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Utilization review in workers' compensation is one of the many tools we have available to ensure that an injured employee receives the best, most appropriate medical care necessary to achieve a quick and sustainable return to work. However, as with any tool, the key to successfully accomplishing your goal is learning how to use the tool appropriately.

Utilization review can be defined as the evaluation of the appropriateness, setting and intensity of medical care. Its use began in the group health world, when health plans began to require patients anticipating a hospital stay or a surgical procedure, call the plan prior to admission to ensure the necessity of the procedure/stay and the appropriate length of that hospital stay.

Rather than simply deciding that utilization review was no longer working and eliminating the "tool" entirely, the group health industry set out to refine the use of this tool by focusing on the cases where it was still having an impact.

Today in healthcare, utilization review is focused on very high-risk and high-cost pregnancies, surgeries and hospitalizations as determined by payer experience and data analysis. In fact, that analysis has pushed the group health industry to move even further upstream lately as they employ disease management techniques on what they now know to be the high-risk and high-cost diseases, in an attempt to avoid the need for hospitalizations or expensive medical procedures through wellness and preventive care.

There is significant evidence that the almost double-digit annual increases in workers' comp medical costs are being driven by medical use rather than price. The chart from the National Council on Compensation Insurance demonstrates the role that utilization plays in the difference between group health medical costs and workers' comp medical costs for both acute and chronic injuries when measured for the first three months following that injury.

Clearly, based on this evidence, we must do something to better manage medical use in workers' compensation claims. However, many claims-payers and employers have been hesitant to aggressively implement utilization review due to several classic arguments against its use.

Many would say that most providers do not over treat, and therefore you are wasting dollars trying to manage their use. It is true that not all providers overutilize, but because most claims organizations do not analyze the performance of the providers treating their claimants, they do not know who the "overutilizers" are or how much they are truly costing.

Alternatively, some would say that they do not need to be concerned about medical utilization because they are achieving better than 80 percent preferred provider organization penetration and, therefore, controls are in place. The dominant national provider network we now have in workers' comp has more than 1 million providers contracted; there is no way they are all the "best workers' comp medical providers."

In fact, we can safely assume that there are just as many poor medical providers in the network as there are outstanding providers who truly understand workers' compensation. The entire premise of PPOs is focused on unit-price control rather than utilization control, and, as a result, having a PPO in place, particularly a big/broad network, does not mean you are effectively controlling the use of medical services.

Providers who agree to give the PPO network a unit-cost discount on every office visit may seek to compensate for that lost revenue by generating more procedures per visit or more visits per claim. Unfortunately, the PPO network has little incentive to monitor or limit this type of potential overuse by their providers because percent-of-savings pricing means the PPO earns money with every medical transaction.

The key to appropriate application of utilization review is the ability to use data analytics to identify the providers whose treatment does not need to be "micromanaged" versus those whose treatment patterns are more questionable--and then apply a targeted utilization-review program accordingly. This data analysis will also provide the information necessary to assist you to narrow your PPO network to only those providers focused on the best medical care and return-to-work.

Many also say that utilization review only provides a sentinel effect savings immediately subsequent to the legislative reforms that mandate its use. California offers perhaps the best example of the shock effect of new utilization-review legislation, where years of questionable treatment patterns in outpatient surgeries, physical therapy and chiropractic care came to an abrupt halt in the post-reform environment.

Now that the worst abusers in the system can no longer propose a regimen of physical therapy visits five times a week for 100 weeks, is it safe to assume that the battle over inappropriate utilization is over?

The lesson from group health is quite helpful here. Once the initial shock effect is realized, applying utilization review across the board is no longer the best approach. However, a more focused approach might be in order. Understanding your particular medical use trends, medical issues and medical-cost drivers in every jurisdiction, for every employer location, for each occupation, is critical to more targeted usage of utilization review.

We learned in healthcare that not every pregnancy requires precertification or management, but we do want to know about and assist in the management of all high-risk pregnancies to assure appropriate care and outcomes. Likewise, every workers' comp procedure in every jurisdiction for every body part does not require utilization review, but we do want to identify and manage the high-risk cases.

The secret to success of utilization review lies in our ability to turn our medical and claims data into information and intelligence so we can continuously manage those particular episodes of care that are creating our increased medical costs. We must target our tools on those particular medical-cost drivers, continuously update our intelligence and apply utilization-review tools appropriately.

MADDY BOWLING is principal of Maddy Bowling Consulting Inc.

April 15, 2008

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