How a Baseline Analysis Transforms Your Workers’ Comp Program

If you don’t know where you are, how can you plan where to go?

In workers’ compensation, this isn’t just a philosophical question—it’s the difference between a reactive, frustrating program and one that steadily improves outcomes and reduces costs.

The starting point for any strategic improvement is a baseline analysis—an honest, data-driven look at how your program is performing today. Without it, you’re just guessing which levers to pull, and your “improvements” may be fixing the wrong problems.

Why a Baseline Matters

Establishing a baseline is part of the very first phase: building your framework. It comes before revising your return-to-work process, before adjusting vendor relationships, before rolling out safety initiatives.

Why? Because without knowing your current state, you can’t:

• Prioritize the right issues

• Set realistic goals

• Measure improvement over time

Think of it like a fitness program—you wouldn’t start training without first stepping on the scale or measuring your mile time.

What to Measure: The Five Critical Metrics

Your baseline analysis should start with the five critical metrics. Together, they give you a comprehensive picture of your program’s health:

1. Cost per Full-Time Equivalent (FTE)
   This normalizes costs so you can compare performance over time, regardless of workforce size changes. If this number is rising, you need to find out why—more injuries, more expensive claims, or both.

2. Total Recordable Incident Rate (TRIR)
   This OSHA metric tells you how often injuries are happening compared to industry averages. High TRIR? That’s a safety and hiring conversation.

3. Lag Time
   Measures the average time between injury and claim reporting. Longer lag times lead to more severe, costly claims and higher litigation risk.

4. Return-to-Work (RTW) Rate
   Tracks how quickly and how often injured employees return to modified or light duty. Low rates indicate missed opportunities to control costs and keep employees engaged.

5. High-Impact Claims (Litigation and Large Losses)
   Shows the percentage and cost of claims that balloon into major financial risks. Often linked to communication breakdowns or poor vendor coordination.

The Russian Doll Effect

These metrics are nested, like Russian dolls.

• At the outer layer: Cost per FTE – the big-picture number.

• Inside it: Number of claims and cost per claim.

• Inside those: Drivers like lag time, RTW rate, and litigation rate.

• Inside those: Even smaller drivers—supervisor training, job descriptions, medical provider relationships, etc.

By understanding how the “drivers of drivers” work, you can identify which specific actions will have the biggest impact on your costs.

How to Conduct a Baseline Analysis

You don’t need a data science degree to establish your baseline, but you do need a process:

1. Gather Your Data
   Start with your loss runs, OSHA logs, and payroll records for at least the last 2–3 years. This gives you enough history to see trends.

2. Calculate the Five Metrics
   Use consistent formulas and, where possible, compare them to industry benchmarks. This puts your numbers in context.

3. Score Your Performance
   Try a simple 1–10 scale for each metric, with 10 being best. This visualizes strengths and weaknesses quickly.

4. Identify Your Top Drivers
   Look for patterns. Is lag time your worst score? Are litigation rates climbing? Focus on the biggest problem areas first.

5. Document Your Findings
   Create a short, clear report you can share with leadership and your team. Include current numbers, targets, and key areas for improvement.

Turning Data into Action

Once you have your baseline, the real work begins: translating numbers into priorities.

Example:

• If lag time averages 12 days, start with supervisor training and a faster reporting system.

• If TRIR is above industry average, focus on safety programs and pre-hire physical ability testing.

• If RTW rate is low, strengthen modified duty options and medical provider partnerships.

The beauty of a baseline is that it doesn’t just tell you what’s wrong—it tells you where to start and how to track whether your fixes are working.

Tracking Progress Over Time

A baseline isn’t a one-and-done exercise. It’s a benchmark you revisit regularly—quarterly or annually—to measure progress.

This ongoing review helps you:

• See the ROI of your initiatives

• Adjust strategies if improvements stall

• Celebrate wins with your team and leadership

And because you’ve defined your metrics upfront, you can make decisions based on facts, not hunches.

Common Pitfalls to Avoid

• Measuring Everything, Fixing Nothing
  Stick to the five metrics at first—don’t drown in data.

• Ignoring Context
  A rise in claims might be due to more accurate reporting, not more injuries.

• Failing to Share the Results
  Your team can’t help improve what they don’t understand. Share the numbers openly.

The Payoff: Confidence and Clarity

Establishing a baseline changes the conversation around workers’ comp. Instead of vague complaints (“Our claims are too expensive”), you can point to specific, measurable drivers (“Our lag time average is 9 days; we need it under 2”).

This clarity helps:

• Win leadership support for initiatives

• Align internal teams around shared goals

• Engage external vendors with specific expectations

It moves you from reactive problem-solving to proactive, strategic decision-making.

Final Thought:
Without a baseline, every improvement is a guess. With one, every improvement is an informed choice. If you want to transform your workers’ comp program, start by measuring where you stand—because the path to better outcomes begins with knowing your starting point.

Michael Stack, CEO of Amaxx LLC, is an expert in workers’ compensation cost containment systems and provides education, training, and consulting to help employers reduce their workers’ compensation costs by 20% to 50%. He is co-author of the #1 selling comprehensive training guide “Your Ultimate Guide to Mastering Workers’ Comp Costs: Reduce Costs 20% to 50%.” Stack is the creator of Injury Management Results (IMR) software and founder of Amaxx Workers’ Comp Training Center. WC Mastery Training teaching injury management best practices such as return to work, communication, claims best practices, medical management, and working with vendors. IMR software simplifies the implementation of these best practices for employers and ties results to a Critical Metrics Dashboard.

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

Injury Management Results (IMR) Software: https://imrsoftware.com/

©2025 Amaxx LLC. All rights reserved under International Copyright Law.

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.