In claims management conversations -- from the water cooler to the executive suite -- one questions comes up again and again: "How will the recession affect workers' compensation claims?" With so many employers struggling to keep their companies afloat, this critical issue must be scrutinized from every possible angle.

The jury is still out on whether the recession, and accompanying workforce layoffs in particular, will result in an increase in workers' compensation claims. Historically, the numbers and cost have spiked during economic downturns. But as the American workforce has shifted from blue- to white-collar jobs with less exposure to physical trauma, an increase in layoffs may not signal an increase in claims. On the other hand, the current recession is the longest in almost two decades, and unemployment reached a 25-year high in March 2009, so the full impact remains to be seen.

Regardless of whether workers' compensation claims numbers go up or not, cost-cutting measures are the order of the day in all areas of operation. Claims management is no exception, and in fact, in tough times, the challenges become even greater. Why? Controlling cost has always been at the very top of the claims management "must-do" list. Many would go so far as to say that wringing any more cost savings out of claims management is like squeezing blood from the proverbial turnip. There's nothing there to squeeze.

Most likely, squeezing isn't the right answer. The imperative today is to execute every phase of claims management with the greatest precision possible and at every step of the way: before a claim occurs, during the claim management process, and after it has been resolved. This is, of course a shared responsibility involving the employer, the claims manager, and even the employee at a certain level. Within each of these three phases -- pre-claim, processing, and post-claim -- and for each of the groups involved, there are specific areas where re-examining current processes and procedures, identifying and correcting inefficiencies or bad habits, and adhering to best practices will help deliver optimal outcomes. Realizing the potential will require collaboration and cooperation throughout the claims management cycle.

To that end, here are nine areas that offer practical potential for improving claims management efficiency and cost savings.

1. Set realistic employee expectations.

Employers should not hesitate to discuss workers' compensation with their employees. The more informed employees are about how the system really works, the more efficiently and appropriately they can participate if the time comes. It's all about setting realistic expectations.

This means not only informing employees about how to report a claim, but also what they can and cannot expect from the workers' compensation system in their jurisdiction. Employees need to know that if they sustain an injury or illness related to their work that they are entitled to certain specified medical and disability benefits. They should also understand that workers' compensation is not a system of unlimited largess, and that the ideal outcome is their return to health and to work as early as possible.

A time-tested technique for communicating about workers' compensation is a brief "payday meeting." Held periodically, even a five-minute session can provide relevant, actionable information not only about how to deal with illnesses or injuries, but also how to prevent and avoid them in the first place. Resources for such information abound, and the return on the negligible investment in education can be significant.

2. Provide explicit guidance for those seeking care.

A key element in setting expectations is making sure that employees seek appropriate care in both emergency and non-emergency situations. If employees have specific guidelines on what kind of care to seek and from whom, they are much more likely to make good decisions. Without adequate training or information up front, especially in an emergency, employees may panic and do all the wrong things, from seeking inappropriate care to consulting a lawyer.

The employer's ability to provide highly specific guidance may be determined by the jurisdiction in which it operates. Nonetheless, the more guidance provided the better, including having a pre-defined medical group to treat injured workers, advising injured employees to seek treatment there, and assuring them that the provider will bill the employer, not the worker. By setting expectations before injuries occur, all involved will know what to do and the fear of the unknown will be removed.

3. Leverage technology for maximum efficiency.

Maximizing the efficiency and effectiveness of claims management processes requires up-to-date, well-integrated information systems and technology. Make sure that efficiency drivers -- data capture, flagging systems, and automatic adjudication rules for example -- are "cooked into" claims management systems at every step. In a bad economy when price competition is likely to increase and margins are razor thin, the less efficient claims management companies may not survive.

4. Focus on timely reporting.

Immediate reporting of an incident is the cardinal rule of efficient claims management, and its importance has never been greater. The faster a claim is reported, the sooner an investigation can be launched and a decision made regarding acceptance or controversion of the case.

Technology comes into play here, too. Reporting claims by phone or fax is certainly acceptable, but the preferred method -- from the claims perspective -- is to have the completed First Report of Injury or ACORD form submitted electronically through the Internet. Making the entire process easy to accomplish online helps ensure that complete, relevant information can be reported immediately, routed to the appropriate claims office and adjuster, and teed up on the claims management system for the next steps in the process.

