Few topics in workers compensation claims have such sustaining interest as medical management. The salient reason is obvious. The medical share of total benefits has increased substantially since the mid-1980s, and continues to grow. This trend endures despite massive efforts to control (i.e. lower) medical costs.
Back in the "ancient" days of workers' comp claims handling (in my mind, that's before the 1970s) the claims adjuster was responsible for "womb to tomb" management of each loss. This included investigation (eyeball to eyeball via a company supplied car in those days), compensability determination, return-to-work tactics, litigation management, settlement and "medical management." Of course, since the indemnity spend, on average, greatly exceeded medical loss costs, the emphasis was on indemnity benefit management rather than on medical expenditures per se. However, since medical status and information was the primary influencer of indemnity exposure, one was forced to deal "reluctantly" with this side of the claim.
The 1980s saw adjuster's cars removed, their caseloads doubled, becoming "office bound" with the telephone as their primary investigative tool. Not surprisingly, loss costs began rising.
In the late 1980s, in the midst of increasing loss costs, a rather bizarre trend began to emerge. The total benefit spend per workers' comp claim began to skew more toward medical than indemnity. This struck the industry like a poke in the eye with a sharp stick, and resulted in a plethora of efforts to medically manage cases. Yet for all the significant efforts and money expended in this arena over the last quarter of a century, medical spend continues to be an increasing percentage of overall loss costs.
The State of the Union
Martin Wolf, formerly the senior economist with NCCI Inc. observed that the medical share of total benefits grew significantly from 1986 to 2006. In Accident Year 1986, losses displayed a benefit spend on average of 55 percent indemnity to 45 percent medical. By Accident Year 2006, indemnity had dropped to 41 percent vs. 59 percent medical.
Between 1987 and 2005, medical spend displayed a 5.5 percent per annum increase. That far exceeded indemnity benefit growth over the same period. Naturally, this caused Wolf to analyze primary drivers of medical expenditures beginning in the late 1980's. These included:
Between Accident Year 1996-1997 and Accident year 2001-2002, it was found that physical therapy costs increased 67 percent, complex surgery and anesthesia increased 60 percent, complex diagnostic testing grew 57 percent, drugs and DME 34 percent, surgical treatments 26 percent, and emergency services 19 percent. These are staggering cost increases!
Also, the National Academy of Social Sciences published a report in 2010 stating that medical costs in workers' comp claims in 2008 escalated to $29.1 billion, and clearly exceeded indemnity benefit spend. Increased cost of medical care, along with more treatments, were noted as likely drivers.
The "Usual Suspect" Remedies
When the scales of workers' comp claim spend began to tip increasingly toward medical, the clarion call was sounded to find strategies to combat this development. I'm sure anyone with a modicum experience in the subject (and three martinis in them) can blandly recite the major methodologies employed:
* Utilization review (to attempt to curtail excessive treatment).
* Preferred Provider Organizations (PPO's) that offer discounts based on volume of referrals.
* Medical Bill Review that strove to reduce billed amounts to fee schedule or usual and customary charges.
* Medical case management largely RN's.
All of these services were, and are, most willingly supplied by medical management vendors. The value proposition is that for an increase in allocated expense for their services, they will decrease medical loss costs far in excess of their fees.
At best this will result in a claim of "cost containment." That phrase is a (pernicious) concept coined by the federal government predicated on the expectation that some expense is expected to yield a certain percentage of increase over the next year, but results in a less precipitous escalation than prognosticated (For example: "The cost of this modality was supposed to increase 9 percent this past year, but we held the increase to 7 percent; we declare victory!").
If all of the usual methods of medical management are resulting in such significant increases of medical spend over the past 25 years to send numerous academics scrambling to determine cause and effects, are the application of these programs really successful? Even if some of these warhorse approaches are "internalized" (such as RN's being hired by insurance carriers, rather than vend the service out), is there statistical evidence that medical spend has decreased on average paid to paid basis per claim over the preceding year?
Yes, I am aware that one must calculate annual cost increases allowed by fee schedules and the CPI, but the statistics evidence that workers' comp med spend exceeds the non-workers' comp medical spend for the same diagnosis groups. I am cognizant of the argument that workers' comp cases require more up-front treatment to get the injured employee back to work as opposed to non-workers' comp injuries. But this doesn't explain the fact that medical costs increase exponentially on claims as small as $5,000.
Please do not misinterpret my point here. The "traditional" medical management programs mentioned in this section certainly have their place, and a program without these attributes would be less than salutary. However, they are merely the starting blocks and certainly do not comprise a "ne plus ultra" medical management approach.
What Can Be Done?
Complex problems rarely yield simple answers, and so it is here. Yet there are approaches that can be pursued that should achieve lower medical costs and shorter workers' comp claim life cycles. Are they easy? Absolutely not. But continuing to implement the same medical management procedures and expect a different result is absurd.
