Study Supports Benefits of Evidence-Based Medicine
Workers’ comp claims that follow evidence-based medicine guidelines have shorter durations and lower medical costs, according to a new study. The research suggests significantly improved outcomes and cost savings can result when medical providers follow recommendations based on peer-reviewed evidence in workers’ compensation treatment guidelines.
While nearly all jurisdictions either have or are considering the adoption of evidence-based medicine guidelines in their workers’ comp systems, there is almost no published scientific evidence confirming their efficacy or mechanism for improvements. But a team from a workers’ comp insurance carrier and Johns Hopkins University School of Medicine have produced what they believe is the first scientific proof that consistently applied treatment guidelines are effective in treating injured workers.
“We set out to prove or disprove empirically that adherence to EBM guidelines was impactful,” said Jack Tower, senior data scientist at the Accident Fund Holdings Medical Center of Excellence. “We were able to do that.”
The researchers developed a methodology to measure adherence to the Official Disability Guidelines from the Work Loss Data Institute and used an adherence score to compare the outcomes for different case mix adjusted claims populations. They found that claims in which there was at least a 50 percent adherence to the guidelines had 13.2 percent shorter durations and 37.9 percent lower medical costs.
“That kind of gives a strong impetus to implement new medical management strategies based on the results,” Tower said. “Carriers and the work comp industry could benefit from developing programs that embrace the concepts behind EBM.”
The idea of evidence-based medicine is to improve the medical decision-making process by emphasizing the use of scientific research and medical consensus. While it has been around for the last several decades, evidence-based medicine has only recently become widespread in the workers’ comp system.
“The application of evidence-based medicine in workers’ comp is much different from the application of evidence-based medicine in the group health world,” said Jeffrey Austin White, director of Innovation for Accident Fund. “In group health the evidence-based medicine guidelines have been scrutinized by the medical professionals as they are limited in scope and typically used to control cost in a hospital setting by limiting reimbursement rates.”
“This study provides a mechanism for evaluating an EBM guideline and can be used to identify how they might be improved in the future.” — Jeffrey Austin White, director of innovation, Accident Fund Holdings
However, White argues that the workers’ compensation guidelines are much more focused and comprehensive. “Evidence-based medicine [in workers’ comp] encompasses tens of millions of claims having similar incoming diagnoses. The guidelines provide outcome expectations at the diagnosis and treatment level for the majority of workplace injuries,” White explained. “When the diagnosis is made, the evidence-based medicine guidelines define how often a treatment is administered, along with the expected cost and time off from work. It’s a much different way to apply evidence-based medicine than is typically done in the group health setting.”
In addition to the Official Disability Guidelines, the American College of Occupational and Environmental Medicine has also created evidence-based medicine guidelines. A majority of states have adopted or are considering adopting either of the two national guidelines, a combination of the two, or homegrown guidelines that are state-specific to improve consensus around the definition of “necessary and appropriate” treatments for injured workers.
But “there’s a paucity of research around evidence-based medicine and best practice protocols,” said Dr. Dan Hunt, corporate medical director of Accident Fund. “We wanted to use our research to come up with hard facts — things that are true — to help improve the care for injured workers whether it’s Official Disability Guidelines, ACOEM, or another to say ‘here’s objective research that shows these guidelines work.’”
The researchers wanted to show whether and to what extent evidence-based medicine works specifically in the workers’ comp population. “There is a lot of literature that suggests the correct ways to do things medically but many times they are not really proven from an outcomes point of view,” said Dr. Edward Bernacki, professor of medicine and director of the division of occupational medicine at the Johns Hopkins University School of Medicine. “The medical care may be better, but does it really affect costs and return to work?”
Previous research from Accident Fund in conjunction with Johns Hopkins has highlighted some of the reasons for the increasing use of opioids in the workers’ comp system. One study, for example showed the use of opioids was an independent predictor of catastrophic claims costs while another identified physician dispensing as a driver of the increased use and costs.
“We found that physicians were contributing to [the opioid problem] and asked ourselves ‘Why?’ Our hypothesis was that providers were not using guidelines to help make administration decisions,” White said. “We thought by developing an algorithm or methodology to analyze a historical cohort of claims that we might be able to see a difference in outcomes between case mix adjusted claims that had various degrees of compliance with the guidelines.”
