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Adjuster X

Citizen Kane

By: | March 3, 2014 • 3 min read
This column is based on the experiences of a group of long-time claims adjusters. The situations they describe are real, but the names and key details are kept confidential. Michelle Kerr is the editor of this column and can be reached at mkerr@lrp.com.

Cynthia Kane, 58, allegedly suffered shortness of breath due to breathing in petroleum fumes over a prolonged period. Kane had already “lawyered up,” so a statement was out of the question. Her file during her 15 years with Union Manufacturing raised no suspicions. Kane was a nonsmoker, and she had never complained to the company nurse about pulmonary problems.

I arranged to tour Kane’s work location. It was separated from the machine shop, where the actual manufacturing took place, by a floor-to-ceiling wall with glass windows. The assembly area was not particularly dirty, and I verified that the HVAC system was up to specifications and maintained twice annually.

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Kane didn’t appear to be in any distress as she did her job.

Kane’s shift ended at 5 p.m., so I returned to the plant at 4:45 that afternoon and waited in the parking lot. I followed her as she made her way home in a fairly new two-door sports car. She stopped at a dry cleaner on the way. I parked and waited nearby for 10 minutes. When she didn’t come out, I decided to
go in.

This was a large operation with the cleaning machines in the back room. There were huge fans throughout the store, but even so there was an unmistakable kerosene-like smell from the solvents used in the dry cleaning process.

At the counter, I asked the clerk about dry-cleaning bedspreads while I strained to see into the back of the store. It was evident Kane was working.

I scratched my head. Why didn’t her attorneys name the shop as a co-defendant on the claims petition? It had far greater pulmonary exposure to airborne contaminants than Union Manufacturing.

The next day, I went back to the dry cleaner and asked to speak with Kane. The flustered counter person said they had no employee by that name. I went back to the dry cleaners three more times during the next two weeks, and each time, I saw Kane’s car there.

I arranged to have a disability evaluation by a pulmonologist, who confirmed that Kane had a mild pulmonary disability (5 percent PPD rating). After reading my report, the doctor concluded the condition was not due to her work at Union Manufacturing. Kane’s attorney had a disability report rating Kane at 25 percent PPD.

I couldn’t fault Kane for wanting a part-time job to help pay for living expenses (and her sports car), but she left me no choice but to deny the claim against Union.

I called her counsel and explained that we’d have to go to trial. He was incredulous, until I explained my findings.

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“Your client didn’t tell you about her ‘under the table’ deal at Salerno’s Dry Cleaning, did she?” I asked him. “I personally observed her working there on three different occasions, and noted the smell of the dry cleaning solvent was very strong.

“I am willing to bet that exposure is the proximate cause of any pulmonary disability she has, rather than from a clean and temperature-controlled environment at Union Manufacturing Co. My examining physician agrees.”

The attorney reluctantly agreed to withdraw the petition. Kane continued to work at Union, and whether she kept her night job at the dry cleaner wasn’t my concern. A good investigation paid off and the claim against Union Manufacturing hit a snag.

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Needless MRIs

Early MRI Could Mean More Expensive Claims

Patients who received early MRI experienced higher costs and longer disability periods. Adherence to guidelines could solve the problem.
By: | August 29, 2014 • 3 minutes min read
042014_vt_02healthcare

In a study of work-related lower back pain claims, patients who received an early MRI had medical costs $12,000 higher and were on disability about 120 days longer than those that didn’t have the test, on average.

“One out of every five people that has fairly benign lower back pain gets an early MRI that they really shouldn’t get,” said Dr. Glenn Pransky, director of the Center for Disability research. “They then have a much higher risk to go on to receive a lot of treatments that aren’t necessarily helpful.”

Most likely, physicians have not been well-educated in the proper application of evidence-based medicine and the judicious use of MRIs in assessing back pain.” — Dr. Rupali Das, executive medical director of California’s Division of Workers’ Compensation.

Evidence-based guidelines state that MRI should not be indicated for non-specific, non-radicular lower back pain. And even in instances where “red flag” conditions exist – like severe traumatic injury or possibility for cancer or infection – guidelines suggest a month of conservative treatment before revisiting the need for an MRI.

