Texas’ report on workers comp networks – fatally flawed?

Texas’ Department of Insurance has been analyzing the performance of workers comp networks for the last couple of years, and the latest report has some pretty interesting results.
Unfortunately, those results look to be based on a faulty analysis, making the whole report questionable.
Before we delve into the results, here’s the problem. On page 2, it reads “Utilization measures represent the services that were billed by health care providers, regardless of whether those services were ultimately paid by insurance carriers. [emphasis added].” Thanks to a comp insurer’s managed care exec for the tip – should have caught this myself, but really, who would have thought they’d count ‘charges’ as ‘costs’?
There is little to no correlation between medical charges and actual costs – defined as amount paid. Providers, especially facilities, charge much more than they’re reimbursed. Reimbursement is affected by fee schedules, medical management determinations, network discount arrangements, prompt pay deals, and bundling/unbundling edits, among other factors.
The findings from the report are also somewhat misleading. For example, several of the networks are based on the Coventry work comp network – Liberty, Travelers, and Texas Star (the Star network was designed by Texas Mutual, and is much smaller than the overall Coventry network). There was significant variation among and between these three Coventry networks, variation that may well be due to the relatively small sample size and relative “newness” of the claims analyzed – the claims haven’t developed sufficiently to draw ‘conclusive conclusions’.
I contacted Coventry in an effort to get their take on the report – which at first blush was pretty damning. I was quite surprised to get a call back from one of their execs – as loyal readers know I’ve been trying – till now unsuccessfully – to get Coventry to talk with me for as long as I’ve been writing this blog – which is now more than five years. This is the first of what I hope will be an ongoing dialogue.
We’ll see.
Coventry’s take on Texas’ report was rather limited as it was just released. They were pleased with the return to work results; but noted their medical resutls (which, according to the report, were not good) may have been tainted by seven outlier cases. Perhaps, but the other networks and the non-network results may suffer from the same issue.
More compelling was the Coventry exec’s observation that much of the “Non network” business actually is handled by the Coventry network. That adds a bit of wonder to the report’s first finding: “Overall, networks had higher average medical costs than non-networks.”
I asked the Coventry exec to get back to me asap with a more complete analysis, but I’ll suggest he save the dime. I may be missing something here (and if I am I’m sure you’ll tell me), but I’m hard-pressed to see how anyone can draw any meaningful conclusions from an analysis based on medical charges.
Lest my comments be construed as damning Texas for their efforts – absolutely not. I applaud the Texas REG for the efforts. I don’t know what limitations they have in terms of resources, access to data, or access to payment data. I do know that they are one of the few states making a serious effort at analyzing cost drivers and the impact of managed care programs. I’ve done enough data analysis to understand you’ve got to use what you can, even if it is far from perfect. Here’s hoping the REG continues to improve their analysis.
What does this mean for you?
An object lesson in not jumping to conclusions, and why abstracts and executive summaries can be misleading.