The idea of the study was to develop a technique for testing the safety and efficacy of an evidence-based medicine guideline rather than to drive public policy decisions on treatment practices.
It’s one of those situations where everyone wins — the employee returns to work and medical costs are constrained. To me, it’s a win-win.” — Dr. Edward Bernacki, professor of medicine and director of the division of occupational medicine, Johns Hopkins University School of Medicine
“If a state mandates the use of evidence-based medicine guidelines for the treatment of injured workers we are legally obligated to use them. If there are no mandated legislative guidelines, we are inclined to promote prospective guidelines that have been shown to reduce system costs and positively impact injured worker outcomes,” White said. “It’s important for us to know which guidelines work and why. This study provides a mechanism for evaluating an EBM guideline and can be used to identify how they might be improved in the future.”
Measuring Evidence-Based Medicine
The team developed two separate analytical techniques; one to stratify each claim for medical complexity and another to determine the adherence to the Official Disability Guidelines. The claims were divided into 10 levels of medical complexity and scored based on adherence.
“The number one challenge when doing claims research is being able to group claims into like claims,” White explained. “You don’t want to compare a claim with a broken finger to a claim with head trauma.”
The group started with non-catastrophic, indemnity claims that spanned the years 2008 to 2012 of the insurer’s data. They considered open and closed claims using a two-year development cutoff.
The researchers developed a compliance score to determine adherence to the Official Disability Guidelines. The score assigns a quantitative value to the claim indicating approximately how many of the treatments were consistent with the recommendations from the guidelines.
They case mix adjusted the claims and compared those with greater than a 50 percent adherence to evidence-based medicine guidelines to those with less than 50 percent adherence for the differences in claim durations and medical costs incurred. Using data from Official Disability Guidelines, the researchers identified the adherence of every procedure given a specific diagnosis for each claim based on the following four codes:
Green flags in the Official Disability Guidelines indicate the procedure is recommended based on prevalence, medical consensus, and historical claim outcomes.
Yellow flags indicate the procedure is a common treatment for that diagnosis and should be allowed on a limited basis with a restriction on the number of times it should be performed.
Red flags denote low prevalence in workers’ comp and that the treatment is not necessarily indicated based on current scientific research, i.e., recommendation is to review.
Black flags indicate inappropriate care and possibly denial of service.
“For every diagnosis and treatment, we label it with the corresponding colors; then we determine an adherence score at the claim level,” White said. “For a given claim, you can consider the cumulative number of green, yellow, red and black flags, and you can devise a score that indicates the level of compliance which can be compared against like claims.”
Based on the scores, the claims were separated. Those with mainly green and yellow flags, for example, were deemed as fairly compliant with the guidelines while those with many black flags were noncompliant.
“If you break the claims into two buckets, you can compare outcomes of the compliant group with the noncompliant group,” White said. “So for two broken finger injuries where one received compliant and the other noncompliant care, you can see how they differ in duration and medical cost.”
The average for all levels of medical complexity showed claims in the low compliance group had a 13.2 percent increase in claim duration and a 37.9 percent increase in medical costs compared to the high compliance group, the study found.
The numbers increased as the medical complexity of a claim increased. In looking at the top 10 percent of claims for medical complexity, there was a difference in claim duration of 18 percent and increased medical costs of 38 percent, between the low and high compliance groups.
The researchers also found there were more black flag procedures in the low compliance group — 3.5 times the number in the high compliance group.
“I think our research in essence provides evidence that if you do employ these guidelines the outcomes are better,” Johns Hopkins’ Bernacki said. “This is systematically over time that people return to work faster, for the insurers costs are a little lower, and for folks employing them the premium costs will be lower, so the cost of doing business will be lower. I think it’s one of those situations where everyone wins — the employee returns to work and medical costs are constrained. To me, it’s a win-win.”
“It’s awfully exciting to be a part of a landmark study. No one else has done this before,” Hunt said. “The ability to develop an adherence process for claims management will have a lot of applications across the whole health care spectrum.”
