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A broad brush approach to managed care.

A 54-YEAR OLD APPAREL FACTORY WORKER was injured on the job when the scissor lift he was operating overturned. He sustained a skull fracture that resulted in a temporary coma as well as residual impairment to his hearing and vision. Traditionally, recovering from injuries such as these has been a long, slow process - and an expensive one. Yet, this worker did in fact recover, and he returned to work just one year later.

Why is this man once again living a full, productive life? Because everyone involved responded correctly to the accident. Medical treatment was provided immediately, and the case manager coordinated the medical and rehabilitation efforts to ensure that the employee received good medical care and regained his ability to function in the world. The employer continually showed an interest in the employee's progress as well. In turn the injured employee resolved to get back to a normal life as quickly as possible and, with the support of his wife, worked hard to do just that.

This case shows the workers' compensation system operating the way it was originally intended to when it was established in 1911 - that is, to provide medical, rehabilitation and indemnity benefits to injured workers quickly and without much difficulty. Unfortunately, several problems - the most obvious being unrestrained costs - are threatening the ability of this system to function as it was originally intended. Because of the dire problem posed to companies in all industries, risk managers need to understand the ways that managed care can be used to control workers' compensation costs.

The costs of managing a workplace injury are skyrocketing. The National Council on Compensation Insurance reports that the average cost of a workers' compensation claim grew by more than 150 percent during the 1980s, from $6,300 in 1980 to slightly more than $16,000 in 1989. The average medical cost per workers' compensation case tripled between 1980 and 1989, increasing from $1,700 to nearly $5,400. For cases such as the apparel factory worker, medical costs are considerably higher still.

While the focus tends to be on workers' compensation medical costs, indemnity costs are increasing at a rate that is more than double the prevailing rate of inflation. Although increases in benefit levels in certain states account for some of this rise, other factors such as excessive litigation and attorney involvement - combined with overburdened and inefficient administrative systems - are also driving up indemnity costs.

Still, rising charges for medical and rehabilitative care in workers' compensation are the most critical concern. In some states, medical benefits now account for 50 percent or more of all workers' compensation claim costs. Cost cutting measures instituted by public and private health insurance plans have led medical providers to shift additional costs to programs with less stringent restraints on reimbursement - notably worker's compensation, which is one of the last first-dollar coverages available. "Doctor shopping" (frequent and unrestricted changes in physician by an injured worker), as well as numerous impartial medical examinations, also drives up medical costs. In addition, legal barriers exist in some states that discourage the development of cost management techniques for workers' compensation - or prohibit their use altogether.

Managed care offers one of the most effective solutions to the problem. And yet, the true nature of managed care for workers' compensation is often misunderstood. If the only objective is to contain medical costs, it misses two other important elements of workers' compensation costs, indemnity payments to injured workers and costly litigation. Effective managed care techniques can help control all of those costs while the injured worker is being restored to a full and productive life.

Because the human and financial costs of a workplace accident affect employers, employees and families alike, managed care in workers' compensation must be broader in scope than mere cost containment measures. It must seek to prevent accidents by addressing the causes of loss, not just the consequences. It must provide the most appropriate medical and rehabilitative care at the most reasonable cost when accidents do happen. And, it must apply knowledge gained from an accident to prevent future injury or illness by improving overall workplace safety.

The Concept

ONE LONG-ESTABLISHED program for both traditional insurance coverage and for self-insured businesses approaches managed care as a comprehensive effort that starts with preventing accidents and continues with extensive case management and rehabilitation services. The key lies in an array of services designed to help injured workers and sick employees get back on their feet and back to work - and to keep them there. Loss prevention, medical expertise and rehabilitation expertise, all tailored to meet individual policyholder needs, can thus be closely coordinated to ensure consistent service while holding the line on disability and medical costs associated with workplace injuries.

Effective managed care is built on four cornerstones: pre-accident management, which involves identification and elimination of specific causes of workplace injury or illness, plus development of procedures for responding to incidents that do take place; disability management, which encompasses coordination of medical, rehabilitative and return-to-work efforts; and rehabilitation, which aims at helping disabled workers recover and return to a full life as quickly as possible.

By working together to identify and eliminate the causes of employee injury and to develop procedures for responding to those that do occur, employers and insurers can control workers' compensation costs. Employers can take a number of important steps to reduce the potential for job-related accidents or illness. For instance, implement a job placement medical evaluation program that can help determine whether employees are medically able to perform the tasks of their job without jeopardizing their own safety and the safety of others. Such a medical evaluation also enables the employer to reasonably accommodate any impairments that may be found.

Another way to manage costs is to establish an on-site occupational health program for on-the-spot response to workplace accidents. The program requires the employment of a nurse practitioner who administers emergency first aid at the scene of an accident and conducts job placement evaluations and periodic medical surveillance that can detect work-related health problems in their early stages.

How important are such health programs in reducing workers' compensation costs? Consider a manufacturer of food service equipment that had 289 workers' compensation claims during the one-year period from January 1989 through January 1990. Of those claims, 269 involved medical benefits only, while 20 involved medical and indemnity benefits. Total costs for those 289 claims came to $104,757. If an occupational health program had existed at the workplace during that period, the company could have significantly reduced the number of accidents and saved almost $54,000 in claims costs.

