The Path to Accountable Care
Not many people are talking about the potential role of accountable care organizations in workers’ comp, at least not yet. But there are indications that “value-based” medical provider reimbursement and the ACO concept advanced by the Affordable Care Act will play a role in workers’ comp.
So a few industry leaders are discussing how ACOs and value-based health care might eventually reduce medical spend while improving care provided for injured workers.
ACOs come in different flavors. In general, the goal is for an ACO to coordinate the entire spectrum of care provided to a population. For a patient needing back surgery, for instance, an ACO would provide primary doctor care visits, MRIs, the surgeon, post-op hospital care, physical therapy, medications and all other necessary attention.
The ACO would do that while shouldering financial risk and being held accountable for providing outcomes measured for their expense reduction and clinical results.
Building this type of business model in workers’ comp may sound idealistic and hurdles do exist.
The idea could replace the fragmented care now typical in workers’ comp, when one specialty network provides the MRI, another the doctor, and still another provides physical therapy services. It would replace fee-for-service arrangements with bundled, “value-based reimbursement” that incentivizes providers to deliver quality care.
Building this type of business model in workers’ comp may sound idealistic and hurdles do exist.
But with many ACO initiatives already operational in group health and some showing positive results, it’s only a matter of time before a form of value-based health care purchasing emerges in comp. Results from those arrangements will help the industry build consensus on which value-based practices to adopt.
Jacob Lazarovic, an M.D., and chief medical officer and senior VP at third-party administrator Broadspire, believes the model most likely to surface in workers’ comp focuses on the bundling of care, with medical providers collaborating to provide “episodes of care” around a worker’s specific injury diagnosis.
Bundled care is sometimes thought of as a stepping stone toward accountable care, according to a paper Lazarovic authored.
A nationwide shift to ACO models won’t be easy or quick, probably occurring over years, even in group health, said Kimberly George, senior VP at Sedgwick Claims Management Services Inc.
But George is also monitoring growing employer efforts to adopt ACO models that meet employee health care needs normally provided through traditional group health plans.
Since late 2013, George has seen health plans nationwide that are Sedgwick clients asking the TPA for information that might help them provide occupational health services as part of their ACO offerings. They want data on the total cost of workers’ comp claims inclusive of all medical services and even inclusive of litigation.
These are health care systems that have implemented ACOs for their own employees and the group health needs of employees working for other employers in their communities. Now they are trying to understand how to price for occupational services.
Those familiar with how managed care practices migrated from group health to workers’ comp shouldn’t be surprised that adoption of ACO models might travel the same path.
So while discussion of ACOs in workers’ comp remains limited today, don’t get caught off guard when talk of value-based reimbursement in exchange for treating injured workers accelerates.
Fate of Two Comp Alternatives Lies With Courts
The push to reform state workers’ compensation systems to allow employers to opt out is by no means secure in Oklahoma, the first state to enact such reform. Similar efforts face new challenges in Tennessee, the second state to seek opt-out legislation.
Eight of nine current Oklahoma Supreme Court justices received their appointments from Democratic governors. In April the justices will hear a constitutional challenge to the law allowing employers to leave the Sooner workers’ comp system by implementing an alternative benefits plan.
By contrast, a conservative legislature and Republican governor friendly toward business interests adopted the opt-out legislation in 2013, bringing the opt-out alternative into law beginning in early 2014.
Claimants presenting the constitutional challenge before Oklahoma’s Supreme Court argue the law is unconstitutional because it denies injured workers due process and creates two sets of workers with disparate rights.
The court’s justices may be sympathetic to such an argument.
Past Oklahoma Supreme Court rulings make it apparent the body leans more liberal in judgment than the state’s “very, very conservative legislature,” said Trey Gillespie, senior workers’ comp director at the Property Casualty Insurers Assn. of America.
