With workers' compensation medical costs continuing to consume ahuge portion of the benefit dollar — a recent high of 57 percent —buyers are more motivated than ever to put the right cost controlsin place.

An effective medical network is the most powerful tool to reducelosses, but how is network effectiveness determined?

Evaluating a network's effectiveness means looking beyond deepdiscounts, an approach that turns provider services into acommodity, misaligning incentives, and diminishing returns.

Networks focusing on discounts alone overlook the volume andtypes of services delivered when focusing less on price and more onchoosing medical partners that yield the best outcomes offer thetrue cost savings.

In workers' compensation — as with other health care industries— outcomes can be defined as the net effect of medicalinterventions and processes. In workers' compensation, meaningfuloutcomes also include sustained return-to-work and total claimcosts.

Therefore, determining a network's effectiveness requiresanalysis and measurement from a performance (or outcomes) and aqualitative basis. This helps buyers verify one network'sperformance over another, especially if the network doctors'performance is considered.

Rooted in Managed Care

In the early years of group health, managed care was aninnovative, simple concept: Apply management principles to apreviously unmanaged insurance scenario. Data analysis became thecornerstone, with waste and inefficiencies analyzed, cost reductiongoals established, and incentives applied to modify consumer andprovider behavior.

To reduce expensive and inappropriate care, co-pays andgatekeeper models were established to change consumer behavior.

Physician behavior was “managed” by focusing on financialincentives, volume contracts, risk sharing, and capitation;decisions were scrutinized by utilization review (UR). Physicianswere forced to participate to protect market share, but unhappyabout interference in patient relationships.

Cost and waste reduction were worthy goals, but group healthmanaged care faltered in some areas. It neglected to engage thephysician as a partner, focusing on numbers at the expense ofqualitative issues.

While managed care wobbled, it did not collapse and itfundamentally changed the way medicine is delivered andconsumed.

Workers' Comp Is Different

In the late 1980s and early 1990s, managed care migrated to theoccupational arena. Predictably, many networks emulated the grouphealth but failed to recognize the difference in the group andworkers' compensation environment.

By comparison, workers' compensation represents a smaller pieceof all medical expenses (two percent), and it has differentregulatory requirements. There is little ability to motivatepatient behavior through benefit design, co-pays, or deductibles.Physician choice is a right that varies by state, and more partiesare involved — the patient, the employer, the insurer or TPA, andfrequently an attorney.

Unlike group health, where cost controls involve only the careitself, separate occurrences of hospitalization, diagnostic tests,and the like, workers' compensation involves a continuum of care,so cost controls impact the total claim.

To achieve a successful return to work, an array of psychosocialfactors must be managed. A provider's effectiveness is not measuredsolely on medical care, but also on the ability to reduceindemnity. Moreover, the behavioral controls in group health eitheraren't available or aren't effective in the occupational arena.

The nature of the claims is different, including the types ofinjuries, claim duration, requirement to assess causality, focus onrehabilitation, physician specialties, litigation risk, and benefitdesign.

Rich Environment for Measurement

Group health operates within time-limited episodes of care, andthese units of care are the basis for analytics. In workers'compensation, the duration of care spans the life of the claim,offering a rich environment for data analysis:

There is an endpoint in return-to-work and claim closure.

There is plenty of data, much of it required for regulatorypurposes, including date reported, date seen by the physician, daysaway from work or in transitional duty and re-injury litigation,and claim closure rates.

There is generally a narrower range and frequency of medicalconditions to treat and measure, like sprains, falls, lacerations,and repetitive trauma. There are many intervention points, and bestpractices can minimize the time between these points.

Trends in Data Analysis

While workers' compensation offers a rich environment formeasurement, it is in its infancy of data analytics and is stilltaking cues from the larger health-care market.

Many states have mandatory UR and fee schedules withdisappointing results. Why? UR services focus on a particularprocedure or series of services and often lead to unnecessarydelays in treatment. Fee schedules focus on unit costs alone andthis often leads to over utilization. Neither strategy focuses onthe total claim cost. Expeditious care that enables the soonestpossible return to work may be more important to overall costs thana fee cap per visit.

Some large managed care firms are moving to more sophisticateduse of analytics, such as analysis of geographic treatmentpatterns. However, even these analytics have limits.

One national carrier is profiling physicians using group healthtreatment records, theorizing that physicians who treatappropriately in group health will do so with injured workers. Thatbelief reflects a lack of understanding of workers' compensation,its financial motivators, the importance of indemnity anddisability duration, and the premium placed on communicationbetween the physician, adjuster, injured worker, employer, and casemanager.

Back injuries illustrate the point. In group health a backinjury is typically treated conservatively. The patient is advisedto go home, rest, use over-the-counter pain medications and perhapsa muscle relaxant. In workers' compensation, while patients are“resting,” indemnity costs are increasing along with the chance oflitigation and the chance the injured workers will not return totheir original jobs.

Evidence-based Medicine

While efforts by group health at workers' compensationperformance measurements are commendable, they lack attention toone of the more promising areas of analytics: the use ofevidence-based medicine.

Despite the media attention to this concept, many experts wouldagree that very little of the medical care delivered today issolidly rooted in evidence.

Among the more common strategies in the evidence based-medicinetrend is the use of decision-support tools, such as disabilityduration and clinical practice guidelines. These reference toolsoffer benchmarks for specific medical conditions, but expertscaution they have limitations. They don't address ways to determinefunctional abilities and limitations that foster or hinderreturning to work. Another prominent decision-support tool isphysician profiling, a discipline that documents and comparespractice patterns to establish baselines and benchmarks.

Physicians Are Key

Workers' compensation system participants can learn from grouphealth experiences and improve on them, but must also understandthe differences. Most important is recognizing that physicians arekey in determining a successful outcome for the injured worker andthe employer.

Behavior change should focus on employers and physicians workingtogether to create a recovery path for the injured worker, whilealigning incentives that achieve positive outcomes: quality,expeditious care, return to work, and loss reduction. Thisinvolves: identifying physicians who produce the best results anddo the right things in the context of occupational medicine;identifying and analyzing “best practices” as determined byphysicians with the best results; and conducting ongoing analysesto develop deeper understanding of workers' compensation medicalpractices that lead to improved result.

There should also be a quality assurance component. For thepatient, this includes whether the doctor practices safe medicine,delivers excellent care and has good patient skills. For theemployer, it involves seeing the doctor as a collaborative partnersensitive to the value of time related to claim costs.

Thomas F. Barrett may be contacted at 813-282-9801 [email protected].