Big changes are in store for work comp, changes brought on by a much-altered economy, health reform, technological leaps, health care provider behavior, governmental influences, budgetary shifts, and demographics.
Driving home from RIMS yesterday, I was struggling to come up with a way of explaining what’s coming in a way that captured where we are today and what the next few years will look like. Fried after three days of nonstop meetings, I flipped on the stereo and there was the answer.
I’d been listening to a book-on-CD entitled ‘1421, The Year China Discovered the World’ by Gavin Menzies. An amazing read (or more properly listen), Menzies spent years reconstructing data from sources around the world, data that build a compelling (and controversial) case for his contention that huge Chinese treasure fleets comprised of hundreds of massive ships circumnavigated the globe seventy years before Europeans got in their tiny ships to sail to the Americas.
According to Menzies, the Chinese built a huge treasure fleet, far more sophisticated and capable than anything the West could even contemplate, and set forth to chart the world’s oceans and continents. They knew a lot about navigation, but there were big gaps in that knowledge. They also had little information about what they would find as they sailed thousands of miles from their home waters.

Their ships, square-rigged and large beyond comprehension for the time, could only sail before the wind, thus they were forced to go where prevailing winds and currents took them. China’s admirals, many of whom were brilliant navigators and leaders, had some charts from previous expeditions and well-built ships designed specifically for years’ long voyages; but by the very nature of their task they were indeed venturing into uncharted waters.
The parallels are certainly clear.
Work comp payers and vendors can’t do what macro influences, the law and the markets don’t allow – at least not for long. We can trim our sails, keep a sharp lookout, carefully question those who have some knowledge about where we appear to be heading, and plan and practice what we’ll do as we come across new challenges and perils.
What we can’t do is stay in the harbor. Like it or not, we’re on the seas heading for places we know not.
Over the next few days I’ll draw more parallels (for nautically inclined readers, pun intended) and climb to the highest crow’s nest to peer ahead.
(Note – Menzies has been severely criticized for some of his methods and conclusions; nonetheless there is ample evidence that Chinese sailors made their way to Africa and many other destinations thousands of miles from their home ports)

The comp industry spends millions on utilization review – certifying a procedure, hospital stay, therapy, or treatment as ‘necessary’ – or not. What most payers don’t realize, or, more correctly, probably realize and don’t discuss, is the reality that their UR systems are not linked to bill review platforms, so if the procedure/therapy/treatment is delivered and billed, in far too many cases it is paid.
That’s not to say payers don’t spend a lot of time, resource, and effort trying to link UR and BR, but the ‘link’ is largely manual, requiring bill review processors to stop what they’re doing, look at (in many instances) a different software application or database, interpret the free form text, and manually enter payment recommendations and explanation codes.
Which is a waste not only of administrative effort, but medical dollars as well.
I’d long heard about this, and seen it in many of the audits of managed care programs my firm conducted, but until I surveyed most of the largest payers in the nation last year I didn’t fully grasp how pervasive this is. (if you want a copy of the survey do not leave a comment to this post, rather email infoAThealthstrategyassocDOTcom)
The problem
The current challenge facing all bill review application vendors is a limited ability to interface with UR software products in general. Most UR software platforms capture their decisions in a narrative form, in text or free-form fields. Therein lies the problem; UR decisions must be capable of being placed in a file format that computers can recognize. Moreover, each payer has their own unique approach, set of UR guidelines, interpretation of state UR rules, and customer requirements, making the integration of bill review and UR doubly difficult.
Potential solutions
Now two bill review companies are working to address that problem. Mitchell, which markets the SmartAdviser application, will be releasing an internally-developed service, entitled Utilization Review Decision Manager, that is designed to automate the feed of utilization review determinations. The idea is to enable customers to auto-adjudicate bills and individual services that up till now people had to research and authorize manually. The new app is slated to be on the market in July of this year; it is currently about to enter the testing phase. That’s a very tight timetable, but SmartAdviser’s General Manager Nina Smith advised me in a call yesterday that Mitchell is committed to hitting the date.
The app, which is ‘enabled’ by SmartAdviser’s Capstone business rules engine, uses a proprietary approach to group procedure codes into a treatment group according to diagnosis, the idea being approval of a carpal tunnel release includes ‘approval’ of related services – facility charges, PT, anesthesia, etc. Mitchell expects the app to increase ‘throughput’ (bills not touched by a reviewer) by about 17%.
Competitor Medata implemented their solution about a year ago; according to Cy King, Medata’s CEO, the company rolled it out with a very large retail client who is quite pleased with the results. So far, client savings have increased from 5% – 7% depending on the month. Components of the solution are provided by Datacare through their Bill Zee product.
King reported that Medata is currently working on several additional implementations.
I’d note that it is entirely possible the other bill review vendors (CompIQ, Stratacare Coventry) offer similar UR-integration functionality, but at least as of last summer, no one was using them. If this is of interest, you can ask them at RIMS next week in Boston.
What does this mean for you?

Hopefully more efficiency and lower medical expense. Hopefully.