Coordinating Recovery

MANAGING A WORKER'S disability is a collaborative effort that should include everyone - the employer, the injured employee, the doctors and the claims administrator. Immediate communication and cooperation among all parties is the best way to get the worker back to a productive life. The case study of a 21-year old man, who worked for a plastics manufacturer, illustrates how a disability management program operates. The worker, who spent practically the entire eight-hour work day on his feet, was injured in October 1990 when pinned between a forklift and a heavy-duty scale. He broke both of his legs and his left ankle, and his injuries necessitated a lengthy hospital stay with three separate surgeries. Within two days of the accident, a rehabilitation nurse visited the injured employee in the hospital and began working with him and his parents, with whom he lived. The nurse visited the patient's home before his discharge to determine how easy it would be for him to maneuver in a wheelchair. In addition, she arranged for all medical equipment to be delivered prior to discharge and made appropriate arrangements for physical therapy.

The worker was recovering well until the time came to increase his activity level. Apprehensive about leaving the security of a wheelchair, he resisted efforts to walk and even purchased his own wheelchair when the attending physician recommended removing the original chair. Working together, the rehabilitation nurse, the doctor and the physical therapist developed a plan where the worker would attend physical therapy every day, leave the wheelchair at the door of the hospital and walk (with assistance at first) to physical therapy. With diligent coaxing, the worker progressed from the wheelchair, to walking with a walker, to using only a cane.

Throughout this period, the employer checked on the young man's progress and encouraged his return to work. By July 1991, the employee was ready to go back to his regular job, which had been modified to allow him to perform some tasks while seated. Periodic follow-ups by the rehabilitation nurse indicate that this arrangement has worked well for both employee and employer. This worker's medical costs totaled very close to original projections at $41,043. However, indemnity costs have been far lower than first estimated; total indemnity costs were approximately $19,500, $11,000 less than projected. Most importantly, however, the worker is once again active and productive.

Managing Medical Costs

CERTAIN MEDICAL FACILITIES and physicians are better suited to handle workers' compensation cases because they are experienced with industrial injuries and understand the importance of returning injured workers to productive lives. In 1990, approximately 4,000 California employers saved more than $18 million by using medical cost management techniques. About 41 percent of $7.5 million of that savings was realized through discounts from preferred provider organizations, medical equipment providers, pharmacies, hospitals and physicians. Another 59 percent savings (approximately $10.5 million) came from the use of medical fee schedules, which automatically reduce overcharges to "usual and customary" fees.

Programs can also employ utilization review techniques to target inappropriate care, discrepancies in medical bills and overcharges. In one case, prescribed treatment for a shoulder injury included 12 physical therapy sessions, 12 visits to the doctor and the rental of expensive equipment. Total charges would have been $5,625. Review of the proposed treatment indicated that it was excessive, costly and offered no guarantee of recovery. A second opinion was requested from a physician experienced with workplace injuries, who recommended educating the employee in correct posture and a home program that would strengthen the affected muscles. This approach would cost a mere $100 for one consultation with a physical therapist.

Rehabilitating the Worker

A SUCCESSFUL CASE of rehabilitation involved a 40-year old sheet metal worker who received crushing injuries to his left hand while feeding metal into a roller. As a result, the long finger and ring finger of one hand had to be removed completely, while the small finger, index finger and thumb had to be partially amputated. The worker underwent several surgeries and also had daily sessions with a therapist specializing in hand injuries. Despite these efforts, the worker still has practically no movement of the little finger, with only some movement of the thumb and index finger.

The patient's employer considered him a diligent employee, but his regular job required the full use of both hands for the majority of tasks. However, one of his previous duties involved welding, which does not necessarily require the use of both hands, so the employer suggested that the patient might be retrained and return to the company as a welder. In June 1991, the worker enrolled in welding classes at a local community college and is currently in advanced training. Tuition and other related costs are paid as part of his employer's workers' compensation insurance policy.

The employer's commitment to having the injured employee return to work in some capacity is very important. All efforts subsequent to this accident have been with that goal in mind. Initially, insurance reserves were set up for $80,000 in medical costs for this case and $89,517 for indemnity costs. Currently, actual costs are $57,453 for medical care and $31,739 for indemnity benefits. While the immediate costs have been substantial, they are still considerably less than had been originally anticipated.

A result-oriented process that places equal emphasis on physical and vocational rehabilitation is absolutely crucial for both serious injuries and high-frequency, high-cost injuries. Helping disabled workers recover their health and return to productive employment as quickly as possible helps them maintain a better attitude, which results in fewer medical problems and reduced costs over the years.

The Employee's Role

IT MUST BE REMEMBERED that employees, too, have a role to play in this team effort. Besides operating equipment safely or completing specific job duties in a safe manner, workers can participate in safety improvement team to develop ideas for preventing or controlling accidents. They can offer suggestions for safety improvements to members of those teams or to management. And, if a co-worker is injured, they can keep in touch with the employee, thus reinforcing the company's interest in the matter and further encouraging a recovery.

Managed care goes far beyond cost containment; it is the result of a solid partnership between an employer, its employees and its insurer or service company. It encompasses accident prevention as well as disability management. By working together and placing equal emphasis on prevention and injury mitigation, employers can reduce workers' compensation costs. If an accident does not happen, there is no need for medical care, rehabilitation or any other responses provided by the system. On-the-job education programs and safety review committees are absolutely essential to holding the line on costs.

If an accident does occur, the focus shifts directly to the injured worker. Employers who have had the most success work with employees before an accident happens to let them know that the company is committed to providing quality care. They show interest and concern from the start to reinforce the employee's desire to return to work. This small but crucial step goes a long way toward minimizing disputes and holding down costs.

[John Ryan is vice president of the Liberty Mutual Insurance Group in Boston.]
COPYRIGHT 1992 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:use of managed care in workers compensation; includes article which offers tips to employers
Author:Ryan, John
Publication:Risk Management
Date:Jun 1, 1992
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