From the April 2008 issue of Claims Magazine • Subscribe!

The Value of Bill Review in Workers' Compensation Claims

Employers, claim payers and workers' compensation care management organizations continue to be challenged to provide solutions for rapidly escalating workers' compensation medical costs. According to a recent study released by the National Council of Compensation Insurers (NCCI), pharmaceuticals and related costs account for approximately 14 percent of workers' compensation medical costs. Pharmacy spending in workers' compensation is now one of the top cost drivers for lost-time claims. While technology and related services have been a significant component of medical cost-management strategies, many employers have adopted a more advanced model that is driving significant levels of additional medical and pharmaceutical cost savings.

Tight Integration Successful

One newer model centers on the tight integration of information systems, as well as the involved procedural workflows between the claim payer -- TPA or insurer -- and the cost management service providers -- medical bill review and pharmacy benefit management providers (PBM). Such tight and detailed workflow integration allows employers and payers to proactively manage and control the PBM process. As a result, financial effectiveness, process efficiency, and information value are increased for all stakeholders.

Historically, PBM programs achieved 40-50 percent network penetration through the use of standard program elements, including first-fill approval at the point of sale, mailing identification cards to claimants for future fills, and enrolling long-term claimants into home delivery programs. Within this type of model, employers still face the problem of having to rely on compliance by the claimants (choosing an in-network pharmacy) as well as struggling to control program leakage and the involvement of third-party billers. Achieving more than 40-50 percent network penetration and greater than 10-15 percent discounts below fee schedule, or medical charge benchmarked cost levels, has been a real challenge in this traditional model.

In-Network Prescriptions Improve Overall Savings

Beginning in early 2006, and with increasing frequency in 2007, employers have worked with their claim payers and cost management partners to create a tighter, more closed-loop system in which each workers' compensation medical bill that is received is reviewed for out-of-network prescription activity and outreach calls are placed to have pharmacies update billing information. By driving more in-network prescriptions at lower billing rates, employers have experienced improved savings levels and financial outcomes.

By implementing more tightly integrated workflows and information flows between the bill review and PBM provider, employers have seen network penetration rates exceed 75 percent, and employers have achieved incremental savings of up to five percent on their total pharmacy spends.

Additional incremental value comes from the employer's ability to establish payment rules based on prescription activity. Within the more tightly integrated program, the PBM can apply its standard adjudication and payment rules on non-network bills as if the bill was processed through the network. These rules can include adjudication against ICD-9 or NCCI codes. Bills that generate adjudication exceptions can be pre-authorized by adjusters using standard, in-network approval processes. Denied bills are processed by bill review with a denial code included on the explanation of review. Approved bills are processed according to normal bill review protocols.

Automated EDI Process

Increased informational and efficiency value is provided through an automated EDI process. The automated and electronic integration between pharmacy and bill review results in faster turnaround times, more consistent application of adjudication rules, and streamlined contact with claim adjusters. The more tightly integrated process turns bills around in 24 hours or less with adjudication exception rates similar to in-network prescriptions. At these rates, savings from denied prescriptions are in the range of 10-15 percent. Assuming that 75 percent of a payer's pharmacy spend is already processed in-network, out-of-network bill processing can save a payer up to an additional four percent off of their total pharmacy costs.

The bill review data also provides an opportunity for enhanced clinical management efforts. By showing all medication activity for the employer, the pharmacy benefit manager can review pharmaceutical trends across the employer's book of business, including overall prescribing practices, jurisdiction utilization, drug/injury relationships, and brand/generic utilization. This information allows for program calibration based on results and experience.

In summary, the tighter and more complete integration of bill review data into PBM workflows should be part of the employer/claim payers' strategy to decrease claim costs and create improved outcomes for all parties. Such tight integration creates financial effectiveness, process efficiency, and informational synergies that result in added value for all stakeholders.

Rob Gelb, senior vice president, and Melissa Borchers, product manager, both work for Coventry Workers' Comp Services. They can be reached by e-mail at,, respectively.

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