5. Investigate early and thoroughly.

The timing of claims reporting is extremely important, as is the quality of the information provided. The quantity and accuracy of information has a significant impact on expediting and enhancing the quality of the subsequent investigation and follow up. Even as they are submitting the first report of injury via the Internet, forward thinking companies are also conducting elemental investigations in the incident. Is the injury consistent with the job function of the claimant? Are there witnesses? Is there anything unusual about how the injury occurred?

The more and better detailed the information from the outset, the more efficient adjustors can be in moving the claim forward. They can ask more specific and relevant questions when interviewing claimants and be more thorough in verifying it with the employer and witnesses. The sooner all the criteria -- injury, circumstances, witnesses -- have been satisfied, the sooner the adjustor can contact the provider to determine diagnosis, treatment, and estimated loss of time and set up the reserve.

6. Maximize the use of evidence-based medicine.

Medical costs now account for more than half of the total cost of workers' compensation costs. In many respects the workers' compensation system is based on the quantity of services provided, which can lead to over-treatment. Making sure the claimant is receiving the appropriate level and type of care in the appropriate environment is critical to optimizing efficiency and cost effectiveness.

Doing this can be challenging, but it will be more effective with evidence-based medicine, which uses scientific data to help providers determine how to best treat a patient for a particular set of condition. For claims managers, evidence-based medicines provides clear step-by-step therapeutic guidelines to help determine whether or not a particular treatment plan is both appropriate and cost effective to the employee's condition. It can be a very useful tool in ensuring that quality and not quantity is the chief determinant of care.

7. Be aware of opportunities and challenges with care providers.

As unemployment rises -- it's now double-digit in many areas -- the demand for healthcare services will most likely decline, and medical providers will be competing for fewer dollars. That may translate into opportunities for more favorable cost or service concessions from professionals and institutional providers.

At the same time, the shrinking pool of dollars may prompt care providers to become more aggressive in billing and treatment patterns to make up for diminishing revenue. Effective utilization review could become the defining factor in cost effective medical management.

With more attention paid to reimbursement, claims managers must continue to adhere to the highest standards and best practices in adjudicating claims. Anything that might contribute to decreased operational efficiency, such as an increase in challenges to claims decisions, should be avoided whenever possible.

8. Emphasize return to work and follow up.

Prompt return to work is one of the most effective ways to reduce the costs of workers' compensation claims and to avoid "open-ended" disability. When possible, employers should have options for modified duty or transitional employment already identified and readily available if needed. Any type of activity that will get the employee back into gainful employment is a positive step. The longer people remain away from work, the more likely that "disability syndrome" will set in.

In addition, as unemployment rates climbs, expect regulators to manifest more vocational oriented programs that focus on re-training or developing new job skills. Claims organization should ensure they have the right trade partners and internal programs to provide compliance and success.

9. Close claims as quickly as possible.

Statistics consistently prove that companies that close claims faster generally achieve better outcomes and enjoy greater cost savings. The ideal goal of claims closure is an appropriate, satisfactory conclusion for all parties. This may include full return to work, modified duty with ongoing medical costs, or a settlement. Ideally, claims are managed to avoid legal involvement, but that doesn't mean avoiding it at all costs. Sometimes it is the only reasonable avenue of resolution. But given that a compensable injury has happened, the aim is to restore the individual, make any legally required settlement, and close the case. As a rule of thumb, play fair and others will do the same.

Put it all together.

The pressures for managing claims with great efficiency and cost effectiveness will remain extremely high for the foreseeable future. The most reliable tools in times of uncertainty are constant vigilance, continuous improvement, and adherence to best practices at every critical juncture of claims management. None of the measures outlined in the article can guarantee success on its own. Applied in a concerted, coordinated effort, however, they can help ensure greater stability for the present and lower claims management costs for the future.

Lori Daugherty is president and CEO of Avizent in Columbus, Ohio. Company information is available at www.avizentrisk.com or 888-646-9675.

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Nine Practical Ways to Manage Claims Costs

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