“This study came from earlier work we had done, where we surveyed providers, giving them case scenarios and asking what they would do as their initial management of acute back pain in a workers’ comp setting,” said Barbara Webster, lead author of the recent study from the Liberty Mutual Research Institute for Safety on the early use of MRI. “And we were struck. Despite what the guidelines said, many of them would order an MRI.”

“Most likely, physicians have not been well-educated in the proper application of evidence-based medicine and the judicious use of MRIs in assessing back pain,” said Dr. Rupali Das, the executive medical director of California’s Division of Workers’ Compensation. “Physicians may be unaware of false positives and lack of specificity with MRIs. It may be easier to order a test than to counsel a patient on proper exercise and behavior. Patients also may play a role in demanding tests and some physicians may find it easier to comply with the request than to explain why a test is not needed or may actually be harmful.”

Those tendencies mean workers’ comp payers end up taking on costs for unnecessary tests and subsequent treatments dealing with issues unrelated to the original claim. That means more time away from work and more expensive claims. Workers’ comp payers may be missing an opportunity to catch inappropriate tests through utilization review, which would help produce better outcomes and contain costs.

“Our studies suggest that requests for early imaging tests should go through utilization review,” Webster said. “It’s likely that if providers are following OEM and ACOEM guidelines, it won’t be certified within the first 30 days.

Das suggested that payers start with “a carrot approach” by providing education on the existing guidelines for treatment, including initial management, and the proper indications that may warrant an early MRI.

“With the involvement of a medical director, the usage of MRIs can be measured, and inappropriate usage assessed,” he said. “Outreach and appropriate intervention should be directed at providers with a pattern of ordering tests inappropriately.”

Fee-for service payment models may incentivize physicians to order more tests, but quality and outcome-based payment proposed by the Affordable Care Act should dampen that trend.

“Many organizations are now educating their members about the proper use of radiologic tests, including MRIs,” Das said. “Hopefully younger physicians will be better educated about evidence-based practices.

MRIs can reveal age-related abnormalities, like compressed and degenerated discs in the spine, that may have nothing to do with what’s causing the back pain, Webster and Pransky said.

“In one study, MRIs found significant abnormalities in 60 percent of people sampled,” Pransky said. “Human tendency is to point to the abnormality as the cause of the pain, and suggest surgery or injection to treat it. It can be hard to dissuade people from thinking that’s not the source of the problem.”

“The natural history of many conditions causing lower back pain is that half of them will resolve themselves without the need for further imaging or surgery,” Webster said.

Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at ksiegel@lrp.com.
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Sponsored: Rising Medical Solutions

Beware of Medical Hyper-Inflation!

Workers’ comp medical costs are spiking in hidden pockets across the country.
By: | August 4, 2014 • 5 min read
SponsoredContent_Rising

Historically, medical inflation rates nationwide have been fairly consistent. However, data is now showing that medical inflation is not a “one size fits all” phenomenon, with hyperinflation spikes occurring in some locations…but not others.

This geographical conundrum means hyperinflation can occur as narrowly as two hospitals having dramatically different charges on the same street in Anytown, USA. So, uncovering these anomalies is akin to finding the proverbial needle in a haystack.

“In recent years, workers’ compensation saw claim frequency decline, while severity rates went up. This basically means that increased job safety has offset increased medical costs,” explained Jason Beans, CEO of Rising Medical Solutions, a national medical cost management firm. “So, whenever a client’s average cost-per-claim went up, it was almost always caused by catastrophic, outlier-type claims.”

But beginning in 2013 and extending into 2014, Beans said, things changed. “I’ve never seen anything like it in my 20-plus years in this industry.”

SponsoredContent_Rising“Our analytics made it very clear that small pockets around the country are experiencing what could only be described as medical cost hyperinflation. The big spikes in some clients’ claim costs were driven by a broader rise in medical costs, rather than catastrophic claims or severity issues.”
– Jason Beans, CEO, Rising Medical Solutions

Data dive uncovers surprising findings

On a national level, most experts describe medical costs increasing at a moderate annual rate. But, as often is the case, sometimes a macro perspective glosses over a very different situation at a more micro level.

“Our analytics made it very clear that small pockets around the country are experiencing what could only be described as medical cost hyperinflation,” explained Beans. “The big spikes in some clients’ claim costs were driven by a broader rise in medical costs, rather than catastrophic claims or severity issues.”

