Improper Application of the AMA Impairment Guides Can Cost You Plenty

The workers' compensation industry is wasting billions of dollars each year due to inaccurate assessments of injured workers, according to experts who reviewed more than 6,000 impairment ratings done between 2006 and January 2010. The study authors say many in the industry are likely unaware of the financial impact -- or what they can do about it.

The ratings studied came from eight states, mostly California, and most using the fifth edition of the American Medical Association Guides to the Evaluation of Permanent Impairment. They observed an error rate of 78 percent, resulting in ratings averaging more than twice what was appropriate.

"You have an area that draws significant costs in the [workers' comp] system," said Dr. Christopher Brigham, chairman of the San Diego-based Impairment Resources that conducted the research. "It's an issue from an industry not understanding the process so not being able to intervene."

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Most states use some version of the AMA Guides to determine the extent of impairment for permanent partial injuries as a basis for monetary benefits. The problem, according to the study authors, is that the ratings are too often performed by people who are untrained on the guides or have a particular bias. This is compounded by the fact that it is unrealistic to expect that adjusters and attorneys can determine whether the rating they receive is accurate.

Brigham and his associates say based on their observations it is probable that the majority of the estimated 600,000 impairment ratings done each year in the workers' compensation arena are incorrect with mistakes costing upward of $15,000 per claim where the original rating was more than 10 percent. The authors also point out that some states pay supplemental benefits if the impairment rating is above a certain threshold, even creating lifetime benefit. Therefore, it is probable that overrating results in more than $10 billion in annual overspending by the workers' comp industry.

Earlier settlement of claims. The guides were created in 1958 to provide consistent ratings that accurately reflect the loss associated with a medical condition and thereby reduce the number of disputes over impairment ratings. When applied correctly, the results should be reliable and reproducible.

"If I have the same patient and take the same clinical information about the patient and apply it to the criteria, you should be able to take that same information and apply it to the criteria and come up with the same rating. If so, that demonstrates inter-rater reliability," Brigham said. "We see significant problems with lack of inter-rater reliability. One rater will come up with a 20 percent [impairment].Another will come up with 10 percent."

"The problem is not with the guides," he added. "It is with how the guides are used."

Brigham says part of the problem stems from a lack of training and experience in applying the criteria. "It's not a skill set that is taught in medical school. You need proper training or go to someone who has proper training," he said.

Each jurisdiction has different requirements for who performs ratings. Typically, they are performed by treating physicians, independent medical evaluators, or designated doctors.

It's also critical to have an unbiased rater to avoid what Brigham calls the manifestation of fraud. Some physicians, he said, "will do inappropriate treatments or be very friendly to their patients or to plaintiff counsel and inflate ratings."

The authors claim the California Applicant Attorneys Association publishes practice tips "that include guidance, from their perspective, on how to make use of the AMA Guides." They go on to say that studies have indicated "that certain attributes, including attorney involvement and claim duration, are associated with unanticipated cost escalation in a small number of cases that drastically affect overall insurer loss."

Inaccurate ratings. The authors say some physicians who may think they are helping an injured worker to get more money by inflating the impairment rating are actually doing them a disservice. "An injured worker who's told he's 50 percent impaired versus 20 percent impaired has a psychological component," said Julie Osborn, COO of Impairment Resources. "If a physician said you were 50 percent impaired, you could have a different perspective on your functionality."

Osborn, who has a background in claims, says she was shocked by the 78 percent error rate revealed in the study. "When you're managing claims, you believe the physician is correct and you just move forward," she said.

Fixing the problem. Persuading stakeholders in the workers' comp industry to address the inaccurate ratings begins by raising awareness of the problem, something Impairment Resources is committed to doing. "Accurate ratings create earlier resolutions of claims," said Fred Uehlein, director at Impairment Resources. "They are so inaccurate they're costing insurers billions. They're also costing aggravation, time and misdirection to employees."

Read more at the WorkersComp Forum homepage.

October 11, 2010

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