Self Insured Challenges – Controlling Medical Provider Costs

Not having to pay the uncontrollable administrative and sales expense that a traditional workman’s compensation insurance policy includes is one of the benefits of being in a self insured program. But that cost benefit could be quickly wiped out by medical providers who are not willing to negotiate rates for treating work comp injuries.

While most states, but not all, have mandated medical fee schedules for providers who treat work comp injuries, those fee schedules are typically higher than those negotiated between the providers and large insurance companies. Large insurance companies can leverage their volume to obtain more favorable fee schedules while your objective is to send those providers as little business as possible. Simply put, you as a self insured company are going to pay more for treatment of injuries than an insurance company will.

Controlling medical provider costs is an extremely challenging task if for no other reason than the complexity of relationships and sheer numbers of vendors. Not only are there the primary physicians (normally employed by a clinic) but labs, hospitals, specialists, medical supply companies, physical therapists and pharmacies each with their own billing policies, each with their own transaction codes and each with their own standards of practice. Auditing these expenses, insuring that they were necessary and actually delivered, is a task worthy of a forensic accountant.

But you don’t have a forensic accountant, you have a TPA.

Perhaps it’s because the task of auditing the costs is so daunting that most TPAs tend to "process" claims rather than investigate them. Processing a claim assumes that the data the claims office receives is accurate and the treatment delivered necessary. Investigating a claim verifies that the data is accurate and the treatments is necessary. The difference between the two approaches can add up to significant sums of money for more than the obvious reason.

Claims that are actively investigated may reveal one or more providers who consistently order longer time off before returning to work, or tests that are not appropriate for the injury, delays in scheduling follow up appointments or pharmaceuticals prescribed that have nothing to do with the injury. Holding medical providers accountable for the quality of their services is the hallmark of an effective TPA but unfortunately a rare one.

Medical providers have operated in a culture of complexity for so long that many claims organizations believe that it costs more to investigate provider services than the any possible benefit that might be realized by holding them accountable.

That simply isn’t the case.

Because you are paying more for these services than an insurance company is, it is imperative that every dollar spent is absolutely necessary and contributes to the rapid return to work of the injured employee. If those dollars are not being used effectively, then you are losing out on one of the principal financial advantages of being self insured.

More importantly, every provider must clearly understand your policy that requires return to work based on recovery at work. Providers should identify the functions that the injured worker can safely perform with his or her injury even though they may not relate directly to their principal job. Not releasing a worker for return to work until he is completely recovered and able to perform his regular assignment is not an option. Providers who do not comply with this policy should be dropped.

Every dollar paid via regular payroll is a dollar not paid in benefits and that can have a significant impact on your experience modification. Further, recovery on the job allows for at least some measure of productivity from the worker and also keeps the worker actively engaged in the process rather than sitting at home becoming accustomed to receiving benefit checks.

The key to controlling medical provider costs is your TPA. The question is, how can you measure their effectiveness other than looking at loss run reports? Would you even know where to begin? Is it possible to manage something that you can’t measure?

If you’re concerned with rising work comp rates maybe it’s time to investigate the use of a risk management consulting firm. Chicago based CXO7 specializes auditing self insured programs and has developed a proprietary analysis platform called S.C.O.R.E. that evaluates compliance with best practices, recommends improvements and even assists in selection of vendors if required. CXO7’s lengthy client list of both Fortune 500 and regional companies attest to their professionalism and effectiveness.

If you would like to learn exactly how one of the largest fast food chains shaved 30% off their workman’s compensation costs we invite you to visit www.riskmanagementcompetitiveintelligence.com Or if you’re ready to get proactive you can get your free workman’s compensation insurance analysis by visiting www.cxo7.com