Fundamentally, it is every stakeholder's interest in each claim to align interests. This includes the injured employee, the claims adjuster, the treating physician, and the employer. But aligning such interests is anything but simple.
For example, attempting to cut the number of treatments of an injured worker through utilization review can often result in an adversarial relationship with the treating doctor. The same thing occurs with the concept of discounts via PPOs. This may often result in the physician expanding both frequency and duration of treatment to make up for the discounted fees. No alignment of interest here.
Clearly, the treating physician is the key to medical management. Yet many times there is a disconnect between what the adjuster/employer is seeking, and what the doctor is providing. This not only can extend to case information, but also to early and accurate diagnosis (which should result in a timely application of appropriate treatment regimens).
So what is a possible model for effective medical management? It involves a combination of education, communication, expectation, information and structure.
This area starts with the employer and doctors. It has always astounded me that some employers do not want to discuss workers' comp with their employees for fear it will make them "claim conscious." This should be a topic at monthly or quarterly meetings. An explanation of how the system operates and what is provided in the way of statutory benefits will go far in dispelling the mystery around the WC system.
The treating doctors need to know what the employer and adjuster need from them. The creation of a one page form with all of the data required after the initial and subsequent visits should be formulated so theses can be faxed or emailed to the adjuster after the injured worker is seen by the treating doctor.
Physicians encounter no workers' comp training in medical school. They normally "pick it up" through on-the-job training. A written primer overview of the workers' comp state law would be helpful to doctors who are not well versed in the comp arena. Also, it would be extremely helpful if the doctor's office had a short video with an overview of the workers' comp system so each injured worker could view it upon the initial visit and have some understanding of what to expect. I know one clinic that did this on their own initiative, and it had a stellar result on most of the injured workers who treated with them.
Placing communication in abeyance because you spoke to the employers and network physicians once or twice about workers compensation issues is a poor choice. Running on "auto-pilot" is no way to insure continuing success with your medical management programs.
Communication is something that needs to be open, candid and continuing to insure a successful claims management program. But it also needs to be specific, economical, concise and well founded. No one appreciates having their time wasted with general platitudes, least of all busy physicians and employers.
Unless you establish criteria for success, how will you determine if your medical management initiatives are successful? These focused expectations also need to be communicated, discussed and agreed upon by the other stakeholders. Otherwise, you will be sure to miss the targets.
Results should provide you with the statistical information you need to enhance the objectives on a quarterly or annual basis. In order to accomplish this, you will need a plethora of accurate information.
How do you know when a doctor or facility is effective or ineffective? What performance parameters do you have in place? Can you link return to work statistics with particular treaters? What outcomes are you seeking and how do you know if you have attained them or not with each physician, clinic, or hospital? What percentage of claims treating with these facilities are litigated? Did the injured workers seek attorney representation before or after seeing the treating physician? What are the most expensive cases, and what doctors are treating those injured workers? What are the least expensive claims with the quickest return to work stats?
My point here is information is knowledge, and knowledge allows the systematic implementation of more efficacious medical management programs. If you have poor or non-existent information, chances are you will not have an effective medical management program. Keep in mind you need to be able to let the doctors you choose to "partner" with know how they are doing on at least a quarterly basis. To do this, your access to accurate data is critical.
The most numerous types of WC accidents do not change appreciably year to year. They largely remain back, neck, shoulder, knee, ankle and hand. Based on the injury, there should be best protocols implemented from your treating doctors that are standard across your chosen medical network. But how would these treatment protocols be formulated?
Expert physicians in each of these areas can be consulted to determine the modalities they would implement when confronted with a specific diagnosis. The doctors should base these recommendations on measurable results that they have had using these protocols over a large segment of claims. You then must decide with what doctors you would like to partner as your primary treating cadre. You do not need a multitude of numbers. Often a dozen doctor network in the geographic area of the majority of your losses should be sufficient coverage. However, they have to agree to willing cooperate.
These treatment protocols can then be communicated to your "core" chosen physician network to determine if they would participate in the use of such protocols. Use of pre-established treatment protocols should render over utilization moot. What is the doctor's incentive to agree to be in the "disability management network?" How about processing their bills quickly and paying a "bonus" for better return to work statistics. For heaven's sake, please do not try to get them to agree to discounts from fee schedule or U&C for being in your core network. That "patient volume for discount" philosophy will not play well when you want to establish a true "medical disability management network."
This is far from a facile concept to implement, but there is gold to be found at the end of that rainbow for those who choose to embark on the journey, be objective, work hard and strive for continuous improvement.
John D'Alusio has over 30 years of experience in property casualty claims. He holds ARM and SCLA designations, as well as BA and MA degrees.
March 15, 2012
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