Managed care overutilization could drive workers comp cost increases
Great article below out of Business Insurance on the issue (Roberto Ceniceros) Often, these services are the true profit center for a carrier or TPA, versus what the intent was supposed to be - Cost containment. Many great companies that use targeted utilization strategies and can quantify impact. Others... not so much -Up until managed care was all the buzz in the early 1990's, allocated loss adjustment expense ("ALAE"... aka "DCC") was approximately 15% of workers' compensation losses.
Since then, ALAE has been 23-26% of loss on average --- 10 points higher. Is the 10 points plus being saved on the loss side to justify these expenses? I think managed care can outperform the cost every time if done right, but the managed care companies need management. What is not discussed here are the hidden cash registers - fee schedule reductions and negotiated rate savings. 25-40% charge-backs for the usage of a managed care network is the biggest culprit, with little accretive value due to the commoditization of networks based on few choices with national scope. Back in my days at Managed Comp, Dr. Jennifer Christian (aka "Dr. J) taught me that it is worth paying the "Gatekeeper" more so that the socioeconomic issues of an indemnity claim would be better managed. In addition, she educated me to the fact that physicians want feedback and always want an "A".. The best outcome for all involved without ever losing sight of the most important aspect - the injured worker. Roberto Ceniceros Managed care overutilization could drive workers comp cost increases April 21, 2013 - 6:00am
Managed care's promise to control medical utilization and reduce workers compensation claims costs is undercut when employers pay for excessive services that don't improve claims outcomes, experts say. Furthermore, workers comp service providers, such as managed care companies and third-party administrators, can benefit from applying additional products — such as utilization review, nurse case management and bill review — when helping resolve claims, they add. “Don't let this be a money maker for the managed care company when there is no impact on a case,” warned David Donn, president of David Donn Consulting Inc. in San Francisco. “Anytime you are dealing with products where utilization drives the revenue of the managed care company, you have to be very mindful of overutilization. ”TPAs say they employ a range of resources — including claims audits, data analytics and reviews by seasoned professionals — to help ensure that the appropriate managed care services are applied at the right time for optimal claims outcomes. And while overutilization of managed care can generate wasteful fees, underutilization also slows claims resolutions, increasing overall costs, said Judie Tsanopoulos, director of workers comp and loss control for Orange, Calif.-based St. Joseph Health System. It is more common for her to prompt her TPA claims adjusters to call in nurse case managers than to question the service's overuse, Ms. Tsanopoulos said.“ They are trying to be good stewards of my dollar,” she said. “But I remind them my case costs are lower when field case management is warranted than when a field case management nurse is not involved.” Ms. Tsanopoulos, however, unbundles the managed care products she buys, purchasing them separately from her contract for third-party claims administration services.
The excessive application of managed care can arise when employers purchase the services from a managed care company or through their TPA, who may either contract for them or provide them through in-house resources, Mr. Donn said. Knowing that nurse case managers are readily available, an adjuster may call for them more often than is necessary to lighten their heavy workload by handing off certain responsibilities to someone else, Mr. Donn said. And there is a system bias for adding the services to more claims than necessary because it generates additional revenue for TPAs and managed care companies, Mr. Donn said. Managed care fees paid by employers are “one of the single biggest items in the total cost of a claim,” Mr. Donn said.
Revenue derived from managed care products can provide an incentive for services companies to utilize them when they may not improve outcomes, agreed Charles F. Martin, U.S. casualty operations consulting practice leader for Marsh Risk Consulting in Norwalk, Conn. “TPAs and carriers make more money on managed care than they do on the claims service fees,” he said. “The money is in the managed care.” Properly applied, however, managed care improves claims outcomes, he added. For example, properly applied nurse case management can reduce an employer's claims expense by 10% on average, Mr. Martin said. But that requires workers comp payers to evaluate claims to determine whether that 10% savings will justify the costs of a nurse case manager on a particular claim, Mr. Martin said. In contrast to that strategy, Mr. Martin said he knows of a large employer client swayed by a managed care company to contract for 12 full-time nurses, costing $172,000 each for a total of more than $2 million per year. “They put managed care on everything as opposed to figuring out which cases will get the best return on investment from it,” Mr. Martin said.
Eliminating over-utilization requires client plan design coupled with service provider instructions detailing the specific claims circumstances that are to trigger managed care intervention, Mr. Donn added. Establishing parameters with criteria that pre-determine when managed care is to be applied to a claim is vital for reducing over- and underutilization, agrees Veronica Cressman, vice president of medical programs in Denver for third-party administrator ESIS Inc. “We call it targeted utilization,” Ms. Cressman said. To that end, ESIS analyzed years of claims data to learn when cases will benefit from managed care. The TPA also provides its adjusters and nurses with policies listing specific expectations for their management of claims, including requirements for documenting their objectives, Ms. Cressman said. Those are followed up with staff meetings to review adherence to time parameters for resolving claims. “We don't want the nurse on it open-ended without specific goals and objectives,” she said.
Other ESIS measures include audits to determine whether adjusters and nurses are appropriately responding to established triggers for implementing managed care services and outcomes reports analyzed to learn whether the services are reducing expenses.Broadspire Services Inc.'s measures for ensuring the appropriate use of managed care include data analytics and an “e-triage” tool or series of questions its adjusters ask claimants, said Candy Raphan, director medical services for the Atlanta-based TPA.The questions were developed using internationally recognized medical, economic, and psycho-social data, Ms. Raphan said.“A lot of research has gone into developing the questions,” she said.
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