I was talking at length with a good friend who works for a large payer last week, discussing the process of getting the organization to make significant, and very much needed, improvements to their managed care program.
This got me thinking – by no means is this situation unique to that one payer. If anything, resistance to change is a consistent thread throughout the workers comp payer/buyer/service industry. Pondering this over the weekend I came up with a few warning signs of and reasons for the resistance.
Warning signs
Statements such as “we’ve always done it that way”, “that’s our policy”, or “that’s how we handle X here” can indicate pride and consistency, traits that are often excuses for not thinking more and deeper about specific issues. Policies are good, as long as they’re ruthlessly examined under a very bright light on a regular basis.
Long, exhaustive, exhausting studies and analyses and research into a new idea, especially those that involve a large committee of folks with lots of other, higher priorities. Committees are where good ideas go to die.
A culture of fear, where junior staff wait to hear what the boss says before chiming in; where criticism is pointed and personal, where people are afraid to speak up for fear of being criticized or chastised.
A resistance to comparison and measurement, where managers seek to report the data that demonstrates positive results (or at least results that help them achieve their bonus targets) and don’t look for ways to compare their performance to competitors or the industry as a whole.
Why?
There is a cultural issue in comp, and perhaps in the larger property and casualty industry that has significant negative influence on the ability of companies to evolve and improve.
People who say ‘no’ succeed; risk-takers do not. Risk takers seek to write the somewhat questionable policies, try different approaches, ask ‘why not’ instead of ‘why’, look for creative solutions to old intractable problems, seek answers outside the industry instead of always relying on the time-tested. Sure, these risk-taking efforts aren’t always, or even often, game-changing successes, but occasionally they do work brilliantly, and even when the improvement is incremental, it is improvement.
The ‘no’ people don’t write the risks that fail to meet every criterion, stick to the book when ‘managing’ claims, don’t direct injured workers in states that don’t provide explicit authority, complain that the laws don’t support tougher stances. They don’t look for the ‘how to’, they complain about the ‘why not’.
More specifically, there’s a financial gravy train that drives TPAs and insurers that makes it difficult to try new approaches in managed care.
That gravy train is fueled by managed care fees, fees that in many cases are larger than the earnings from claims administration, and can represent a big chunk of an insurer’s profit margin. Fees, whether from case management, utilization review, bill review, networks, or other services, contribute to the overall organization’s financial results, making it tough to consider programs that might actually reduce the amount ‘earned’ by managed care programs.
Never mind that these new programs will also reduce medical costs. In fact, I can, and often have, made the argument that the current large generalist PPO reimbursed on a percentage-of-savings basis is actually driving up workers comp medical expenses, and the data I’ve seen bears that out.
Yet the vast majority of payers are still wedded to this old model.
What does this mean for you?
More evidence that change in the comp industry, however much it is needed, will be difficult and frustrating. Precisely because of that difficulty, those organizations that adapt and evolve will find themselves better positioned than their moribund competitors.
Jun
14
Thank you for saying what needs to be said. Even minimal risk at low cost is shunned in many places. We need a “whistle-blower-type” protection for those in Workers Comp who are willing to step away from the ordinary.
Another point is that some employers still want the % of savings agreements just so they see some savings, not realizing that as the average amount billed by providers increases the amount they (employer) are actually paying is more than what most providers would accept in an acceptable fee schedule.
I agree with your article and with what Karen said. There happens to be individuals out there that can share some pretty good stuff and if considered and furthermore implemented, could possibly move some of the “old school” thoughts and individuals out into retirement. Old school doesn’t necessarily work these days.
with more than a few years invested in this business, I can tell you that they are all client driven and thus limited to what their clients have the wit to ask for. Some types of buying decisions factor in new ideas and originality but other buying decisions– by the same buyer– value the tried and true. The same risk manager who stands in line to get the first iPad wouldn’t think of making any major change in his WC program because it is located in an entirely different compartment in his brain. WC is generally viewed (correctly) as an industry in which very little ever happens. Innovation is limited by the glacial pace of regulation, so anything new and shiny is inherently suspect. That can’t be legal because no one’s done it before. Buyers do not seek out or expect new thinking, so they don’t value it when they see it– it’s in the wrong place. I expect my IT vendor to dazzle me. I do not expect that from my WC plan and I don’t trust it when it does happen.
The whole WC industry is locked into stasis as a business plan– and it works because they all make enough money to be happy because ambitious people do not go into the WC industry in the first place.
That’s the deal in the wonderful world of WC.
Joe,
Unfortunatley in some states the courts are handcuffing payors allowing lawsuits that kill any ability for managed care with no end in site. hard to be inovative while being sued. thanks for the post
Joe –
I can’t believe that you proffer an assertion that “… the argument that the current large generalist PPO reimbursed on a percentage-of-savings basis is actually driving up workers comp medical expenses, and the data I’ve seen bears that out.” I fail to see the causal connection between rising work comp medical expenses and a PPO’s percent of savings form of compensation!! You owe your readers an explanation for what is patently unsupportable by any database available in the public domain over the past 20 years. The fact is that a PPO’s fee income increases or decreases proportionally based on the depth of the discounts and the reimbursement methodolgy the PPO uses with its participating providers. That was understood as early as 1985 when CCN used its per diems as the basis for reimbursement for inpatient hospitalizations. You should ask UCSD Medical Center how per diem contracts impacted their “gross revenues”, and then ask Liberty Mutual how they reacted to the enormous “savings” they enjoyed even after CCN got is 20% of savings fee!
I think you need to step up and share the data that you claim supports this specious conclusion.
Ralph – believe it.
Here’s the logic. “percentage of savings” fees are based on the difference between the billed or FS amount and the negotiated discount for each CPT or other code.
The more codes there are, the more bills there are, the more ‘savings’ are produced – and the more fees generated.
It’s as simple as that.
The methodology leads to huge networks comprised of any and all providers, living or otherwise, who will agree to a discount – regardless of whether they know anything about comp, are competent, convenient, or even sentient. The higher the medical costs, the higher the PPO’s income.
That’s pretty simple.
And Ralph, I’d appreciate it if you kept the nastiness out of future comments. A simple question will suffice.
Paduda