1 Managing Outcomes in Workers Compensation: From Hands Off to Managed Care to Injury Management Insurance International Spring 2004 By Maddy Bowling Director of Managed Care Sedgwick Claims Management Services, Inc. Summary: Employer involvement in post-injury management of workers compensation cases in the United States has evolved through three stages: 1. An early posture of regulatory compliance with only limited post-injury involvement 2. An emphasis beginning in the 1980 s on medical cost containment and sufficiency of treatment through managed care 3. An emerging focus on return-to-work (RTW) through more comprehensive injury management strategies This latter stage offers promising possibilities for reducing costs and improving outcomes of workplace injuries for both employers and employees by using qualified occupational medicine specialists, emphasizing RTW programs and making effective use of information technology. Workers compensation and managed care are sometimes regarded as the odd couple of risk management for U.S. employers. Can managed care really operate as an integral component of a workers compensation program? Is managed care the answer to skyrocketing costs in the workers compensation line? Is there an approach beyond managed care that might provide more comprehensive and valuable business solutions? Exploring the original intent of both workers compensation and managed care might be a helpful place to begin in answering these questions. The states of the United States adopted workers compensation systems in the 1880s as a means of assuring that injured workers would receive medical care and replacement income while disabled. Employers are responsible for financing the benefits. Most do so through an insurance policy, although larger employers may also use a variety of selffunding strategies and manage claims themselves with the help of internal staff or third party service providers. General categories of workers compensation entitlement are defined by law. Throughout most of the history of workers compensation, employers have approached the system principally as a defined financial obligation. Beyond writing checks for medical services and indemnity benefits (replacement income), most employers limited
2 their post-injury involvement to disability certification and fraud prevention activities. Some offered alternative employment for workers unable to resume their previous occupations, but there was little expectation of creative involvement in the management of care or the facilitation of rehabilitation. Employers did their duty, sometimes grudgingly, but their understanding of duty was generally literal and legalistic. Relationships between program administrators and beneficiaries were often more adversarial than collaborative. Managed Care: An Imperfect Solution. Managed care, on the other hand, developed in the 1980s as the non-occupational healthcare insurance industry s panacea for rapidly rising medical expenses. With employers facing the same cost pressures in their workers compensation programs, WC insurers and administrators quickly adopted the same strategies. Little was done initially to customize managed care techniques to the different needs of occupational medicine. Ever since, administrators have been tweaking managed care methodologies to achieve a better fit for workers compensation programs. Yet average medical costs and the average duration and cost of disability cases continue to escalate. (See charts of indemnity and medical cost trends from the National Council on Compensation Insurance State of the Line Report for 2002.) CHARTS Time for a Paradigm Shift. Is there a useful role in workers compensation for managed care? We have been trying to retrofit managed care into the workers compensation model for years with little success. It is time, I believe, for a paradigm shift. We must first agree that managed care is composed of three principal components: 1. Utilization management, which is the management of the necessity and appropriateness of care 2. Fee management, the management of the cost of the care 3. Disability management, the management of the duration of the disability Group health or non-occupational applications of managed care focus almost exclusively on the first two components, whereas in workers compensation, the ultimate goal is really the third component, minimization of the duration of the disability and the return of the injured employee to the workplace. Often the achievement of the third component involves a different approach to the first two components; i.e. aggressive diagnostics and treatment, while more costly in the short run, may reduce the duration of disability. In other words, controlling the utilization and cost of care (or better said, managing care) may not be our primary objective if we believe that more expensive care drives a better RTW result. Given this difference in focus, it appears that the term managed care is really a misnomer as it applies to workers compensation. In the best case we are not just managing medical care, we are managing the consequences of an injury, both medical
3 and functional. We might communicate a better understanding of the preferred outcome by calling what we do in workers compensation injury management. Once we agree on terminology that better expresses our intent, we should ask ourselves if we have actually built the tools necessary to ensure that injured employees receive the most cost effective medical care possible to affect the earliest possible safe and sustainable RTW. This is, after all, what it will take to get both medical costs and indemnity costs back in line. What Is Needed? There is strong opinion among injury management professionals that the quality of the treating provider makes a significant difference in both the recovery of the injured worker and the total cost of the claim. This conviction is based on the view that the right provider will deliver the right treatment at the right time, resulting in a faster recovery for the injured worker and fewer, if any, lost work days. The right provider may be defined as one with the following: Experience in occupational health or sports medicine and disability management The skills and abilities to treat injuries aggressively and involve the employee and employer throughout the process The know-how to evaluate and communicate physical capacities and