Managed care in workers' compensation: the great solution or a prescription for disaster.

As employers in the greater Los Angeles area attempt to recover from the recession, the earthquake, the riots, and other disasters, both natural and manmade, the state legislature is attempting to fuel recovery by enacting legislation that encourages the use of managed care in workers' compensation.

If we examine the legislature's version of managed care called Health Care Organization ("HCO"), we find a classic example of a horse designed by committee -- a camel. While well intended and not without some promise, efforts by an employer to use the HCO will prove costly, and the HCO promise of greater employer control ranks right up there with, "The check is in the mail."

In addition to the HCO, state and federal "mandates" to reduce the cost of medical care precipitated a flurry of activity in the medical provider and insurance communities. Many of these activities are intended to bring workers' compensation managed care options into reality.

If however, we look closely at what most folks call "managed care," it turns out to be little more than a euphemism for "managed costs." In turn, the consideration that medical costs are actually "managed" is usually a euphemism for the fact that managed care providers "manage" costs by actively avoiding the provision of services that are deemed "unnecessary."

Workers' comp is unique in that the delivery of medical care impacts additional cost centers, such as lost work time, employer productivity, and litigation. Unless a delicate balancing act is accomplished by medical providers and claims professionals who are aware of desired outcomes and the potential risks, cost center damage could occur, especially in lost work time.

While combining managed care with workers' comp is fraught with hazards, curiously, health care rendered in the work comp setting is particularly amenable to bona fide managed care principles. If properly applied, there is every reason to believe that quality of care will increase and medical costs will decrease -- without risking disaster in other cost centers.

But this cannot be accomplished by simply contracting with an existing managed care entity or solely through an aggressive approach to medical cost containment. Just as the management of your business (or even your checkbook) is dependent upon the collection of accurate and relevant data, the opportunity to truly manage care is dependent upon the timely availability of accurate and relevant data -- data necessary to track progress and to accomplish necessary behavior modification.

In this regard, our ability to better manage both medical care and the costs that are directly and indirectly linked to the care process is inextricably linked to how we gather, process, and analyze medical information. In other words, if we want to manage care and costs better, we must better manage information about what we do and don't do.

Unfortunately, the health care and lost work time information that moves through the workers' comp system (from provider to payer to case manager, etc.) is better characterized by the term "information chaos." This creates disparate sets of too little data of dubious accuracy and available in anything but a timely manner.

In fact then, our ability as managers to effectively and aggressively pursue desired outcomes (and simultaneously avoid undesired outcomes) is first dependent upon our ability to manage information. In fact, the managed care solution that employers and payers are looking for will not come from our managed care/cost colleagues in group health. Instead, it will await the dawning realization that the payer and medical provider communities must (in a vertically integrated manner) revamp their approaches to gathering and processing information. In other words, the solution will come through managed information.

Any attempt to substantially improve the actual management of the medical care delivery process (and thereby, reduce medical costs) will prove to be dependent upon accurately collecting relevant data and then, making that data -- along with its analysis -- rapidly available to both those who provide the care and those who pay for it.

This can be done through new computerized medical programs recently launched around the U.S. Organizations have figured out how to apply managed care to workers' compensation by integrating a top-notch statewide medical network with information systems technology. This "marriage" of technology and medicine provides an opportunity for third party payors to reduce internal operating costs substantially.

Complications, exaggerated disabilities, and litigation can be reduced by using this high-tech approach to managed care. Injured workers receive appropriate, quality care; doctors can increase patient volume and efficiency; employers control costs and receive realistic savings projections; and payers can reduce risk and costs.

Henry W. Lubow, M.D. is the CEO of Advantage Care, the largest medical provider specializing in the provision of workers' compensation medical services in the greater L.A. area. Dr. Lubow is also the CEO of InterNet Medical Systems, Inc., a statewide network of occupational medicine providers.