Impairment Rating Screens Cost-Effective Claims Strategy

Saturday, June 30, 2007 | 0

By Dr. Christopher R. Brigham

An understanding of the effectiveness of impairment rating screening and the performance of selected reviews is gained by reviewing the experience of a California client who initiated a policy in 2007 where all AMA Guides impairment ratings (including 0% ratings) were reviewed. If the rating was 5% whole person permanent impairment (WPI) or less, only a screen was performed; if the rating was more than 20%, a detailed critique was provided. A detailed critique was also provided if there was a difference of more than 2% WPI between the original rating and the corrected rating. This program was initiated with recognition of the high error rate among rating physicians and difficulties by claims and legal staff in consistently identifying erroneous ratings.

Based on the review for this client of all ratings (including 0% WPI ratings), 57% of the reports were found to be incorrect, with the average original rating of all reports being 8% WPI and upon correction 5% WPI. Of the erroneous ratings, 89% were overrated. The nature of errors is that it is more likely to overrate then underrate. Each impairment rating was converted to a permanent disability rating per the California Permanent Disability Rating Schedule; the average dollar difference was $4,730 (reflecting net adjustments for both overrated and underrated reports) and the average cost of the review service was $412; this reflected an opportunity of an 11.4 return on investment. The fee for an Impairment Screen is a nominal $95 if the rating is determined to be correct and $195 if it is incorrect; these charges reflect a cost which is a small fraction of the dollar amount associated with a difference of 1% WPI. The fee for a detailed critique report is dependent on the time involved in performing the review and preparing the report. The reported experience was that the majority of the time physicians would correct their ratings based on our feedback or that this information was useful in negotiation or case resolution. Therefore, the review service was very cost-effective.

If the original rating is 3% WPI or less, it is highly probable that the rating is correct. 34% of the original ratings were 3% whole person permanent impairment or less; 95% of these ratings were correct (with the exception of a shoulder case rated at 0% WPI and re-rated at 5% WPI). Of the ratings more than 3% WPI, 82.5% were incorrect, with the average original rating 12% WPI and upon correction 5% WPI. After conversion to Permanent Disability this reflects an average dollar difference of $7330 and average cost of review of $574; this reflects an opportunity of a 12.8 return on investment. In terms of review fees, 40% of these were impairment screens ($95 if correct and $195 if incorrect) and 60% were detailed reports (averaging $855).

Therefore, assuming a similar profile of cases, per 100 cases it is probable that approximately 1/3 (34) of the cases will be less than 3% whole person permanent impairment and the vast majority of these ratings will be correct. Of the remaining 66 cases rated as 3% whole person permanent impairment or greater, it is projected 12 will be correct, 15 will be incorrect with a difference equal to or less than 3% whole person permanent impairment, and 39 will be incorrect with a difference greater than 3% whole person permanent impairment. The projected total cost per 100 cases, with only those cases of 3% whole person permanent impairment or greater is $37,315, and projected savings is $483,780 (based on the difference of $7330 for 66% of the cases); this reflects a potential return on investment of 13:1. Although the screening of reports with 3% WPI or less is less likely to identify errors, it does create a more valid database of impairment ratings for specific diagnoses and assists in profiling physicians. Therefore it is recommended that all ratings be reviewed. The increased cost of reviewing all ratings (assuming 95% of the cases of 3% WPI or less are correct) is an additional $3330 reflecting a total of $40,645 and a slight reduction in the immediate ROI to 11.9. It is our opinion that the value obtained in having an inclusive database of all ratings supports reviewing all ratings.

Routine expert review of all impairment ratings is highly recommended. The reviewers should have years of experience in the use of the Guides, clinical expertise, and resources to collect and analyze data. The goal is to assure accurate, unbiased ratings.

Brigham is the editor of the Guides Newsletter and Guides Casebook. To view more of these tips visit:

www.impairment.com/tips

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