“I think everybody in Oklahoma will agree the Oklahoma Supreme Court is significantly more liberal in their view of the construction of laws and the application of laws than the Oklahoma Senate and House of Representatives,” Gillespie said. “There have been instances…where it appears the Oklahoma Supreme Court seems to get a lot of joy out of declaring certain acts of the Oklahoma legislature unconstitutional.”
Bill Minick, president of consulting firm PartnerSource and a chief proponent of efforts to allow opting out of state workers’ comp systems, called the Oklahoma Supreme Court’s makeup “a legitimate consideration.”
But Minick argues that the lawsuit’s goal of preventing employer’s from opting out of Oklahoma’s workers’ comp system will fail in the long run. It “is clear that the Oklahoma legislature is committed to do anything necessary to preserve” the law adopted as the Employee Injury Benefit Act, he said.
Gillespie said opt-out backers are already urging Oklahoma legislation that would adjust the law to mitigate the impact should the lawsuit plaintiffs prevail.
Gillespie and Minick will both speak at the National Workers’ Compensation and Disability Conference & Expo to be held November 11-13 in Las Vegas. They will present two divergent viewpoints on opt out.
Meanwhile, Tennessee’s Senate Commerce & Labor Committee passed opt-out legislation on March 30, but unless proponents can drum up support in the House, a bill may not hit the governor’s desk this year.
Five days earlier, Tennessee legislators in the House Consumer and Human Relations Subcommittee deferred taking action on opt-out legislation, which could delay further consideration of its passage until next year.
Two days prior to that, a Tennessee Advisory Council on Workers’ Compensation voted 6-0 against recommending the legislation that would allow employers to leave the state’s workers’ comp system and set up alternative plans.
The advisory council provides research and recommendations to Tennessee’s General Assembly and to state agencies. Mr. Gillespie testified before the council against the opt-out legislation, embedded in Senate Bill 0721 and House Bill 0997.
Tennessee is the first state where proponents for laws allowing employers to opt out of state workers’ comp systems are seeking favorable legislation after winning the right to do so in Oklahoma.
Conditions for Oklahoma’s adoption of an opt-out alternative were ripe at the time of that legislation’s signing into law by Republican Gov. Mary Fallin. Oklahoma employers were frustrated with a dysfunctional workers’ compensation system while neighboring Texas provided an example of advantages employers could gain by opting out.
Texas has allowed employers to opt-out of its workers’ comp system since that system was first created.
The case Oklahoma’s Supreme Court is scheduled to hear on April 14, is Judy Pilkington and Kim Lee V. State of Oklahoma.
Pilkington was injured in 2014, while working for retailer Dillard’s Inc. Lee was also injured in 2014, while an employee of Swift Transportation Co. of Arizona, according to their legal filing.
They claim Oklahoma’s opt-out law strips them of the right to have their workers’ comp cases heard by an unbiased body.
“There is no due process protection in allowing an Oklahoma employer to OPT OUT of the statutory workers’ compensation system, set up its own benefit plan, make all the decisions regarding benefits, determine who and how a plan can be reviewed, and have total control of the development of the record for appeal,” the plaintiffs’ Supreme Court filing states. “Nowhere along the way is there an agency or court or unbiased tribunal to look at the merits of an injured worker’s case. OPT OUT employers are allowed to replace a judge with a committee chosen by the employer.”
They also argue that the Oklahoma Injury Benefit Act creates disparate rights for accessing benefits. For example, injured employees working for employers that do not opt out generally have one year to file a claim while an employer that opts out may allow only a 24-hour statute of limitation, they claim.
Oklahoma’s constitution prohibits separate treatment of members of the same class of people, said Bob Burke, an attorney representing the plaintiffs.
Asked whether the Supreme Court justices about to hear his case are likely to be influenced by the fact that 8 of them were appointed by Democratic governors, Burke said that “the court has a tradition of maintaining access to justice for injured workers and anyone harmed.”
Employment Growth Impacting TPAs
U.S. employment growth is driving increased worker’s compensation claims volume and pushing claims management companies to hire new employees of their own.
