The cost of workplace injuries in the US topped $50 billion in 2003, despite a 6.3% drop in the injury rate. These results continue a long-running trend of declining frequency that is more than offset by medical inflation.
The often-asked question is how can this be? If the number of injuries is dropping, how can total costs be increasing? While it appears that the severity of injuries may be increasing, that is actually a proxy for medical costs (the workers’ comp research firms equate severity with higher medical expense). The culprit is medical inflation, and more specifically increased utilization of medical services.
There are fee schedules in about half the states (most of the larger ones) that do a pretty good job of constraining price increases. With rates pegged to Medicare’s fee schedule, prices for most physician and outpatient services are under control. Unfortunately, that’s only part of the problem – the other two drivers are the percentage of claims that have a particular type of medical expense, and the volume of services per claim.
As an example, physical therapy occurs in about 26% of cases with lost time. However, given there are few treatment guidelines that are helpful in managing PT, and the propensity for therapists to overutilize, PT costs appear to be growing significantly. Without objective clinical guidelines to ensure the volume and specific treatment modalities are appropriate, work comp payers are essentially unable to constrain the delivery of PT.
The result – a recent analysis conducted by my firm, Health Strategy Associates, showed that over 55% of lost time cases treated at a national occupational medicine company had PT services. Sure, the price per service was low, and the average number of visits was quite low, but there is no doubt many of the patients receiving PT did not need it.
The work comp market is recognizing the extent and cost of the problem; MedRisk, a firm that specializes in managing physical medicine in workers comp has seen explosive growth, and now manages PT on a national basis for carriers and TPAs including Liberty Mutual, Zurich, ACE, Sedgwick, Gallagher-Bassett, and Amerisafe. (MedRisk is a consulting client.)
And physical therapy is but one example of a medical service that is a key driver of medical inflation. With work comp medical expenses trending up at double-digit rates, payers are finally beginning to adopt intelligent strategies that are specific to the key drivers of inflation.
What does this mean for you?
If you are a work comp payer and have yet to adopt a “specialty managed care strategy”, your medical inflation rates are likely higher than your competitors’. If you don’t get costs under control, you will not be a payer much longer.
Sep
21
Joe,
Thanks for pointing out the increasing expense trends for physical therapy services in workers’ compensation claims. You are absolutely on point with the need to manage the outcomes of physical therapy care rendered – not just the per unit cost. Specialty networks like TechHealth, MedRisk and others that address the total cost of physical therapy by actively managing those providers participating in the network and the pratice patterns they render – specifically looking for evidence based pratice protocols – will be a key strategy for payer organizations to include in their cost management solutions if this trend is to be reversed.