Buyers Can Put Brakes On Cost Drivers

New technology helps risk managers enhance expense oversightcapabilities

In workers' compensation programs across the country, riskmanagers are struggling to round up the usual suspects behind costhikes--medical, indemnity, administration and litigationexpenses.

At the same time, workers' comp managers who are balancing afull plate of responsibilities have chosen to outsource specificfunctions to external parties--such as claims management, medicalmanagement and litigation management.

Although utilizing these third-party vendors has significantbenefits--including saving an organization the time, money andhassle of managing processes internally--many risk managers feelthey've lost direct control over the cost and performance of theirprograms.

To ensure optimal outcomes and program success, they mustdevelop an enhanced oversight capability that tightly managesperformance, controls quality, and provides continual guidance tovendors in regards to program improvements. Today, technology is acritical enabler of the ability to oversee high-cost serviceareas.

Claims Management

Processing workers' comp claims requires the participation ofmultiple parties, including examiners, nurse case managers,physicians and attorneys. These entities are usually spread outover a distributed environment and often use disparate informationsystems, which can create lags in communication andcollaboration.

Today, new claims technology connects these stakeholders andtheir related applications, allowing information to be shared inreal-time across the claims chain.

This connectivity maximizes efficiency through an automated andelectronic workflow. Customized business rules ensure cost-savingprocedures and best practices are consistently carried out.

Rather than waste 20 percent of adjusters' time onadministrative functions, they can now focus on tasks that directlyaffect the program's bottom line, such as claims investigations andcase management.

Most importantly, the latest Internet-based platforms provideorganizations with powerful oversight capabilities. These systemsleverage the Internet to create a centralized hub that captures andcollects data in one location, providing risk managers with anenterprise perspective and an enhanced capability to direct theirprograms.

For instance, workers' comp managers can perform concurrent,online audits of 100 percent of their claims, rather than thetraditional retrospective sampling of 20 percent of claims.

Risk managers can ensure best practices are applied throughspecial handling instructions the third-party administrator mustadhere to, and use technology to monitor the regular performance ofthis as well. This enables a higher level of uniformity in thequality of claims handling.

Risk managers can also run their own analytical reports withouthaving to rely on the TPA. These reports contain the specific,drill-down information needed to implement timely interventionsthat save money and reduce losses.

Through this oversight function, risk mangers are able tocultivate accountability in special handling procedures, resultingin a claims process that goes beyond administration and settlementof claims to a process that adds value and saves costs.

Medical Management

Double-digit medical inflation has affected workers' compprograms nationwide. Medical costs now account for more than 50percent of the average claim. As a result, the approach tocontrolling medical costs must be four-fold:

o The most critical component to effective medical management isusing an appropriate network of physicians who understand workers'comp requirements, return-to-work objectives and releasing patientsto modified duty.

Today's latest data analysis tools can help organizationsprofile physicians to pinpoint providers with the lowest overallclaims costs and best outcome-oriented results. When workers areinjured, technology helps direct these patients to preferredproviders in the established network, ensuring the best delivery ofcare and the greatest level of discounts.

o Nurse case managers must be more effectively incorporated intothe workers' comp process.

They should immediately be notified of urgent claims activity,so they can accompany the employee to the initial medical visit,begin communication about RTW expectations and transitional workassignments, and help direct care to the extent allowed by thejurisdiction.

Many of today's nurse case managers are mobile or work fromhome. The latest Internet technology allows them to access claimsand medical information securely, at anytime from anywhere.

o Medical bills must be effectively reviewed to ensure medicalcosts are billed in accordance with fee schedules and providerdiscounts for additional savings.

Bill review technology can update fees and discounts inreal-time, ensuring the highest level of cost-savings. In the past,medical bills and reports were housed separately from claims,creating disjointed knowledge areas which hampered efficiency.Today, medical bills and reports can be scanned in at one locationand linked at the claims level to ensure the most claims completepicture.

o In the end, the best way to reduce medical costs and improveoverall outcomes is to prevent injuries from occurring in the firstplace.

To this end, technology streamlines data reporting and analysis.Risk managers can automatically generate and schedule injuryreports to be distributed via the Internet, allowing variousstakeholders to stay informed of injury-prone areas.

Risk managers can then use this information to establish newpolicies, procedures and training to prevent future injuries.

Litigation Management

Today, not only is the number of litigated cases growing, butthe average settlements also are increasing. Generally, lawyerinvolvement drives up the cost of claims and reduces the actualbenefit paid to the injured worker. As a result, it is in theinterest of all parties to reduce litigation and lawyerinvolvement.

The best defense is obtaining highly qualified and experiencedclaims professionals to avoid litigation through up-frontmanagement. Litigation specialists ensure proper procedures areestablished to evaluate claims and identify problems early on, soappropriate preventive measures can take place.

When litigation must occur, communication and sharing ofinformation with attorneys must be seamless and ensure the mostup-to-date information.

Today, new Internet tools like hyperlinks sent via e-mail allowexternal users such as lawyers to directly access the informationthey need. Hyperlinks are secure and access rights are defined bythe sender.

For instance, an examiner can e-mail a hyperlink to the defenseattorney. By clicking on it, the attorney connects to claims notesand can add information to the system in real-time.

To analyze results, risk managers must be able to document andtrack judgments for plaintiff and defense counsels to identifytrends. This can help them uncover why employees retain counsel andmitigate these factors in the future. They can analyze outcomes forboth plaintiff and defense counsels to optimize results.

For example, with plaintiff counsel, risk managers can determineif a firm is targeting their employees or their specificorganization. In regards to defense firms, risk managers shouldknow the volume of claims each of their defense firms are handling,so they can understand the billing practices and promote healthycompetition.

Organizations may also want to analyze "demand versus amount."In other words, risk managers would analyze the win-rate and typesof exposure, and quantify those exposures.

A lot has changed in a few years, but most of the usual suspectsin workers' comp cost hikes have stayed the same. The critical newpiece is using technology to oversee and tightly manage programcosts and performance.

This technology manages timely reporting of injuries, ensuresthe use of the best network of providers, and guarantees claimshandling instructions are consistently followed.

As risk managers struggle to leverage new infrastructure, acentralized hub has evolved that enhances productivity and theability to analyze cost drivers. With all these components inplace, risk managers should be well-equipped to effectively put theusual suspects under lock and key.

Paul Przysiecki is director of risk management at ADPTotalSource Inc. in Alpharetta, Ga. ([email protected]).Randy Wheeler is CEO of Valley Oak Systems in San Ramon, Calif.([email protected]).

Infographic: Medical scene picture?

Flag: Tip Sheet

Head: What Can Buyers Do?

To better control double-digit medical inflation in workers'comp claims, risk managers can take a number of steps--all of whichare enhanced with the wise application of technology:

o Use an appropriate network of physicians who understand how tohandle comp claims.

o More effectively incorporate nurse case managers into theworkers' comp process.

o Effectively review medical bills to make sure doctor bills arehandled according to negotiated fee schedules.

o Improve loss control and safety efforts so that injuries areprevented from occurring in the first place.

Quotebox, with Paul's mug:

"Risk managers must be able to document and track judgments forplaintiff and defense counsels to...help them uncover why employeesretain counsel and mitigate these factors in the future."

Paul Przysiecki, Director of Risk Management

ADP TotalSource Inc.

Quotebox, with Randy's mug:

"New claims technology connects stakeholders and their relatedapplications, allowing information to be shared in real-time acrossthe claims chain."

Randy Wheeler, CEO

Valley Oak Systems