This conclusion is supported by several key data patterns:

  • Geographic dependency: While many payers operate at the national level, only relatively small, geographically clustered claims showed steep cost increases.
  • Median cost per claim: The median cost per claim, not just the average, increased greatly within these geographic clusters.
  • Hospital associated care: Some clusters saw a large increase in the rates and/or the number of services provided by hospital systems, including their broad array of affiliate locations.
  • Provider rates: Other clusters saw the same hospital/non-hospital based treatment ratios as prior years, but there was a material rate increase for all provider types across the board.
  • Utilization increases: Some clusters also experienced a larger number of services being performed per claim.

One of the most severe examples of hyperinflation came from a large Florida metropolitan area which experienced a combined 47 percent workers’ compensation healthcare inflation rate. Not only was there a dramatic increase in the charge per hospital bill, but utilization was also way up and there was a shift to more services being performed in a costlier hospital system setting.

“The growth of costs in this Florida market stood in stark contrast to neighboring areas where most of our clients’ claim costs were coming down or at least had flat-lined,” Beans said.

An Arizona metropolitan area, on the other hand, experienced a different root cause for their hyperinflation. Regardless of provider type, rates have significantly increased over the past year. For example, one hospital system showed dramatic increases in both charge master rates and utilization. “Even with aggressive discounting, the projected customer impact in 2014 will be an increase of $773,850 from this provider alone,” said Beans.

ACA: Unintended consequences?

So what is going on? According to Beans, a potential driver of these cost spikes could be unintended consequences of the Affordable Care Act (ACA).

First, the ACA may be a contributing factor in recent provider consolidation. While healthcare industry consolidation is not new, the ACA can prompt increased merger and acquisition efforts as hospitals seek to improve financials and healthcare delivery by forming Accountable Care Organizations (ACO). ACOs, the theory goes, can take better advantage of value-based fee arrangements in existing and new markets.

“As hospital systems grow by acquisition, more patients are being brought under hospital pricing structures – which are significantly more expensive than similar services at smaller facilities such as independent ambulatory surgery centers and doctors’ offices,” Beans said.

Unfortunately, there is little evidence that post-consolidation healthcare systems have become more efficient, only more expensive. For example, a recent PwC study reported that hospital IT infrastructure consolidation alone is projected to add 2 percent to hospital costs in 2015.

Another potential ACA consequence is group health insurers may have less incentive to keep medical costs down. An ACA provision requires that 85% of premium in the large group market must be spent on medical care and provider incentive programs, leaving 15% of premium to be allocated towards administration, sales and subsequent profits. “Fifteen percent of $5000 in medical charges is a lot less than 15% of $10,000,” said Beans. “This really limits a group health carrier’s incentive to lower medical costs.”

How do increased group health rates relate to workers’ comp? In some markets, a group health carrier may use its group health rates for their work comp network so any rate increase impacts both business types.

In the end, medical inflation is inconsistent at best, with varying levels driven by differing factors in different locations – a true “needle in the haystack” challenge.

What to do?

Managing these emerging cost threats, whether you have the capabilities internally or utilize a partner, means having the tools to pinpoint hyperinflation and make adjustments. Beans said potential solutions for payers include:

  • Using data analytics: Data availability is at an all-time high. Utilizing analytical tools to spot problem areas is critical for executing cost saving strategies quickly.
  • Moving services out of hospital systems: Programs that direct care away from the hospital setting can substantially reduce costs. For example, Rising’s surgical care program utilizes ambulatory service centers to provide predictable, bundled case rates to payers.
  • Negotiating with providers: Working directly with providers to negotiate bill reductions and prompt payment arrangements is effective in some markets.
  • Underwriting with a micro-focus: For carriers, it is vital that underwriters identify where these pockets of hyperinflation are so they can adjust rates to keep pace with inflation.

“This trend needs to be closely watched,” Beans said. “In the meantime, we will continue to use data to help payers of medical services be smarter shoppers.”

Contact Rising Medical Solutions: info@risingms.com | www.risingms.com

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Rising Medical Solutions. The editorial staff of Risk & Insurance had no role in its preparation.


Rising Medical Solutions provides medical cost containment, care management and financial management services to the workers’ compensation, auto, liability and group health markets.
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