Hunt, who called the study a “gargantuan undertaking,” hopes it will lead to additional studies that drill down more into the findings. “Age, jurisdictional differences — there are a whole host of really interesting things we can do now,” he said. “You’re going to see additional papers once this method is established.”
For now, the authors hope the findings will help spur action in states that currently do not use evidence-based medicine guidelines in their workers’ comp systems. With properly worded legislation and effective dispute resolution processes in place, evidence-based medicine guidelines should offer better outcomes for everyone.
They hope workers’ comp practitioners will begin using the methodology they’ve created to further refine evidence-based medicine guidelines. In fact, they have developed a 10-step process for companies to replicate the results.
“It’s like a recipe. With evidence-based medicine guidelines, you can quantify exactly how much of each ingredient you put in and therefore enhance your ability to refine, measure, and improve your results over time. At least that is what EBM tries to do,” White said. “It’s a recipe that applies to, say 80 percent of the population most of the time. The recipe should reduce system costs and facilitate cooperation from both sides of the business — payers and providers alike.”
Hire for Integrity
As risk managers we are all too familiar with being awakened by calls in the dead of night involving major incidents, accidents, injuries or events. The root cause of many of these misfortunes is often our employees and — unfortunately — their bad habits.
In more cases than we’d like to see, the bad outcome may have been caused by a negligent, careless, hostile, disgruntled or even criminal employee.
Yes, we all have (or should have) strong safety protocols and policies and procedures in place to prevent these accidents from occurring. In addition, we all provide (or should provide) risk management and safety training to our employees, especially after these serious events occur.
But all the training in the world won’t offset a bad hire. So what if we had a risk management time machine? What if we could go back in time and prevent that disastrous event from happening by not hiring the employee who was responsible? What would that be worth to you and your organization?
What if we could go back in time and prevent that disastrous event from happening by not hiring the employee who was responsible? What would that be worth to you and your organization?
At Silverado, we assessed our hiring process to determine if we could mitigate and reduce risk based on how we hire. Our conclusion? Yes, we absolutely could.
We looked at traits common to what we would consider “bad hires,” and the shared traits of employees who were terminated for cause and/or caused or contributed to an avoidable accident.
Several years after making the decision to include risk management in our hiring practices, our claims data and new safety culture has validated our initial belief.
The Importance of Integrity
Warren Buffet said, “In looking for people to hire, you look for three qualities; 1. Integrity, 2. Intelligence, 3. Energy.” At Silverado, we incorporated an integrity screen for ALL new hires companywide a couple years back. To work for Silverado, you must pass this test.
I understand we all need to be profitable to survive. So adding an extra step and upfront expense may seem unnecessary or even impractical, especially for something that isn’t a state or federal requirement.
But we concluded early on that it was the right thing to do in order to employ the safest and highest integrity employees possible.
In our case, these employees are providing care to thousands of vulnerable memory-impaired individuals whom we are entrusted with every single day. Knowing care is being provided by high integrity people is extremely important to us.
We also know that any cost or time associated with it will be paid back tenfold by a reduction in claims (and related hard and soft costs). And we have the data to prove it.
Two years after making integrity screens part of the Silverado culture, we wanted to look at the effect on our risk data.
The University of Arizona ran an in-depth two-year independent study on our employees who took the integrity test and those who didn’t. This study specifically addressed workplace injuries (workers’ compensation claims) and focused on frequency and severity. The results showed even greater impact that we anticipated.
- Incidence of any claim being filed is nearly 3 times as strong among non-test takers.
- Incidence of a claim exceeding $5K is nearly 4 times as strong among those who never took the test.
- Incidence of a claim exceeding $20K is nearly 12 times as strong among those who never took the test.
- Internally we also found that hiring for Integrity positively affected our turnover rate as well as our professional liability frequency.
At Silverado we have found that higher integrity equals lower risk. By hiring for integrity we have successfully been able to mitigate risk from the initial hiring process and prevent many injuries (and associated costs) before they ever occur.
Helping Investment Advisers Hurdle New “Customer First” Government Regulation
This spring, the Department of Labor (DOL) rolled out a set of rule changes likely to raise issues for advisers managing their customers’ retirement investment accounts. In an already challenging compliance environment, the new regulation will push financial advisory firms to adapt their business models to adhere to a higher standard while staying profitable.
