their work environment?” Washington said.

With about half of the city’s workers’ compensation system to be run by private firms and the other half by the city, the groundwork will be laid for comparing city vs. private productivity and savings, Keeley said.

“Not only is this the biggest win yet on privatization, but also it’s a perfect opportunity to compare the private sector performance against public sector performance,” Keeley said.

Eventually, such comparisons might result in a decision to have the private sector run the entire program, he said.

“I’m confident we can keep up in this competition,” Washington said of her staff. “We know we’re in a contest.”