Managed Care in Work Comp: Worth the Cost?

Monday, July 2, 2012 | 0

Medical cost containment expenses in California have doubled over six years. Yet medical expenses have continued to increase, led by facility and surgery expense, and WorkCompCentral reports the combined ratio hit 122 in 2011, a substantial jump from previous years. (sub req).

Are we wasting hundreds of millions on ineffective programs, or are these programs holding costs well below what they otherwise would be?

The answer isn't readily apparent and it isn't straightforward no surprise there. Let's reach into the cost-containment bucket and see what we are paying for.

Bill review accounts for about $90 million of the $384 million total (based in a cost of about $6 per bill). We will be publishing our second Survey of Bill Review next month; a preliminary review shows most respondents see a good deal of value in bill review although that value would beach higher if UR and BR were electronically and tightly connected.

Networks are a bit knottier. Most incur a percentage of savings fee; I've long held that this arrangement for generalist networks encourages higher utilization of medical services and can drive up costs. My best guess is network costs in the Golden State account for about $110 million in cost-containment expense, and that's too much by far for many networks that don't positively affect medical outcomes. (There's no question some smaller tighter networks can and do have a dramatic impact on outcomes, but they just aren't used enough.)

Case management can be very useful; if used correctly (Im seeing a pattern here...). Task-based field case management and well-coordinated telephonic CM can be very helpful indeed. Identifying problems, educating the employer about return-to-work and non-comp-savvy docs about comp, getting the claimant to the right providers and supporting the adjuster in assessing treatment are all necessary and cost-effective. But dumping cases on case managers, or allowing CM to run up lots of hours while doing not much more than documenting the downward spiral of a case happens far too often.

And let's not forget many (but by no means all) third-party administrators generate additional revenue and profit by employing CM whenever and wherever possible.

Utilization review has been around forever, yet it is still misunderstood and controversial. Appropriately employed, UR can help ensure the care that is delivered is the right care for the claimant in the right setting at the right time. Used indiscriminately, it can be a cost driver that infuriates physicians, delays necessary treatment, prolongs disability, and does little to improve outcomes.

I'll have much more to report on UR next month; we're closing our first Annual Survey of UR in Workers Comp Friday. To date we have over 150 participants; if you'd like to add your thoughts to the survey (and get a detailed copy of the report) click here.

The net?

Some payers are doing an excellent job managing medical and managing cost containment by focusing on outcomes. But most are not.

Paying more than $100 million for network access without clear and convincing proof that they are improving outcomes is not smart.

Using case management and UR indiscriminately across all providers in all cases is a waste of money and counter-productive.

More to come.

Joe Paduda is owner of Health Strategy Associates and co-owner of CompPharma, a consortium of pharmacy benefit managers. This column was reprinted with his permission from his Managed Care Matters blog.