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What works in managed care.

THE TERM MANAGED CARE HAS BECOME one of the most misunderstood phrases in today's business world. As used by the hundreds of managed care vendors who compete in the marketplace, the phrase can mean a broad spectrum of treatment approaches ranging from an integrated, forward-thinking system that supports quality care while controlling costs to a jumble of different services whose sponsors promise a great deal, but deliver little.

As medical costs consume an ever greater share of the total workers' compensation tab, managed care vendors see a growing opportunity to apply their skills in this lucrative area. As a result, they flood the desks of risk managers with slick sales brochures that promote a dizzying array of services. However, risk managers are likely to find it difficult to judge which vendors offer the services that will best improve their workers' compensation coverage.

Despite the wide assortment of available services, risk managers interested in hiring a managed care organization to improve their workers' compensation coverage can learn how to select an effective program. To accomplish this, the risk manager must evaluate the products offered by each vendor and then select the one that provides the services that are essential for any successful managed care plan.



Sorting through the various options becomes simpler by taking a look at what works and what doesn't in managed care - especially in the area of workers' compensation. Many people view managed care as simply a catch phrase, a convenient label for an array of techniques used to damp down on rising workers' compensation costs. But a closer look at the most successful managed care systems in today's workers' compensation field suggests something different: far from being a loose collection of elements, the best managed care systems are integrated and seamless, relying on teamwork and synergy to produce results.

A good managed care system views health care as a continuum rather than a series of isolated events and operates on the belief that costs are better controlled through cooperation and communication than in pursuing deep provider discounts. The most successful systems also operate on the principle that early reporting of workers' compensation claims and early involvement in the treatment process are absolutely vital for ensuring both quality care and financial savings. Finally, these systems provide the data risk managers need to measure results and plan continuous improvements to the system.

This general framework helps elucidate the elements that should exist in an effective workers' compensation managed care system. From this framework, the risk manager can construct a checklist of services that should be part of any successful managed care plan. This checklist becomes even more important should risk managers choose to buy unbundled services, because gaps in these services can make it difficult to maintain quality service and achieve financial savings.

At minimum, a good workers' compensation managed care system should include four elements. The first is an effective system for fast claim reporting. Most workers' compensation experts agree that delays in the claim management process fuel bad results. In addition, utilization review programs fail when the review process begins well after the treatment plan is set. Delays in claim reporting can also result in needless attorney involvement when injured workers do not receive the immediate attention and support they need. And provider networks can produce little benefit unless workers learn about them before injuries take place.

In order to eliminate these problems, the leading claim management operations are devising ways to reduce the average two-to-three-week delay in claim reporting, making it easier for employers to report workers' compensation claims as they happen. The Travelers Insurance Co., for example, has built a nationwide, toll-free phone network for fast claim reporting. The average compensation claim now takes about nine minutes to report; Travelers instantly transmits claim data to the appropriate local office, where managed care activities begin immediately.

A successful workers' compensation program must also include specialized provider networks that are uniquely equipped to treat injured workers. There is a great temptation for managed care vendors, many of whom began their career in the employee benefits field, to try to use the same networks for workers' compensation. However, these networks may not contain the occupational clinics, physical therapists, neurologists, trauma experts and other specialists needed to care for injured workers. Not only are these specialists best qualified to handle the medical problems most often seen in workers' compensation cases, but their experience in handling these cases can be invaluable. In addition, providers who know the vocabulary and procedures used in the compensation system make efficient partners in the treatment process.

Well-designed workers' compensation networks are customized, yet they include virtually every type of provider an injured employee might need from hospitals, clinics, physicians, therapists and counselors to pharmacies, labs and home health care specialists. One way risk managers can identify the best networks is by studying the different provider directories published by vendors. If the risk manager sees pages and pages of names of pediatricians, obstetricians and other family practitioners, this indicates that the network has probably been "borrowed" from the employee benefits field. However, a listing that contains a small number of family physicians supplemented by a wide variety of workers' compensation-related specialists suggests a customized network.

The third element in any good workers' compensation managed care system is a utilization review (UR) program that supports, rather than undermines, the planning and delivery of quality care. To measure the quality of a vendor's UR efforts, risk managers must return to the issue of timeliness. When claims are reported quickly, UR professionals can contact medical providers early in the process; this gives both parties the best possible chance to establish a dialogue that will lead to cooperative treatment planning. The UR professionals can supplement the provider's knowledge by offering data on widely used treatments and outcomes, and can also begin setting the stage for return-to-work planning, which is an important first step toward lowering medical and indemnity costs.

In addition, risk managers should learn about the training and expertise required of a vendor's UR personnel. A vendor's sales brochures may claim that "an entire staff of doctors is available to answer questions," but does this mean that every call is answered by a physician? If inquiries aren't handled by medical professionals, then who does handle these calls? At the very least, UR staff should have a solid background in health care as well as in workers' compensation.

Information technology that enables vendors to gather data for results assessment and improvement constitutes the fourth part of a successful managed care system. Measuring the effectiveness of managed care in the area of workers' compensation is a relatively new pursuit. But leading managed care vendors are designing systems and measures that will help them evaluate their results.


Although vendors whose programs contain the four essential elements outlined above may provide excellent service in managing workers' compensation claims, risk managers should investigate a little further before making their final decisions. There are a number of other important questions - some seemingly obvious - that risk managers can ask to determine if a managed care organization is suitable for their needs.

