In light of those numbers, it is surprising that claimsorganizations often overlook the management of physical therapyservices to focus instead on pharmacy (accounting for only 12percent of the increase in severity) or hospital services(accounting for only 14 percent).

One reason for this common oversight is the relatively moderate19 percent price increase in physical therapy costs, compared tothe pharmacy price increase of 42 percent or the hospital servicesincrease of 48 percent.

Pricing, however, is not the only factor that drives theincrease in medical severity.

Physical medicine services (physical therapy, occupationaltherapy, and chiropractic care) typically generate small treatmentcharges per service. These small charges are easy to overlook, butthey can occur repeatedly over a period of weeks or months. Theutilization of services, not unit cost, is the key cost driver ofphysical medicine services.According to the five-year study period,the utilization of physical therapy has increased by 67 percentand, as a result, has become the number one contributor to theincrease in medical severity in workers' compensation.

What are your best options to manage the utilization of physicalmedicine services?

1. Implement a comprehensive managed carestrategy. Make sure that your physical medicine managementstrategy incorporates a tiered set of services that can touch anytype of claim, whether it is a directed, managed, undirected, orunmanaged claim. Ideally, claims organizations could direct care toa special group of providers with workers' compensation expertiseand a program of financial incentives geared toward deliveringbest-practice treatment. However, provider direction is notavailable in all states, so it is important to have a program thatcaptures additional savings on non-directed claims. This couldinvolve assigning specific treatment protocol for a diagnosis,education in evidence-based physical medicine, and/or having expertadvisors.

2. Connect injured workers to providers with expertisein treating work-related injuries. Cost studies show thatproviders with a high volume of workers' compensation cases havetotal claims costs that are significantly less than their peers whowork mainly with group-health patients. In workers' compensation,the goal is to successfully restore functionality and return anemployee to the worksite as quickly as possible. The therapist willoften use different techniques than his or her group counterpartwith more frequent and aggressive treatments, combining techniquesin different sequences.

3. Make sure the providers have easy access toevidence-based treatment guidelines. In order for amanaged care strategy to be judged effective, it must be bothcost-effective and clinically effective. This means that theselected organization should make data-driven, expert-based,literature-supported and outcomes-validated guidelines accessibleto providers and provide case-specific coaching to ensure that theyfollow them.

4. Look for systems that reimburse the providerappropriately. Asking providers for a discount per servicewill not reduce the overall cost of a claim. In fact, it willlikely encourage unnecessary treatments, and it is the frequencyand number of treatments that drive costs. Savvy managed-careorganizations incentivize providers to deliver the right treatmentby compensating providers based on claim-specific best practiceguidelines.

5. Select a managed care organization that has thetechnology to provide feedback on outcomes. Like allmedicine, best practices in physical medicine continue to evolve,and it is important to continually evaluate clinical and financialoutcomes. Look for an organization that captures and aggregatesdata to analyze outcomes and validate results. Protocols should bein place to identify and facilitate new strategies as new evidencebecomes available. Additionally, the system should be able tocommunicate these practices and the new evidence to all the partiesinvolved, including the payer and provider.

In physical medicine, best practices produce the best outcomes,both clinically and financially. Claims organizations can reducetheir workers' compensation medical severity by addressing thelargest component of their medical costs -- physical medicine. Witha sound and comprehensive strategy in place, insurers, third-partyadministrators, state funds, and self-insured employers should beable to significantly reduce their physical medicine costs.

Ruth Estrich is chief marketing officer at MedRisk, Inc.Company information is available at www.medrisknet.com.