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

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

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

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

In workers' compensation — as with other health care industries — outcomes can be defined as the net effect of medical interventions and processes. In workers' compensation, meaningful outcomes also include sustained return-to-work and total claim costs.

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

Rooted in Managed Care

In the early years of group health, managed care was an innovative, simple concept: Apply management principles to a previously unmanaged insurance scenario. Data analysis became the cornerstone, with waste and inefficiencies analyzed, cost reduction goals established, and incentives applied to modify consumer and provider behavior.

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

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

Cost and waste reduction were worthy goals, but group health managed care faltered in some areas. It neglected to engage the physician as a partner, focusing on numbers at the expense of qualitative issues.

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

Workers' Comp Is Different

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

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

Unlike group health, where cost controls involve only the care itself, 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 psychosocial factors must be managed. A provider's effectiveness is not measured solely on medical care, but also on the ability to reduce indemnity. Moreover, the behavioral controls in group health either aren't available or aren't effective in the occupational arena.

The nature of the claims is different, including the types of injuries, claim duration, requirement to assess causality, focus on rehabilitation, physician specialties, litigation risk, and benefit design.

Rich Environment for Measurement

Group health operates within time-limited episodes of care, and these 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 regulatory purposes, including date reported, date seen by the physician, days away from work or in transitional duty and re-injury litigation, and claim closure rates.

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

Trends in Data Analysis

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

Many states have mandatory UR and fee schedules with disappointing results. Why? UR services focus on a particular procedure or series of services and often lead to unnecessary delays in treatment. Fee schedules focus on unit costs alone and this often leads to over utilization. Neither strategy focuses on the total claim cost. Expeditious care that enables the soonest possible return to work may be more important to overall costs than a fee cap per visit.

Some large managed care firms are moving to more sophisticated use of analytics, such as analysis of geographic treatment patterns. However, even these analytics have limits.

One national carrier is profiling physicians using group health treatment records, theorizing that physicians who treat appropriately in group health will do so with injured workers. That belief reflects a lack of understanding of workers' compensation, its financial motivators, the importance of indemnity and disability duration, and the premium placed on communication between the physician, adjuster, injured worker, employer, and case manager.

Back injuries illustrate the point. In group health a back injury is typically treated conservatively. The patient is advised to go home, rest, use over-the-counter pain medications and perhaps a muscle relaxant. In workers' compensation, while patients are “resting,” indemnity costs are increasing along with the chance of litigation and the chance the injured workers will not return to their original jobs.

Evidence-based Medicine

While efforts by group health at workers' compensation performance measurements are commendable, they lack attention to one of the more promising areas of analytics: the use of evidence-based medicine.

Despite the media attention to this concept, many experts would agree that very little of the medical care delivered today is solidly rooted in evidence.

Among the more common strategies in the evidence based-medicine trend is the use of decision-support tools, such as disability duration and clinical practice guidelines. These reference tools offer benchmarks for specific medical conditions, but experts caution they have limitations. They don't address ways to determine functional abilities and limitations that foster or hinder returning to work. Another prominent decision-support tool is physician profiling, a discipline that documents and compares practice patterns to establish baselines and benchmarks.

Physicians Are Key

Workers' compensation system participants can learn from group health experiences and improve on them, but must also understand the differences. Most important is recognizing that physicians are key in determining a successful outcome for the injured worker and the employer.

Behavior change should focus on employers and physicians working together to create a recovery path for the injured worker, while aligning incentives that achieve positive outcomes: quality, expeditious care, return to work, and loss reduction. This involves: identifying physicians who produce the best results and do the right things in the context of occupational medicine; identifying and analyzing “best practices” as determined by physicians with the best results; and conducting ongoing analyses to develop deeper understanding of workers' compensation medical practices that lead to improved result.

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

Thomas F. Barrett may be contacted at 813-282-9801 or tfbarrett@choicemedmgt.com.

Special Reports /

Evaluating Effective Networks: Improving Results Using Analytics

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