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Partnership, Cost and Care.

Public-private partnerships between states, managed care providers, physicians, and employers are helping state workers' compensation bureaus get a handle on rising costs--and provide quality care to employees.

In the mid- to late-80s, when workers' compensation medical expenditures were a growing concern for employers and insurers, many companies began turning their attention to a concept that helped curb escalating costs and deliver quality medical care to employees in the group health arena-managed care.

Indeed, by the early to mid-90s, a number of states began legislating managed care in their workers' comp programs. Today, six states (Colorado, Florida, Nevada, North Dakota, Ohio, and South Dakota) have mandated the use of managed care in workers' comp, and 19 states have implemented managed care regulations.

While the initial focus was on cost containment, a number of states have begun turning their attention to assessing the impact on the quality of care received by injured workers. By partnering with managed care providers, physicians, and employers, many state workers' comp bureaus are experiencing successful outcomes.

According to the Workers Compensation Research Institute (WCRI), based in Cambridge, Mass., the strategies most often used by state workers' comp programs to contain medical costs include managed care, medical fee schedules, utilization review, provider choice, and treatment guidelines. WCRI's most recent study of state workers' comp cost-containment strategies, "Managed Care and Medical Cost Containment in Workers' Compensation, A National Inventory, 1998-1999," reports that the most common cost-containment measure, in place in almost every jurisdiction, is the restriction on an employee's ability to choose or change medical care providers.

In addition, the report notes, "Measuring what works in existing innovations in medical cost containment has captured the attention of policymakers and practitioners and is emerging as the new focus of cost-containment strategies."

Unlike group health plans, workers' comp statutes often place limitations on the use of certain cost-containment methods--including the use of restricted provider networks, such as managed care organizations, HMOs, or PPOs--although their use is beginning to increase. Managed care workers' comp programs typically include a preselected group of providers or hospitals to which employees may be directed. The extent to which employers or insurers can direct care varies based on state regulations.

Mandated managed care programs include any jurisdiction where the employer/insurer is required to provide workers' comp medical services under a managed care arrangement. Injured employees are not necessarily required to obtain treatment within managed care provider networks. States with regulated managed care plans regulate--but don't require--the use of managed care arrangements according to state statutes or rules.

In many cases, the state workers' comp bureau is the certifying agency. Certification requirements typically specify the minimum number and types of providers that must be included in a managed care plan, establishment of a utilization review program, case management services, internal dispute resolution methods, and requirements for reporting data to the certifying agency. Many states also require the establishment of specific return-to-work measures, rehabilitation and safety services, treatment guidelines, staff training, peer review, quality assurance programs, and fraud detection units.

Taming the Job Killer

One program that has been particularly successful is the Ohio Bureau of Workers' Compensation's (BWC) Health Partnership Program. Since its introduction three years ago, the program has resulted in an estimated net savings of $162 million in medical and indemnity costs. But that wasn't always the case.

"In the late 80s to early 90s the workers' comp system had become a huge mess," says Jim Samuel, director, corporate affairs, for the BWC. "The governor had declared the system 'the silent killer of jobs,' and companies were leaving the state to do business elsewhere. In response to the workers' comp crisis and the cry for help from Ohio's injured workers and employers, legislation was passed in 1993 that transformed the state's workers' comp system."

The legislation created a mandatory managed care workers' comp program for Ohio's 275,000 state-insured employers, designed to reduce costs and improve the delivery of medical care for injured workers. The Health Partnership Program was formally implemented in March 1997. The program was developed with the assistance of organized labor, large and small businesses, the legal community, and health care providers. The BWC partners with certified managed care organizations, which handle the medical management of workers' comp claims.

"Our main focus is on providing quality medical care and returning injured employees to work," says Samuel. In January 1999, the BWC added a financial incentive for managed care organizations based on their ability to manage disabilities and return employees to work in a timely manner. "While we have seen a slight rise in the cost of medical treatment, we're seeing lost wage hours come down. We're addressing injuries much quicker and employees are returning to work sooner," he stresses.

"The key to the success of the program is getting injured workers to the appropriate providers, who understand occupational injuries and the state's return-to-work philosophy," says Clairmonte Cappelle, vice president of University CompCare of Cleveland, Ohio, a managed care organization that participates in the health partnership program. "The team approach provides us with a competitive advantage. We know what's going on with a claim, and we're able to provide consistent customer service."

According to the program's most recent progress report, released in March, the lag time between reporting an injury and filing a claim was reduced to an average of 25 days, compared with 66 days in 1995. By the end of 1999, the state's return-to-work rate had improved to 93.6 percent. The BWC is continuing to work with the provider community on the development and education of peer review physicians to ensure timeliness of medical decisions, timely notification of the injury to all parties involved, documentation of the rationale for health care decisions, and the application of nationally recognized treatment standards.