restrictions to the designers of transitional work assignments Managed care providers initially utilized group health-oriented preferred provider organizations (PPOs) in workers compensation programs. PPOs are typically large broad-based networks of medical providers who agree to accept discounted payment schedules for their services. General health PPOs have produced, at best, mixed results in containing loss costs. They produce a good feeling because of their discount feature, but documentation of actual savings in medical and indemnity costs has not been forthcoming. By comparison, a mid-sized employer using an occupational health program reports the following excellent results after converting to the use of qualified occupational health specialists : Reduction in medical expenses of 29 percent 14 percent fewer lost time claims Reduction in indemnity costs of 49 percent Average medical case closure of 14 days Channeling injured workers to specialized providers possessing the right skills and a focus on returning employees to work as expeditiously as possible is vital in progressing from traditional managed care to true injury management. Having the right care providers is not the complete solution, however. Even the most highly qualified occupational medicine specialists can successfully or expeditiously
4 return an injured employee to work if no appropriate job is available. In the Gallup Survey of Injured Workers, commissioned by managed care services provider Intracorp in 2001, only 40 percent of workers surveyed reported that their employer offered some type of special return-to-work program. Given the increasing severity of indemnity claims, is 40 percent an acceptable result? The data in support of the effectiveness of structured RTW programs is convincing: We ve found that workers who return to work faster - even in a job that is different from the one they usually do - tend to recover more quickly and more fully than those that stay at home to recover. Workers often feel isolated at home and typically the longer they remain out of the workplace, the harder it is for them to return at all. (Insurance Journal, August 2002.) A recent study of 220 Michigan employers by the W.E. Upjohn Institute for Employment Research demonstrated a direct relationship between proactive RTW programs and reduction in lost workdays. In this study, a 10 percent increase in RTW programming resulted in a reduction of 7.3 percent in lost workdays. (Anne Engleman, Injury Management: Beyond Rehabilitation Coordination, 1999.) The Washington Business Group on Health (WBGH) reports that organizations can expect to save $3-10 for every dollar invested in RTW strategy. (Engleman, Injury Management.) Moving the needle for the availability of structured RTW and transitional duty programs from 40 percent to anything approaching 100 percent, or even 60 percent, would have a major favorable impact on rising claims costs. Progressive RTW strategies are an important part of effective injury management. What else can help? Insurance & Technology reported in January 2002 on an industry study demonstrating that more than 40 percent of the time spent in the claim handling process is associated with routine overhead functions that have little or no impact on the outcome of the claim. Should we not relieve claims professionals of such nonproductive activity so that they can focus on the right things like helping injured workers find qualified providers and assisting employers with RTW efforts? In our everyday world, technology has improved almost every aspect of our lives. The world of workers compensation, however, has been slow to leverage technology in support of reduced loss costs. There are clearly additional advantages to be realized through more effective use of technology-based information systems. Consider the advantages to claims handlers and other injury management professionals of having online access to: All claims-related documents such as reports, letters, s, pictures and videos Daily dashboard-like reporting Best practice alerts and expert advice Web-based links to information resources Immediate trend and predictive reporting tools Electronic communication with all stakeholders for instant communication of:
5 o o o Referral and scheduling of same-day appointments Sharing of regular and transitional duty job descriptions at the time of provider referral Same-day receipt of RTW releases, details on physical capabilities and approvals of transitional work assignments In these and other ways technology can enhance the efficiency and velocity of the RTW process. The optimal injury management toolbox must also contain the technology tools necessary to improve our data: its capture, storage, protection and most importantly analysis. Over the years, there has been little change in the way many claims administrators collect, utilize or analyze data. The new HIPAA regulations and other patient privacy legislation have forced our industry to become more savvy regarding the collection, storage and protection of data. The greatest opportunities for improving outcomes lie in data analysis, which is critical to understanding causality in workers compensation programs. Risk managers must be able to turn data into intelligence that helps them: Make more informed and consistent decisions Predict outcomes Detect problem areas Create knowledge models and solutions to problems Track progress and generate continuous renewal of information For example, data collected over the years on case outcomes can be put to work to identify effective providers. Reliable predictive models can be used to identify interventions that have worked in similar cases. Case histories can be used to identify aberrant treatment patterns and institute changes where appropriate, isolate problem jurisdictions, profile specific injury problems and forecast loss trends. Such analysis empowers risk managers and claims specialists to plan intelligently and to allocate their time to the cases and situations that offer the greatest potential for meaningful intervention. Accepting the Challenge. Injury management works, but it must be worked. The challenge now facing everyone involved in the selection, design and delivery of workers compensation programs is to act with discipline and consistency on what we know to be an effective strategy.
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