Tag Archives: comorbidities

How to Power Down WC Medical Costs

It just makes sense. When an injured worker has an underlying medical condition, recovery is compromised in one way or another. The case will be more complex, and it is likely to have a longer duration, higher severity scores and cost more. A recent article published by Denise Johnson in Claims Journal describes how identifying comorbidities early can help control workers’ comp claim costs.

Johnson identifies common comorbidities to watch for, including obesity, diabetes, hypertension and depression. There are many more, too. For instance, a pregnant injured worker will require careful medical management. Pregnancy should be considered a comorbidity and followed closely. Other examples include HIV, hepatitis C, cardiac disease and chronic pulmonary disease. The important thing is to identify the comorbid conditions in claims so they are monitored carefully and referred to nurse case management early.

See also: 25 Axioms Of Medical Care In The Workers Compensation System  

Comorbid diagnoses can be found in the data—usually. Treating doctors can include the comorbid diagnosis in the list of diagnoses on the bill, but sometimes they do not. They might consider a general health problem irrelevant to a workers’ comp claim, while it might be critical.

Reviewing diagnoses in a claim by the date they were added can be revealing. A diagnosis of diabetes or obesity can appear weeks after the injury date and well into the treatment process. Moreover, when in the course of treatment a diagnosis appears can be enlightening and deserves attention.

Some comorbid diagnoses appear late in the data because they are newly discovered or the treating doctor becomes aware of them later. An example is discovering a diagnosis for a mental disorder in the data long after the actual injury.

A mental disorder diagnosis might result from delayed or unsuccessful recovery as the patient acts out in frustration. Or the late diagnosis might imply previously unrecognized psycho-social factors. Nevertheless, the data should be monitored continually to tag any diagnosis that creeps into the claim picture at any point.

When comorbid or any apparently unrelated diagnoses appear later in a claim, it could be a pre-emptive signal of poor response to treatment or even impending litigation. Monitoring the data continually to uncover new diagnoses is essential to avoid missing subtle issues.

Data can be made smarter by the form and mechanism in which it is presented to those managing the claim. The manner in which diagnostic data is portrayed for claims reps and medical managers can be not only informative, but actionable. An example is portraying all diagnoses by the date they were added to the claim in bills. Such views can disclose subtleties about what is occurring in the treatment process and inform those managing a claim of ensuing problems.

See also: Even More Tips For Building A Workers Compensation Medical Provider “A” Team  

Identifying comorbidities and other troublesome conditions in claims using predictive analytics and continuous data monitoring leads to early intervention and best results. For additional perspectives on this topic, please see, “Analytics-Informed Early Intervention Drives Best Outcomes.”

Healthcare Reform’s Effects on Workers’ Compensation

Since its passage in 2010, the Affordable Care Act (ACA) — commonly referred to as healthcare reform — has been the subject of intense political debate and a source of anxiety for many employers. Although most employers have focused on the law’s health benefit requirements, the ACA is also expected to affect how they manage their workers’ compensation costs. Employers should understand how reform will affect the quality of care available to their employees, the calculation of workers’ compensation premiums and claims filings — and what employers can do to manage those effects.

Workers’ Health Proponents of the ACA say it will lead to a healthier society. Because more people will have access to healthcare, advocates say, there will be a reduction in comorbidities — additional diseases or disorders that individual patients often have along with a primary disease or conditions. For example, diabetes and hypertension are typical comorbid conditions of obesity. These comorbidities can frequently complicate workers’ compensation claims. Consider that a California Workers’ Compensation Institute analysis of claims from 2005 to 2010 found that average benefit payments on claims for employees with obesity as a comorbidity were 81% higher than those without. There is, however, no significant evidence to support the contention that an employee is less likely to file a workers’ compensation claim simply because the employee is insured. For example:

  • A recent Assured Research study examining health insurance penetration rates and workers’ compensation loss ratios in individual states from 1999 to 2011 showed little correlation between the two measures.
  • Data from the Centers for Disease Control and Prevention indicate that heart disease remains the leading cause of death in the U.S. and that the percentage of Americans with a high body mass index has steadily climbed over the last 50 years — two trends that are not confined to the uninsured population.