Outcomes Compared

Another state that's working closely with medical providers to manage workers' comp claims is North Dakota. Managed care was mandated for use in the state beginning in January 1992. In May 1995, legislation was approved that allowed employers who implement an approved risk management program to select designated medical providers for treatment of compensable injuries.

"The managed care program has helped us control medical costs, reduce premium costs, and increase the speed of claims acceptance and processing," says Gloria David, public and provider information specialist for North Dakota Workers Compensation (NDWC), the exclusive state fund. Currently, 1,100 employers participate in the managed care program, which can be implemented by either the NDWC or a third-party administrator (TPA) Managed care vendors are required to operate according to guidelines adopted by the NDWC to ensure that injured workers receive appropriate medical treatment in a cost-effective manner.

"Medical providers can establish a better understanding of the workplace and develop a relationship with employers once they learn how the workers' comp system works. We work closely with the medical community to help them determine when employees can return to work, with or without restrictions. We also provide treatment guidelines and ask for provider feedback on a regular basis," David added.

NDWC is currently working on a pilot program to monitor physicians' services and compare outcomes within various peer groups. The state hopes to eventually put together a report card on physicians' services that would help direct educational efforts. In addition, physicians could be reimbursed or given incentives for practicing within the state's guidelines. "By using a database of evidence-based clinical treatment guidelines, physicians could pull up information instantly on their computers or via the Internet to determine appropriate treatment for an individual," says David.

"Looking at doctors as part of the solution improves outcomes and helps return employees to work faster," stresses Dr. Jennifer Christian, president and chief medical officer of, a Wayland, Mass.-based organization that connects employers and insurers with physicians over the Internet to communicate about employees' return to work after an injury or illness.

"By knowing how to talk to one another, doctors, employers, and insurers can work together as partners. Closing the gap between the work site and the physician's office will ultimately reduce disability days," she notes.

Focus on Duality

In Florida, where managed care in workers' comp has been mandatory since January 1997, the Agency for Health Care Administration, part of the Bureau of Managed Health Care, aims to put medical decisions in medical professionals' hands.

The agency approves each proposed managed care plan and authorizes workers' comp insurers to offer managed care arrangements. Plans must have a sufficient number and variety of providers to ensure prompt, convenient care.

"We have medical care coordinators who are responsible for the management of an injured employee's care within the managed care network," explains senior management analyst Linda MacDonald. "Providers understand the importance of working with employers to return injured employees to work. Our goal is to set up processes of care so injured workers receive timely, quality medical treatment."

In Minnesota, which implemented a managed care program in October 1992, insurers are reporting a 15 percent reduction in workers' comp medical costs since the program was established. "We educate health care providers and certified managed care plan administrators about the importance of returning employees to work and managing disabilities," says Gloria Gebhard, medical policy analyst, Department of Labor and Industry (DLI), which is responsible for certifying managed care plans.

About one-third of Minnesota's employees are covered under managed care plans. "The rules to become a managed care plan are fairly stringent," says Gebhard. "Providers must be located in certain areas of the state, meet rules concerning the number and type of practitioners included in the network, and meet DLI criteria on treatment parameters." The state's focus on return to work is strongly emphasized.

The focus on quality medical care is also evident in California's Division of Workers' Compensation (DWC). Legislative reforms in 1993 allowed for the creation of certified health care organizations, which provide medical treatment in a managed care setting. Since the program's inception, medical costs have been reduced by $3 billion.

"The largest component of workers' comp is medical costs," stresses Richard Stephens, a spokesman for the California Department of Industrial Relations, Division of Workers' Compensation. "Managed care is a cost-effective way of providing medical care and allows the state to set standards for quality medical treatment."

Health care organizations are required to have a full-time, board-certified occupational medicine physician and one primary treating physician per 1,200 expected injuries or illnesses. The DWC sets certification criteria and monitors the organizations, which include HMOs, disability insurers, and workers' comp health care provider organizations. These organizations must provide programs for cooperative return to work and workplace health and safety; methods of reporting data to the DWC for the evaluation of effectiveness; quality assurance and grievance procedures; and provisions for peer review and utilization review.

"It's important to have doctors become accountable for helping manage injuries--and provide them with incentives to do so," says Christian of "Physicians can make better and more objective decisions about returning employees to work when the employer or insurer is a visible participant in the process. By working together, the physician, employer, and insurer can truly manage the injured worker's care."
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Publication:Risk & Insurance
Date:Jun 1, 2000
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