I posted on the growing problem of hospital costs in California a few days ago, and since then I’ve been working on a project to identify facilities to include – and exclude – from its MPN (California’s version of a certified work comp provider network)
It’s sometimes tough to tell which facilities are the ones to steer injured workers away from, and it’s even tougher to convince the treating physician to make a change.
Fortunately, some providers in California have decided it’s time to fess up, providing payers not only their names, but clear evidence on why they shouldn’t be treating work comp patients.
The list, available here (thanks to WorkCompCentral for the head’s up), identifies the hospital outpatient and ambulatory surgery centers that have opted to be paid as ‘outliers’. That is, these facilities don’t want to be paid based on the fee schedule’s standard 1.22 times the Medicare rate on all cases. Instead, they have notified payers that they are to be paid 1.20 times the Medicare rate on all cases plus an additional payment for specific outlier cases.
Fortunately, there aren’t that many providers on the list – probably less than fifty.
Even more fortunate, the good folks at California’s Division of Workers Comp have published each facility’s cost-to-charge ratio. Simply put, this is a comparison of what it costs the facility to deliver the service to what it charges payers for that service (on average). So, the lower the cost to charge ratio, the higher the charge in relation to what it actually costs to deliver the care.
There are some rather stunning revelations on the thankfully-brief list of ‘outliers’.
For example. The Long Beach Pain Center Medical Clinic, Inc. has a cost to charge ratio of .20. That means they charge payers five times what it costs to deliver the service. And they aren’t the…most ambitious.
There are seven (7) providers that charge more than five times costs, with two charging more than nine times costs. (Midway Hospital Medical Center and John F. Kennedy Memorial)
More information
This isn’t the only resource for payers trying to find out which providers charge ‘reasonably’ and which ones less so. For more background, CDC is an excellent resource with lots of information written in laymen’s terms; they also publish the average state cost to charge data here.
Our friends at HHS publish a variety of reports that help payers determine provider efficiency, here’s one for inpatient admissions (covers all states and all providers). Many states publish similar data; here’s Kentucky‘s,
Before I get flamed by providers telling me how their costs charges are justified because they only treat really sick patients or the cost evaluation isn’t fair or their treatment is just soooo much better, I’ll freely admit that cost is only part of the cost-benefit equation, and reasonable folks would argue it’s unfair to look at one without the other.
True. And as soon as these providers show exactly why they’re worth the added cost, we’ll consider their evidence.

Many readers are undoubtedly getting ready for next week’s annual Risk Insurance and Management Society annual meeting, held this year (conveniently enough) in Boston.
For most, ‘preparing’ means buying gel insoles, making sure the extra-think padding has been ordered for the booth, confirming appointments and hoping the notoriously changeable Boston weather doesn’t bring snow sleet freezing rain or all of the above.
Beyond the obvious, here’s a few things to look for at the annual confab.
1. The new thing. A few years ago it was pharmacy benefit management, back in 2002 it was emergency preparedness, a couple years back data mining was big. As to what’s going to be the buzz of the show, it’s anyone’s guess. It most likely won’t be a big transaction or venture; the Sedgwick deal is public, the Bunch sale is in limbo, and a couple others aren’t ready for public display just yet. Product launch? It will have to be a BIG deal. New customer? Again, it best be BIG to be ‘the’ thing.
2. Excitement, or at least a pulse, among the TPAs. This is admittedly hyperbole, but after the last few years, it’s a bit surprising there are any TPAs left. There are some indications the TPA business is picking up; reports are that more currently-insured, larger employers are looking intently at self-insurance. This is anecdotal, but encouraging nonetheless.
3. New network offerings. Healthcare Solutions (formerly Cypress Care and Procura) are reportedly making significant inroads in the payer market, offering access to the Aetna WC and MagnaCare networks and generating lots of interest among payers. Expect that their competitors will also be announcing expansions, multiple network offerings, and carve-out products to meet a growing demand for ‘non-me-too’ provider networks.
4. Investor interest is high. Expect to see even more venture capital folks/private equity investors/bankers on the floor, at the bar, and dining out this year than in the past. Interest appears to be pretty significant in work comp in specific and claims/P&C in general, as the smart people who work for investment firms continue to try to figure out why this business is so…backward? Inefficient?
5. Potential employees. I’ve always advised clients searching for sales talent to go to the shows, walk around later in the day/week, and find the booth staffers that are not sitting down, thumbs flying over their blackberries, yawning away, but on their feet, asking questions, listening hard, and doing their best to ignore their boredom and sore feet and backs and represent their company, and themselves, professionally.
See you there.

Noted work comp attorney Jon Gelman has an excellent post on one of the heretofore lesser known provisions of the Health Reform bill – the ‘Libby Care’ amendment. A quick read may lead some to think that the Feds are just about ready to take over handling of occupational diseases.
The provision Gelman is referring to is in Section 10323, Medicare Coverage for Individuals Exposed to Environmental Health Hazards, 2009 Cong US HR 3590, [this takes you to the entire bill and is a long download, the relevant Amendment is on page 111th Congress, 1st Session (December 31, 2009).
A more careful read produces a somewhat different conclusion; this looks to be a one-time fix to a specific ‘problem’. That’s not to say that the work comp industry has done a good, or even passable, job in addressing occupational disease, but the Libby Care Amendment isn’t an attempt to Federalize management and treatment of occupational disease. Color me a cynic if you will, but my sense is the Manager’s Amendment isn’t so much the ‘camel’s nose under the tent’ as a political move by Sen Baucus (D MT) to curry favor and win votes; the Amendment is specific to an environmental disaster in Libby, Montana.
Here’s why.
1. The Amendment requires a site be designated a “Public Health Emergency” by the Secretary of HHS. To date, Libby is the only site so designated.
2. The provision covers care for all affected residents and employees, not just workers. This is clearly far beyond ‘occupational’ and is much more of a public health issue than a work comp one.
3. Care is to be delivered through the Medicare system. This will require allocation of additional funding for each new site, something a cash-strapped CMS is unlikely to encourage.
I’d encourage readers to review Gelman’s piece in its entirety; Jon knows of what he writes and has done a credible job in identifying and analyzing this important issue.
What does this mean for you?
Likely increased attention for occupational disease, and over time, a push by CMS to ensure those responsible pay for the associated cost.