Insurers are all too familiar with the problem: Workers’ compensation medical costs are rising; as noted in the first installment of this series, they’ve more than tripled.
There are several underlying reasons for this, some of which can be attributed to the following megatrends.
Demographics. The U.S. workforce is getting older, and as it ages a larger proportion of workers suffer from long-term medical problems and pre-existing conditions that complicate an injured worker’s recovery and increase workers’ compensation medical costs. The workers’ comp system is paying the price for this trend.
Medical innovation and utilization. These innovations — often enabled by technology — are wonderful for society, but they’re very expensive. Innovation alone is not the only cause. What is crucial to the delivery of a quality outcome — and absolutely crucial to the bottom line — is making sure medical services are absolutely necessary and are not over-utilized. Medical necessity reviews can mitigate this issue, but there is no industry-wide system for conducting these reviews for all claims.
Fraud. Unfortunately, the workers’ comp system is a target for dishonest people, and the problem is getting worse. Even subtle anomalies in provider billing patterns can include traces of fraud and often go unrecognized.
Simultaneously, many insurance companies have process and organizational issues that make matters more challenging. Claims staffs typically have limited medical knowledge and no formal training. Teams are hampered by inefficient workflows and manual processes that can and should be automated. Plus, many claims staffs are under pressure to do more with less, even as their workloads grow.
All of this sounds very daunting — and it certainly is a serious challenge. But in our experience, the workers’ compensation challenge is manageable. In fact, in our experience it’s possible to save $7 out of every $100 that is paid in medical benefits, without affecting patient outcomes.
The key is to accurately diagnose the challenges and attack the biggest problem areas with targeted solutions.
Measure, Then Manage
Step one is to analyze a key metric called “claims leakage.” Simply put, this is the difference between what your organization pays in claims and what it should pay, according to industry best practices. The average claims leakage rate is believed to be up to 5%, but in our experience, this number often swells to as high as 10%.
Once your organization has measured the extent of the problem, it should focus on three areas: treatment planning, claims management, and process improvement. Creating an evidence-based projected plan of care, and monitoring treatment progression against it, provides valuable insights into which providers are adhering to clinical guidelines and providing best outcomes for the injured worker and carrier.
ID the Claims’ Outliers
In managing claims, your organization needs to be vigilant from the start, when claims are submitted. One immediate goal is to identify which claims do not follow the norm. These need to be questioned. You also want to get a comprehensive view of the claim, which would include the claimant’s medical history and treatment plan, and everything needed to understand the current status of the claim, including payments that have been made and those that are pending.
Follow a Treatment Plan
Every claim, once approved, should have a treatment plan for the employee. Integration of industry-accepted clinical guidelines is available for those organizations that need assistance. An injured worker’s treatment plan should also be based on the unique demographics of his or her injury, medical history and other elements. The objective is simple and straightforward — claims adjusters can make informed decisions using evidence-based treatment guidelines.
Streamline the Process
Next, your organization needs to optimize the entire claims process. The objective is to minimize, if not eliminate, manual intervention. Often, that means automating redundant and manual processes. It’s also an opportunity to utilize analytics that can help prioritize efforts. As an example, use claim examiners review only claims that need manual review and decision. Let the analytics-enabled treatment plan drive the decisions so that the examiners can focus on claims where they influence outcomes.
Claims management for workers’ compensation is a tough challenge. The good news is, it’s a challenge that can be overcome. Companies usually begin to gain control when they are able to systematically identify and isolate “abnormal” claims. From there, the goal is to manage all claims cases with discipline and rigor, and then to apply that same level of rigor to your entire claims management process.
Ultimately, you can generate significant savings and deliver strong patient outcomes. Everyone benefits.
Part three of this series reveals the principles of a winning workers’ compensation strategy and highlights how one workers’ compensation carrier is benefiting from a more rigorous approach to claims processing.