Physician Networks

MPNs Not All They’re Cracked Up to Be

Despite early promise, California's provider networks haven't sustained their power to lower workers' comp medical costs.
By: | July 13, 2015

California’s medical provider networks have resulted in increased participation in networks, lower rates of attorney involvement, and higher rates of claim closure. But a new study also shows MPNs have not sustained their ability to significantly lower medical costs in the workers’ comp system.

While not an indictment of MPNs, the California Workers’ Compensation Institute said their findings indicated several shortcomings, including a first-time showing that average medical payments on MPN claims with attorney involvement cost 2 percent more than non-MPN claims with attorneys. The report is based on data from more than 1.8 million claims between accident year 2000 through AY 2011.

“The bottom line is that physician networks now manage most California workers’ compensation treatment, but in recent years the cost savings historically associated with network medical management have declined,” the report said.  After adjusting for claimant characteristics, injury type, and administrative aspects, “average savings associated with network vs. non-network medical management on lost-time claims declined from 16 percent in the preferred provider organization era to 3 percent after MPNs became fully operational.”

MPNs were introduced in California in 2005 and “were intended to ensure appropriate levels of treatment, improve efficiency, better coordinate treatment, and reduce the cost of care,” the authors wrote. They allow workers’ comp payers to use networks of medical providers for injured workers and, unlike prior regulations, allow employers to retain medical control for the life of a claim. Previous research has shown medical provider networks were typically associated with lower costs and facilitated return to work.

The researchers measured the percentage of all claims and indemnity claims in which the primary treating physician involved was a network provider. They also tracked average medical payments for network vs. non-network claims and reviewed the changing nature and characteristics of claims managed inside and outside of a network. Their findings included:

  • Network utilization overall increased from 55.4 percent in the PPO period to 79.5 percent in the full MPN period. For indemnity claims, it increased from 44.2 percent to 77.2 percent.
  • Network claims had higher claim closure rates. However, the rate for network claims at 12 months post-injury decreased from 72.7 percent in the PPO period to 61.2 percent in the full MPN period.
  • The percentage of network indemnity claims with at least one opioid prescription increased from 39.1 percent in the PPO period to 54.5 percent in the full MPN period.
  • Average risk-adjusted medical payments on network claims with opioids were 16 percent less for network claims than for non-network claims in the PPO period, but were 20 percent less in the full MPN period.
  • Average risk-adjusted medical payments on indemnity claims at 24 months post-injury were 16 percent less for network claims than for non-network claims in the PPO era, but were only 3 percent less in the full MPN period.

The authors said there was “considerable variation” among individual networks with “just as many networks generating lower average costs per claim as higher average costs per claim when their results were compared to those of claims managed outside of a network. This suggests not only variations among network physician rosters, but in the medical management and reimbursement systems used by the various networks, as well as in the populations and regions served.”

There were “significant” geographic variations, according to the report. Networks generated significant savings in several areas. However, the savings associated with network management in Los Angeles County “completely evaporated in recent years, with the spread between the average medical payments for network and non-network claims declining from 12 percent in the PPO era to no difference in the full MPN period.”

With provider networks evolving in the California workers’ comp system, “clearly, the clinical and regulatory complexity of providing treatment for occupational injuries requires greater network vigilance than ever before,” the report said.

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected].

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