The new proposal mandates a fiduciary standard that requires advisers to place a client’s best interests before their own when recommending investments, rather than adhering to a more lenient suitability standard. In addition to increasing compliance costs, this standard also ups the liability risk for advisers.
The rule changes will also disrupt the traditional broker-dealer model by pressuring firms to do away with commissions and move instead to fee-based compensation. Fee-based models remove the incentive to recommend high-cost investments to clients when less expensive, comparable options exist.
“Broker-dealers currently follow a sales distribution model, and the concern driving this shift in compensation structure is that IRAs have been suffering because of the commission factor,” said Richard Haran, who oversees the Financial Institutions book of business for Liberty International Underwriters. “Overall, the fiduciary standard is more difficult to comply with than a suitability standard, and the fee-based model could make it harder to do so in an economical way. Broker dealers may have to change the way they do business.”
As a consequence of the new DOL regulation, the Securities and Exchange Commission (SEC) will be forced to respond with its own fiduciary standard which will tighten up their regulations to even the playing field and create consistency for customers seeking investment management.
Because the SEC relies on securities law while the DOL takes guidance from ERISA, there will undoubtedly be nuances between the two new standards, creating compliance confusion for both Registered Investment Advisors (RIAs)and broker-dealers.
To ensure they adhere to the new structure, “we could see more broker-dealers become RIAs or get dually registered, since advisers already follow a fee-based compensation model,” Haran said. “The result is that there will be likely more RIAs after the regulation passes.”
But RIAs have their own set of challenges awaiting them. The SEC announced it would beef up oversight of investment advisors with more frequent examinations, which historically were few and far between.
“Examiners will focus on individual investments deemed very risky,” said Melanie Rivera, Financial Institutions Underwriter for LIU. “They’ll also be looking more closely at cyber security, as RIAs control private customer information like Social Security numbers and account numbers.”
Demand for Cover
In the face of regulatory uncertainty and increased scrutiny from the SEC, investment managers will need to be sure they have coverage to safeguard them from any oversight or failure to comply exactly with the new standards.
In collaboration with claims experts, underwriters, legal counsel and outside brokers, Liberty International Underwriters revamped older forms for investment adviser professional liability and condensed them into a single form that addresses emerging compliance needs.
The new form for investment management solutions pulls together seven coverages:
- Investment Adviser E&O, including a cyber sub-limit
- Investment Advisers D&O
- Mutual Funds D&O and E&O
- Hedge Fund D&O and E&O
- Employment Practices Liability
- Fiduciary Liability
- Service Providers D&O
“A comprehensive solution, like the revamped form provides, will help advisers navigate the new regulatory environment,” Rivera said. “It’s a one-stop shop, allowing clients to bind coverage more efficiently and provide peace of mind.”
Ahead of the Curve
The new form demonstrates how LIU’s best-in class expertise lends itself to the collaborative and innovative approach necessary to anticipate trends and address emerging needs in the marketplace.
“Seeing the pending regulation, we worked internally to assess what the effect would be on our adviser clients, and how we could respond to make the transition as easy as possible,” Haran said. “We believe the new form will not only meet the increased demand for coverage, but actually creates a better product with the introduction of cyber sublimits, which are built into the investment adviser E&O policy.”
The combined form also considers another potential need: cost of correction coverage. Complying with a fiduciary standard could increase the need for this type of cover, which is not currently offered on a consistent basis. LIU’s form will offer cost of correction coverage on a sublimited basis by endorsement.
“We’ve tried to cross product lines and not stay siloed,” Haran said. “Our clients are facing new risks, in a new regulatory environment, and they need a tailored approach. LIU’s history of collaboration and innovation demonstrates that we can provide unique solutions to meet their needs.”
For more information about Liberty International Underwriters’ products for investment managers, visit www.LIU-USA.com.
Liberty International Underwriters is the marketing name for the broker-distributed specialty lines business operations of Liberty Mutual Insurance. Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. This literature is a summary only and does not include all terms, conditions, or exclusions of the coverage described. Please refer to the actual policy issued for complete details of coverage and exclusions.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.