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

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

Legislatures across the nation are passing or formulating reforms of their states' workers' comp regulations. Too often, however, these reforms do not address the real issues. Most reforms, even those that establish medical fee schedules that cap some reimbursements to providers and limit the number of visits to chiropractors and physical therapists, do not go far enough to fix the system. The private sector also must offer strategies for solving the crisis. Insurance companies and self-insured employers must change the way that medical care is delivered and make health-care providers more accountable in order to lower costs and improve the quality of care that workers receive.

Changes that will go farthest to bring relief include:

New Standards of Utilization There must be controls for over-utilization of services. Even if reimbursement is capped and the number of visits limited, some providers will schedule more visits than are needed to treat a patient in order to drive up revenues, especially if they feel that reimbursement rates are too low. In California, for example, a new workers' compensation law gives physical therapists 24 visits without any scrutiny, although many cases require only half that amount.

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

Provider Incentives Provider incentives must be aligned with those of workers' compensation insurers. Insurance companies often ask for provider discounts, but offer no incentives in return. Insurers must meet their contractual obligations to employers by directing care of injured workers to preferred providers with expertise in treating workers' compensation injuries. If insurers use pay-for-performance programs, in which providers are paid a flat fee per case up-front, providers are motivated to get their patients back to work quickly and safely.

Patient Satisfaction Quality of care includes the treatment process, as well as its results. Insurers must focus more on patient satisfaction. Do patients have to wait several days to get appointments? Is enough time spent with injured workers to educate them on the mechanisms of injury and how to avoid such risks in the future? Satisfied patients who feel that providers are interested in their well being, and who are educated properly about the nature of their injuries and how to avoid getting re-injured, will be less likely to initiate litigation.

Management of Care Managed care patients in HMOs and PPOs heal more quickly than workers' compensation patients with the same diagnoses. Rather than placing limits on treatment for workers' comp injuries, there should be more controls that use managed care techniques, such as a network of preferred providers, negotiated fee arrangements with participating providers, case management, and utilization review. Currently, most employers do not regulate which medical providers their injured workers visit, and they do not know whether the providers are geared toward treating injured workers. By directing care promptly to providers experienced in treating workers' comp injuries, when state law allows, employers can better control costs and also protect themselves against those workers who have potentially fraudulent claims.

Elimination of Conflicts of Interest Payors can lower costs by using providers with no conflicts in ownership that can drive up utilization and reduce the quality of care. Physician ownership of physical therapy offices, as opposed to physical therapist-owned offices, tends to drive up costs through over-utilization. In physician-owned physical therapy facilities, visits per patient were 39 percent to 45 percent higher, and both gross and net revenue per patient were 30 percent to 40 percent higher, according to a study in the Journal of the American Medical Association.

A study in the New England Journal of Medicine found higher costs associated with physical therapy care under the California workers' compensation program when the services were provided in physician-owned physical therapy offices. Physical therapy was initiated 2.3 times more often by physicians in self-referral groups than by those in independent referral groups (68 percent versus 30 percent).

Assigned Risk Pool Employers who lose workers' compensation coverage should have options for new insurance through assigned risk pools. One example of an assigned risk pool is California's FAIR Plan (Fair Access to Insurance Requirements), which offers fire insurance to hard-to-insure homeowners in fire-hazard brush zones. Similarly, workers' comp insurers could share liability for employers unable to obtain workers' insurance elsewhere.

The remedy for our runaway workers' comp system? Create incentives for everyone involved — insurers, employers, patients, and providers — to do their parts to lower costs and improve the quality of care received by injured workers. The results will be increased work-place productivity and a healthier business environment for the entire country.

Michael Weinper is president and founder of PTPN, a network of private rehabilitation practitioners with headquarters in Calabasas, Calif.

Special Reports /

Proposals for Workers' Comp Reform

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