Cost Shifting Employers have long been concerned that injuries from non-work-related causes will be shifted to workers’ compensation. Doing so is tempting because of workers’ compensation’s combination of higher reimbursement rates for medical providers and lack of deductibles and copayments for employees. There is significant evidence to show that treatment for the same diagnosis costs more under workers’ compensation than under group health insurance because of higher reimbursement rates and greater utilization of services. A recent Workers’ Compensation Research Institute study of 16 large states, for example, showed that workers’ compensation payments for shoulder surgeries were often significantly higher than group health medical payments for the same procedure. Some have speculated that the greater access to health insurance promised by the ACA will reduce this shift to workers’ compensation. However, it has become clear that the law will not result in all Americans having health insurance coverage. With the ACA requiring that employers offer coverage to all employees working 30 or more hours per week starting in 2015, one in 10 large companies are planning to cut back on hours for at least a portion of their workforce, according to Mercer’s National Survey of Employer-Sponsored Health Plans 2013. Other employers are using higher copayments and deductibles to help offset cost increases. It appears, therefore, that the financial incentive for employees to shift treatment toward workers’ compensation will continue under the ACA.

Access to Care Probably the most predictable outcome of the ACA is that it will increase the number of individuals in the U.S. with health insurance coverage. Despite the potential benefits, this could put additional stress on a health are system that is already short on doctors. Among the 34 member nations of the Organisation for Economic Co-Operation and Development, the U.S. ranks 27th in physicians per capita (see Figure 1). And this problem does not appear to be going away: The Association of American Medical Colleges forecasts that physician demand will dramatically outpace supply over the next decade, leading to a shortage of more than 90,000 physicians in the U.S. in 2020. This is particularly troubling as it relates to specialists — for example, orthopedic surgeons — and the potential for delays in obtaining diagnostic tests and scheduling elective surgeries and other procedures. Longer periods of disability and complications as a result of such delays would ultimately drive workers’ compensation costs up. With this added pressure on a limited number of medical providers, it becomes more important than ever for employers to develop medical networks that focus on quality of care and outcomes — even if it means paying more on a fee-for-service basis. Employers that pay their medical providers fairly and quickly will have more timely access for their injured workers and should ultimately have lower workers’ compensation costs.

Standards of Care Traditionally, the healthcare industry’s focus has been on volume; more patient admissions, tests and procedures translated to higher revenues. Post-reform, however, the industry has shifted its focus to improving standards of care and achieving better patient outcomes. If this transition results in less emphasis on costly procedures, which often produce questionable results, workers’ compensation costs could be reduced. Although it remains to be seen whether the standards of care developed under the ACA for group healthcare would be enforced under workers’ compensation, this is a promising development for employers.

Premium Refunds The ACA provides for insurers to rebate premiums to employers that have better than expected performance with their healthcare programs. Employers can either refund such premiums back to their workers or use them to offset future premiums. The National Council on Compensation Insurance (NCCI) has indicated that if premium refunds are given to employees, this would be considered payroll under workers’ compensation premium calculations. In other words, having a good performance on its group health program could increase an employer’s workers’ compensation program costs because premium calculations are tied to payroll. Employers should keep this in mind when deciding what to do with healthcare premium rebates that may be received.

Managing the Effects of Healthcare Reform There is little doubt that healthcare reform will have an impact on workers’ compensation costs and claim trends. And while the extent will not be known until the ACA has been fully implemented, employers can take steps now to lessen any potential negative impacts, and increase the value of the positives. For example, employers should:

  • Increase efforts to identify medical providers that can provide the best quality care for injured workers and take the necessary steps to ensure the workforce has access to these providers.
  • Carefully manage the approach to healthcare premium rebates, which could affect how payroll is calculated under workers’ compensation.
  • Closely monitor any shifts in injury claims to workers’ compensation. Despite the ACA’s promise of greater access to health insurance coverage, there remains a financial incentive for employees to seek treatment under workers’ compensation rather than group health.
  • Remain committed to loss-control efforts. Don’t let concerns over the ACA cause a loss of focus on this key area.

How to Optimize Nurse Case Management in Workers' Comp

Traditionally, in workers’ comp, nurse case management (NCM) services have been widely espoused yet misunderstood and underutilized. The reasons for underutilization are many. Tension between NCM and claims adjusters is one. Even though overburdened, adjusters often overlook the opportunity to refer to NCM.

Also to blame is the NCM process itself. In spite of professional certification for NCM, the process is poorly defined for those outside the nursing profession. More importantly, NCM has difficulty measuring and reporting proof of value.

Underlying issues

Continuing to do business as usual is not acceptable. NCM needs to address several issues to qualify as legitimate contributors. First, NCM needs to articulate its value. To do that, NCM must computerize and standardize its process and measure and report outcomes, just like any other business in today’s world.

Too often, computerization for NCM is relegated to adding nurses’ notes to the claim system. However, such notes cannot be analyzed to measure outcomes based on specific nursing initiatives. 

In most situations, an individual NCM interprets an issue, decides on an action and delivers the response. The organization’s medical management is thereby a subjective interpretation rather than a definable, quantifiable product. 