The worker’s comp third party administrators have not hit on boom times. But with 3 million U.S. jobs created during 2014 and more than half a million added in the first two months of 2015, they are managing more claims and seeing an accompanying uptick in revenue growth.
At the same time, the TPAs are seeing more of their seasoned adjusters and other experienced employees who kept their jobs during the recession deciding to exit now that stock-market earnings have lifted their retirement savings.
That along with increased claims volume has led TPAs to post help-wanted signs for veteran claims handlers while also recruiting recent college grads they can train.
“We have a number of things we are doing in order to ramp up (hiring) whether it’s a very robust campus recruiting effort, because we want to be able to develop our own, as well as looking to add experienced hires who will be able to step into a desk and take over very quickly,” said Mike Hessling, chief client officer at Gallagher Bassett Services Inc.
“We are in growth mode,” added Scott Rogers, executive VP, casualty operations at Sedgwick Claims Management Services Inc. “We are adding adjusters and other claims professionals at a couple hundred per month. We anticipate we will hire between 2,500 and 3,000 new colleagues in 2015.”
Some of that expansion comes from existing customers demanding more services, the acquisition of new clients, and job growth.
The U.S. Bureau of Labor Statistics reported March 6, that employers added 295,000 in February. That follows millions of job created during each of the past three years. The Bureau said February’s job gains occurred in in food services and drinking places, professional and business services, construction, health care, transportation and warehousing.
With more workers come more injury claims to manage. But other forces may also be at work.
During the recession, when claim volume was flat or declining, the frequency of minor, medical-only claims filed also declined, said Frank Murray, senior VP of claims services at ESIS, a TPA unit of ACE Group.
Observers speculated back then that the decline in those claims was partially due to employee reluctance to file minor-injury claims because they feared losing their jobs.
Now, as U.S. employment improves, Murray said he is seeing an increase minor, medical-only claims.
“As the economy improves people are less concerned about reporting a minor claim,” Murray said.
The overall number of claims rose “last year significantly and the year before that as well,” he said. “Prior to that, frequency was flat or slightly declining. But the last two years there has been a very noticeable increase in claim volume.”
Employment numbers are closely monitored by TPAs. Broadspire does so because of their correlation with claim volume, said Danielle Lisenby, the TPA’s president and CEO.
“We are definitely seeing year over year growth,” Lisenby said.
Broadspire’s revenue increased to $268.9 million during 2014, up nearly 7% from the prior year, driven in part by claims volume growth and acquiring new customers.
Several TPAs are privately owned and do not publicly report revenues.
But TPA leaders have similarly seen the volume of claims their companies manage steadily improve over the past year or two with the growth in claims depending on the industry sector served. As they handle more claims so do other worker’s comp claim industry entities -such as medical cost control companies- that the TPAs contract with for services.
So far, most of the growth in claims has come from sectors that typically lead the way in post-recession hiring, such as those in the temporary employment, retail, and service industries.
The recent years’ increases in overall U.S. employment, however, means TPAs are beginning to see growth in claims from other industries as well.
Along with noticing more construction underway in the cities she travels to, Debbie Michel, president of Helmsman Management Services said the TPA unit of Liberty Mutual Group has seen a slight increase in worker’s comp claims from construction industry customers and from companies providing products and services for construction companies.
“But construction is nowhere near where it was before ’09,” Michel said.
Overall, though, several of Helmsman’s larger clients are seeing more claims due to employment growth, Michel said.
Several TPA sources said they expect the claim volume growth to continue throughout 2015.
Worker’s comp claims, however, typically lag the addition of new jobs, said Rogers at Sedgwick.
“We have seen overall unemployment rates drop, which means our employers are adding salaries, adding staff, so we do anticipate the correlation that historically exists (between employment and claims growth) to continue,” Rogers said. “With more employment opportunity comes more risk and more potential for claims, but it is a lagging factor.”