Driven largely by skyrocketing medical costs and lack ofcontrols for utilization, workers' compensation insurance costshave risen 50 percent nationwide in the last three years, with thegreatest increases in California and Florida. The average medicalcost per claim has nearly doubled over the past decade, to $15,300and, in some states, the cost per claim has even quadrupled,according to the Insurance Information Institute.

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In California, where workers' compensation premium rates are thehighest in the nation, the median number of medical visits perworkers' compensation claim is more than 70 percent greater thanother states. The higher utilization is due mainly to higher ratesof particular types of services, such as physical medicine andchiropractic care. Medical treatment frequently goes unchecked, andproviders lack incentives to curtail the number of visits.

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Legislatures across the nation are passing or formulatingreforms of their states' workers' comp regulations. Too often,however, these reforms do not address the real issues. Mostreforms, even those that establish medical fee schedules that capsome reimbursements to providers and limit the number of visits tochiropractors and physical therapists, do not go far enough to fixthe system. The private sector also must offer strategies forsolving the crisis. Insurance companies and self-insured employersmust change the way that medical care is delivered and makehealth-care providers more accountable in order to lower costs andimprove the quality of care that workers receive.

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Changes that will go farthest to bring relief include:

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New Standards of Utilization There must be controls forover-utilization of services. Even if reimbursement is capped andthe number of visits limited, some providers will schedule morevisits than are needed to treat a patient in order to drive uprevenues, especially if they feel that reimbursement rates are toolow. In California, for example, a new workers' compensation lawgives physical therapists 24 visits without any scrutiny, althoughmany cases require only half that amount.

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Consequently, a case management program should be put into placethat monitors services and ensures that treatment matches the needsof patients and is producing the desired outcomes. In such aprogram, a physical therapist would be reviewed by an experiencedpeer case manager, as opposed to a nurse or claim manager who lacksthe training to properly monitor the continued need for aparticular type of specialty care.

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Provider Incentives Provider incentives must be aligned withthose of workers' compensation insurers. Insurance companies oftenask for provider discounts, but offer no incentives in return.Insurers must meet their contractual obligations to employers bydirecting care of injured workers to preferred providers withexpertise in treating workers' compensation injuries. If insurersuse pay-for-performance programs, in which providers are paid aflat fee per case up-front, providers are motivated to get theirpatients back to work quickly and safely.

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Patient Satisfaction Quality of care includes the treatmentprocess, as well as its results. Insurers must focus more onpatient satisfaction. Do patients have to wait several days to getappointments? Is enough time spent with injured workers to educatethem on the mechanisms of injury and how to avoid such risks in thefuture? Satisfied patients who feel that providers are interestedin their well being, and who are educated properly about the natureof their injuries and how to avoid getting re-injured, will be lesslikely to initiate litigation.

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Management of Care Managed care patients in HMOs and PPOs healmore quickly than workers' compensation patients with the samediagnoses. Rather than placing limits on treatment for workers'comp injuries, there should be more controls that use managed caretechniques, such as a network of preferred providers, negotiatedfee arrangements with participating providers, case management, andutilization review. Currently, most employers do not regulate whichmedical providers their injured workers visit, and they do not knowwhether the providers are geared toward treating injured workers.By directing care promptly to providers experienced in treatingworkers' comp injuries, when state law allows, employers can bettercontrol costs and also protect themselves against those workers whohave potentially fraudulent claims.

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Elimination of Conflicts of Interest Payors can lower costs byusing providers with no conflicts in ownership that can drive uputilization and reduce the quality of care. Physician ownership ofphysical therapy offices, as opposed to physical therapist-ownedoffices, tends to drive up costs through over-utilization. Inphysician-owned physical therapy facilities, visits per patientwere 39 percent to 45 percent higher, and both gross and netrevenue per patient were 30 percent to 40 percent higher, accordingto a study in the Journal of the American Medical Association.

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A study in the New England Journal of Medicine found highercosts associated with physical therapy care under the Californiaworkers' compensation program when the services were provided inphysician-owned physical therapy offices. Physical therapy wasinitiated 2.3 times more often by physicians in self-referralgroups than by those in independent referral groups (68 percentversus 30 percent).

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Assigned Risk Pool Employers who lose workers' compensationcoverage should have options for new insurance through assignedrisk pools. One example of an assigned risk pool is California'sFAIR Plan (Fair Access to Insurance Requirements), which offersfire insurance to hard-to-insure homeowners in fire-hazard brushzones. Similarly, workers' comp insurers could share liability foremployers unable to obtain workers' insurance elsewhere.

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The remedy for our runaway workers' comp system? Createincentives for everyone involved — insurers, employers, patients,and providers — to do their parts to lower costs and improve thequality of care received by injured workers. The results will beincreased work-place productivity and a healthier businessenvironment for the entire country.

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Michael Weinper is president and founder of PTPN, a network ofprivate rehabilitation practitioners with headquarters inCalabasas, Calif.

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