First, risk managers should ask vendors how long they have been in business. Although this may seem like a peculiar question, the answer is nonetheless important. Experienced vendors who have generated valuable results for their clients will answer without hesitation; however, those who were literally born yesterday will lack the kind of track record that more established companies possess. The risk manager should also ask the vendor about its philosophy in regard to provider discounts. Vendors that promise immediate, across-the-board savings often rely on provider discounts to deliver those savings. But managed care systems that make discounts their main focus tend to backfire when it comes to managing costs over the long term.

In addition, an overriding concern with discounts will in many cases overshadow the greater goals of cooperation and communication. Seeing their revenues drop, and feeling little encouragement to support their managed care partners, providers may make up for their losses in a variety of ways. Some providers, for example, may simply order more units of care for injured workers; others may perform extra tests. Unless UR efforts can reestablish a sense of cooperation, an adversarial atmosphere may develop - one that hampers quality care, reduces the effectiveness of return-to-work programs and at its worst encourages the growth of employee lawsuits. In the end, the most generous provider discounts may be canceled out.

Another important issue to determine is whether the vendor's provider networks are managed locally. Few organizations of any kind can be managed capably from afar. This is especially true for provider networks, where one-on-one relations with health care providers are essential. Network effectiveness grows when managed care personnel make it their business to meet regularly with providers, offering the information and support that foster ongoing cooperation. If a vendor's notion of network management involves flying in once a month for quick visits with a few providers, risk managers should weigh this information carefully.

Risk managers should also determine whether a vendor's UR program makes use of special software and data bases. The information technology available to managed care vendors today can greatly enhance their UR efforts; knowledge-based systems can place a wealth of information about diagnoses, treatments and outcomes at the fingertips of UR professionals. In addition, specially designed practice review software can help UR professionals evaluate specific procedures that are commonly used in workers' compensation. For example, software has helped The Travelers review cases where arthroscopy, carpal tunnel surgery, laminectomy or spinal fusion are recommended. In about 15 percent of these cases, UR personnel are able to help caregivers plan equally effective treatments that cost less overall.

Finally, the risk manager should find out whether the vendor provides automated bill review services. Retrospective bill review should not serve as a substitute for concurrent utilization review, but should be practiced in tandem with UR to help identify errors and look for signs of potential abuse. Although these services can be performed by people rather than by machines, automated review brings an extra measure of speed and efficiency to the process. Additionally, it serves as another point for the collection of valuable data that can link diagnoses with the required procedures and their ultimate costs.

For the risk manager, knowing what works in workers' compensation today is the key to building the right managed care system for the company's needs. Whether the risk manager is considering hiring one vendor or several, the issues of integration, timeliness and quality of care should serve as the means of measuring their services. Ultimately, the best organizations are those whose structure, philosophy and staff provide the unified support necessary to deliver quality care at affordable costs.


Though the concept of managed care evolved largely in the realm of employee benefits, a great deal can be learned by examining its history and eventual arrival on the workers' compensation scene.

The health maintenance organization (HMO), an early initiative that later became a cornerstone of many managed care programs, made its debut in the 1930s. HMOs emerged during the Great Depression as one means of providing affordable medical services to employees and their dependents. Although the first HMOs did not measure units of care or study the effectiveness of treatments, they did help educate patients on the best ways to use the health care system. This remains a key element in today's best managed care programs.

Decades later, another bold initiative helped employers and insurance carriers focus on controlling rising hospital and surgical costs. Through a process known as utilization review (UR), insurers began to require that patients review their medical needs with trained UR personnel before allowing inpatient costs to be covered. Successful UR programs helped open a dialogue among patients, insurers and caregivers that aimed at the goal of providing appropriate care at affordable rates.

In the early 1980s, employee benefits managers began to merge UR programs with provider networks to achieve better care at lower costs. As a result, the evolution toward managed care in workers' compensation began. In one variation on the UR approach, insurers hired skilled nurses to coordinate and support medical care while overseeing compensation claims cases involving catastrophic or chronic medical problems. While reviewing the cost of care was certainly part of the nurses' function, their main concern lay with helping employees achieve a healthy return to work. Employers and insurers hoped this latter goal would reduce the indemnity costs that consumed the lion's share of total workers' compensation costs.

In the mid-1980s, a number of occupational health care networks appeared in California. A state law that allowed California employers the right to choose a worker's physician up to 30 days after filing a workers' compensation claim helped fuel the networks' success. In different parts of the country, others began to try the same approach, finding that even where state statutes did not give employers the option of choosing a physician, the mere existence of networks as a health care option resulted in better communication among injured workers, employers and caregivers. Later, utilization review, health care education programs and other managed care techniques were gradually added to the networks. As the 1980s drew to a close, managed care vendors who had served their clients on the employee benefits side sought to transfer their skills to the workers' compensation market.

Michael R. Costigan is vice president of the property-casualty claim department at The Travelers Insurance Co., Hartford, CT, and Dwight L. Robertson, M.D., serves as The Travelers Insurance Co. 's vice president and national medical director for workers' compensation managed care.
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:Workers' Compensation
Author:Costigan, Michael R.; Robertson, Dwight L.
Publication:Risk Management
Date:Nov 1, 1992
Previous Article:Claims-made vs. occurrence coverage.
Next Article:Recent trends in compensation planning.

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