Medical cost containment expenses in California have doubled over six years. Yet medical expenses have continued to increase, led by facility and surgery expense, and WorkCompCentral reports the combined ratio hit 122 in 2011, a substantial jump from previous years. (sub req)
Are we wasting hundreds of millions on ineffective programs, or are these programs holding costs well below what they otherwise would be?
The answer isn’t readily apparent and it isn’t straightforward – no surprise there. Let’s reach into the cost containment bucket and see what we are paying for.
Bill review accounts for about $90 million of the $384 million total (based in a cost of about $6 per bill). We will be publishing our second Survey of Bill Review next month; a preliminary review shows most respondents see a good deal of value in bill review although that value would beach higher if UR and BR were electronically and tightly connected.
Networks are a bit knottier. Most incur a percentage of savings fee; I’ve long held that this arrangement – for generalist networks – encourages higher utilization of medical services and can drive up cost. My best guess is network costs in the Golden State account for about $110 million in cost containment expense, and that’s too much by far for many networks that don’t positively affect medical outcomes. (there’s no question some smaller tighter networks can and do have a dramatic impact on outcomes, but they just aren’t used enough.)
Case management can be very useful; if used correctly (Im seeing a pattern here…). Task-based field case management and well-coordinated telephonic CM can be very helpful indeed. Identifying problems, educating the employer about RTW and non-comp-savvy docs about comp, getting the claimant to the right providers and supporting the adjuster in assessing treatment are all necessary and cost-effective. But dumping cases on case managers, or allowing CM to run up lots of hours while doing not much more than documenting the downward spiral of case happens far too often.
And let’s not forget many (but by no means all) TPAs generate additional revenue and profit by employing CM whenever and wherever possible
Utilization review has been around forever, yet it is still misunderstood and controversial. Appropriately employed, UR can help ensure the care that is delivered is the right care for the claimant in the right setting at the right time. Used indiscriminately, it can be a cost driver that infuriates physicians, delays necessary treatment, prolongs disability, and does little to improve outcomes.
I’ll have much more to report on UR next month; we’re closing our first Annual Survey of UR in Workers Comp Friday. To date we have over 150 participants; if you’d like to add your thoughts to the Survey (and get a detailed copy of the report) click here.
The net?
Some payers are doing an excellent job managing medical and managing cost containment – by focusing on outcomes. But most are not.
Paying over a hundred million dollars for network access without clear and convincing proof that they are improving outcomes is not smart.
Using case management and UR indiscriminately across all providers in all cases is a waste of money and counter-productive.
More to come.
Jun
27
Based on the 1.5 years we were allowed to use Managed Care in our organization, we saw a significant decrease in the cost per claim, days away and employee satisfaction. When the MCO was removed, the WC claims cost went up 40+% and days away rose exponentially. MCO’s work if you hire the right MCO…
Joe, I agree with you on unnecessary charges with UR and CM. There was nothing I hated more was to see UR expenses billed to me on simple cases that I could review or manage myself. However, I would strongly state that onsite case management by an RN certified as an occupational health nurse or case manager will save a company in lost time injuries, OSHA recordable injuries and short term disability. The caveat is to choose wisely from experienced OHNs or CCMs and let them mentor the next generation.
h When I compare my self-insured healthcare program and network to CA workers comp medical expenses, it’s not even close. The costs for the same procedure under WC is at least 20% more. I have not seen any true savings under a WC cost containment program whether it be through an insurer or TPA.
We have been using managed care for years. I found you need to find the right balance. Bill Review definately shows savings. UR plays a critical role in ensuring only appropriate treatment is approved – no add ons. Case management, again critical, but managed appropriately – FCM on task based referrals, TCM sometimes early to ensure appropriate treatment plan. With our new vendor we also have them ask for authorization to keep FCM and TCM open after 8 hours of work. Also, UR is tied directly to Bill Review so we don’t pay for anything that wasn’t authorized. With this new vendor our medical cost have come down $500,000 over 5 months compared to the previous 5 month period.