Cost management in workers' comp claims
Aug 16, 2016 | By Chris Daniel, Ajoy Kumar Palanivelu
The use of data and standards can help insurers reign in rising costs. (Photo: iStock) The squeeze on workers’ compensation costs has been dramatic, with medical benefits on lost-time claims tripling since 2003, according to the National Council on Compensation Insurance (NCCI), a U.S. rating and data collection bureau.
Informed claims management can help ease the pressure. The use of data access and standards provides structure that enables payors to better manage costs while delivering improved service to injured workers and their employers.
With informed claims management, payors such as carriers, TPAs or self-insured companies, can tap into pooled information and databases that are widely available and easily shared. They also gain newfound access to data such as processed medical bills that many have gathered but had limited opportunities to use.
The advances are long overdue. Unlike group health claims processing, which has always had policy definitions and benefit caps, workers’ comp has historically had few limitations. There has been little structure for treatment requests and care authorizations. Even worse, payors have had few systems for measuring how an injured worker's treatment is progressing against norms.
Aggressive pricing strategies and network optimization have helped drive down medical costs per unit of service, but without a system of checks and balances, medical benefits on lost time per claim have risen from $18,400 in 2003 to $28,500 in 2015, according to the NCCI.
Four approaches to contain claims costs
The use of data and standards helps create the checks and balances payors need to provide quality service while containing costs. Here are four strategies to assist companies in reaching that goal:
Following established treatment guidelines can help expedite cases and reduce costs. (Photo: Shutterstock)
1. Adopt evidence-based medical guidelines.
Adhering to treatment guidelines significantly lowers stakeholders’ costs and closes cases faster, according to new research from Johns Hopkins University and Accident Fund Holdings.
The researchers measured adherence to the Official Disability Guidelines (ODG) from the Work Loss Data Institute and compared the outcomes for different case mix adjusted claims populations. Claims that had at least a 50 percent adherence to the guidelines had 13.2 percent shorter durations and 37.9 percent lower medical costs.
With its empiric support for the use of evidence-based guidelines, the research will likely fuel their continued adoption, a trend already well underway as more state regulatory bodies embrace their own guidelines or those from ODG and the American College of Occupational and Environment Medicine (ACOEM).
There is a good reason why guidelines are gaining traction. When they are integrated into payors’ workflows, claims handlers can more quickly determine the most effective treatment for something like back injuries, or the optimal number of physical therapy appointments required for recovery from a torn rotator cuff. Still, many payors lack processes for applying the guidelines. As a result, they’re able to make only sporadic use of them.
What's the best approach for adopting evidence-based guidelines? Payors’ first steps are to examine how to interface with the guidelines and then build data feeds that incorporate them organically into their processes. How can payors make the information they contain more actionable? Establishing the answers will help lead to the lower costs and quicker case closings that researchers are documenting.
Technology can automate reviews of claims and medical records to verify services and flag any questionable claims. (Photo: Shutterstock)
2. Implement medical necessity reviews (MNRs) for all claims.
Sounds impossible, we know. After all, MNRs have traditionally been used in mandatory utilization review states, on defined sets of procedures or at the claim handler's discretion. But data-driven, evidence-based guidelines make wider use of MNRs financially feasible.
MNRs are an important tool so payors can stop claims leakage, or the difference between the amount paid and the amount that would have been paid had best practices been applied. Leakage occurs in surprising places. It can be greater for routine injuries than the high-value cases typically flagged for MNR.
Digital technology helps payors apply medical expertise to claims in affordable ways that enable its broader use. For instance, payors may create OCR-based solutions that review medical records for treatment outliers and identify co-morbid and pre-existing conditions such as smoking and hypertension, which impact claims outcomes. Medical bill data can be used to identify services that are unrelated to a claim's approved injury or that exceed the guidelines. Instead of relying on adjusters to pore over stacks of documents, digital systems can handle it.
The result for payors is identification of candidates for early intervention and better allocation of resources to mitigate claim severity.
Utilizing the expertise of nurses and other professionals can help identify some issues earlier while managing costs effectively. (Photo: Shutterstock)
3. Rethink your approach to medical expertise.
Although it seems counter-intuitive at first, incorporating more medical expertise can limit medical costs without increasing claims allocated loss adjustment expenses.
For example, nursing expertise adds valuable clinical insight into cases, but traditional approaches to it can be expensive. In our work with payors, we found fewer than 20 percent of indemnity cases utilize nurse case management services. Payors typically reserve it for the small percentage of cases that require mandatory utilization review or involve complex care.
Yet the remaining 80 percent of cases is where nursing expertise can make a difference for payors. By spotting issues that claims handlers might miss such as treatment plan deviations, co-morbidities and unrelated conditions, nurses can uncover early opportunities to revisit overall case strategies and action plans. The application of clinical insights has the potential to limit overall claims costs.
Growing acceptance for global delivery models is also driving payors to reconsider how they put clinical insights to use. Tapping offshore medical expertise from qualified, experienced nurses — many of whom hold U.S. licenses — is an option that allows them to address patient needs and determine treatment methods at lower rates.
Deploying nursing expertise more broadly also requires new pricing models. As nurse case managers engage in clinical reviews rather than long-term coordination efforts, payors will likely switch to transactional pricing for nursing utilization from the popular model of billable time and expenses.
Data mining can help rank providers' performance and other factors critical to generating best outcomes. (Photo: Shutterstock)
4. Improve medical provider profiling.
Adopting evidence-based guidelines and implementing more MNRs provides payors with a world of new data to access, including statistics on treating physicians. By mining data sets to rank providers in terms of performance, workers’ comp payors can determine which medical providers follow established treatment guidelines and produce the best outcomes for injured workers.
Profiling makes use of granular transactional data such as insurers’ medical billing and claims data, and external data sets from ODG to score individual providers or provider groups relative to one another based on quality of care. By running analytical models on the data sets, payors can detect patterns of treatment and duration of care, and compare providers’ performance against evidence-based guidelines. They can develop “outcome-based networks” comprising health-care professionals who conform to guidelines.
The result is a one-two punch against costs: Not only will insurers better understand providers’ costs, but they can also potentially identify excessive charges. More importantly, provider profiling shifts stakeholders’ focus from discounts and fees to better outcomes and treatment.
Despite the sliver of relief in NCCI's recent projection of a one percent decline in medical severity for 2015, it is likely that medical severity will continue its march upwards. Informed claims management provides workers’ comp payors with a strategy to contain costs — and stay profitable.