A recent study by the National Council on Compensation Insurance, Inc. (NCCI), made a startling claim: increases in workers’ compensation medical claims severity have been outpacing the rise of medical inflation. During the five-year study period, general medical inflation grew by 21 percent, while workers’ comp medical severity rose by 73 percent — more than triple the amount of general medical inflation.

Physical medicine was an integral component of this increase. The 2007 research brief “Measuring the Factors Driving Medical Severity: Price, Utilization, Mix” identified physical therapy services as a key cost driver, accounting for 24 percent of the 73 percent figure.

Why is this happening?

The answer is that physical medicine costs (physical therapy, occupational therapy, and chiropractic care) are driven by utilization — the number of services provided over the life of the claim — and not the price per service. This is further evidenced by NCCI’s finding that physical medicine utilization rose by 67 percent while the price per service increased by only 19 percent.

The magnitude of physical therapy services in the workers’ compensation industry cannot be ignored. Data from the Workers’ Compensation Research Institute (WCRI) shows that physical medicine accounts for 20-to-30 percent of the total workers’ comp medical dollar.

Given these statistics, it is more critical than ever that insurers, third party administrators (TPAs), state funds, and employers look for specialty managed care programs that effectively control the utilization of all physical medicine services.

Here are some recommendations to consider:

Look for a managed care program that specializes in physical medicine (physical therapy, occupational therapy, and chiropractic care) as well as workers’ compensation. Physical medicine management strategies for workers’ compensation differ from group health. Workers’ comp places emphasis on restoring functionality quickly and keeping employees at the worksite or returning them to work as soon as medically appropriate. Treatment may be more frequent in the beginning and finish more quickly. A partner with clinical expertise in physical medicine and in-depth knowledge of workers’ compensation can ensure that treatment plans are appropriate.

Look for a specialty managed care program that controls the number of services per day and over the life of the claim (utilization). While it is important to control the number of services and costs on a per-visit basis, it is also critical to manage the entire episode of treatment with contractual payment maximums by diagnostic category.

Look for a comprehensive program that manages both in-network and out-of-network services, regardless of direction. In a perfect world, payers could direct their injured employees to an elite network of physical medicine providers who would deliver best-practice workers’ comp treatment. In the real world, payers should be able to select a strategy that incorporates a multi-tiered set of services — directed, undirected, in-network, and out-of-network — for the best medical outcomes.

Make sure your specialty managed care program has workers’ compensation expertise both in the areas of clinical treatment recommendations as well as state regulatory requirements. A clinical approach based on expert-based best practices in physical medicine for workers’ compensation will deliver the best outcomes, both medical and financial. The program should be built on data-driven, expert-based, outcomes validated and literature-supported guidelines that can hold up to both regulatory and provider scrutiny.

Make sure your specialty managed care program has the technological expertise to implement the program successfully. Effective programs rely on sophisticated, rules-based technology to integrate all these elements. The system must be able to continuously capture and aggregate data, analyze outcomes, and validate expert consensus. Supporting utilization-driven reimbursement methodologies, streamlining certification processes, and instantly disseminating current research and protocols to treating clinicians can only be accomplished through well designed and robust technology.

Make sure your specialty managed care program regularly evaluates guidelines for continuous improvement. Like other areas of medicine, physical medicine continues to evolve. The partner should continually mine professional literature to identify trends and evaluate, validate, and if necessary, adjust its best-practice protocols. Payers and their partners work best when they establish operational processes that enable data capture and periodic evaluation. Even ideal strategies lose their effectiveness if they aren’t updated and kept current over time.

Make sure your specialty managed care program is URAC accredited for Workers’ Comp Utilization Management and HIPAA Privacy and Security. In today’s environment of mergers, acquisitions, and new-company start-ups, it is increasingly important that your managed care partners demonstrate their commitments to consumer protection, quality operations, and regulatory compliance. URAC accreditation is a symbol of quality in the health-care industry that identifies best practices and promotes performance measurement against expert national standards.

Physical medicine takes such a large slice of the comp medical pie that it is well worth implementing a specialized program to address this specialized area. Lower costs and better medical outcomes translate into improved employer results and competitive advantages for payers.

Shelley L. Boyce is founder and chief executive officer of MedRisk, Inc., a provider of specialty managed care services and automated, expert-based claims management tools for the workers’ compensation industry. She may be reached at 800-225-9675, www.medrisknet.com.