Granted, the NCM is a trained professional. But when the product is unstructured, variables in delivery cannot be measured or appreciated. A process that is different every time can never be adequately defined.

It's crucial to establish organizational standards about what conditions in claims require referral to NCM—without exception. This will remove the myriad decisions made or not made by claims adjusters to involve the NCM. The referral can be automated through electronic claims monitoring and notification. NCM takes action on the issue according to organizational protocol, and the claims adjustor is notified.

Measure

When the conditions in claims that lead to intervention by NCM are computerized and standardized, the effects can be measured. Apples can legitimately be compared with apples, not to oranges and tennis balls. Similar conditions in claims are noted and approached the same way every time, so the results can be validly measured.

Results in claims such as indemnity costs, time from DOI to claim closure or overall claim cost can be compared before and after NCM standardization. Comparisons can be made across different date ranges for similar injuries going forward to measure continued effectiveness and hone the process.

Measuring outcomes is the most essential aspect of the process. Value is disregarded unless it is defined, measured and reported.

For non-NCMs, the dots in medical management must be connected to see the picture. Describe what was done, why it was done and how it was done the same way for similar situations and in context with the organization's standards. Then report the outcome value. Establish a continuing value communication process.

NCM constituencies should be informed in advance of the process and outcome measurements. Define in advance how problems and issues are identified and handled and how results will be measured. Then proceed consistently.

Recognized NCM value

Even as things now stand, NCM's value is being recognized. American Airlines recently reported it is adding NCM to their staff and will refer all lost time claims. The company cited a pilot project where nurse interventions were documented and measured, proving their value in getting injured workers back to work. 

Christopher Flatt, workers’ compensation Center of Excellence leader for Marsh Inc., wrote in WorkCompWire (http://www.workcompwire.com/), “One option that employers should consider as part of an integrated approach to controlling workers’ compensation costs is formalized nurse case management. Taking actions to drive down medical expenses is an essential component to controlling workers’ compensation costs.”1

Industry research and corporate or professional wisdom regarding risky situations can supply the standardized indicators for referral to NCM. American Airlines uses the standard that all lost time claims should be referred to NCM. But there are many, sometimes more subtle, indicators of risk and cost in claims that can be identified early through computerized monitoring and referred for NCM intervention.

Another example of developing standard indicators for referral is based on industry research that shows certain comorbidities, such as diabetes, can increase claim duration and cost. These claims should also be referred to NCM. Yet another example is steering away from inappropriate medical providers who can profoundly increase costs. 

As a long-ago nurse and a longer-time medical systems designer and developer, I believe the solution lies in appropriate computerized system design. The elements need to be simple to implement, easy to use and consistently applied. Only then can NCM offer proof of value.

1 Christopher Flatt: The Case for Formalized Nurse Case Management

Workers’ Compensation Comes of Age

With close to $40 billion in net written premium, the workers’ compensation line of business is an important driver of financial success for many property/casualty insurers. It has come a long way since its inception roughly 100 years ago. 

As we move forward into the second century of workers’ compensation, it’s possible to anticipate many of the challenges (and opportunities) that are coming. What follows is a checklist of areas to watch.

CLAIMS FREQUENCY—Many aspects of the U.S. economy should help keep claims frequency flat or negative in the near future, including:

An increasing underground economy

In April, Mark Koba, a senior editor at CNBC, chronicled the growth of a large shadow economy of workers who, because they are unable to find regular employment, are taking jobs under the table with no reportable income or taxes. Since these workers have no workers’ compensation insurance protection, medical costs may shift from the workers’ compensation system to the health care system. With some estimates showing construction employment at just 75 percent of 2007 levels, it’s possible that a portion of these jobs are being filled by under-the-table workers. If that’s the case, these traditional higher-frequency classes may not show up as heavily in the industry’s calculations as they have in the past—moderating frequency trends going forward.

Growth in Social Security disability payments

Also in April, CNN Money reported a 29% increase in the number of Americans with little or no employment income who receive disability payments. For those who were formerly employed, the increase was a staggering 44%. In 2011, according to the CNN report, the federal government spent almost $250 billion on disability payments to some 23 million Americans. Although this is a ballooning liability for the federal government, the impact on workers’ compensation insurers is largely in the opposite direction. As workers who are less than healthy exit the workforce, the remaining pool of healthier workers will lead to claims frequency decreases in the future.

Expansion of other state and federal backstops

Since the recession began, there’s been a dramatic increase in federal and state assistance. A March article that appeared on the MoneyNews website reported that the number of food stamp recipients reached a record high in 2012, with an average of 46.6 million people receiving food stamp benefits each month. According to Supplemental Nutrition Assistance Program (SNAP) data, total food stamp benefits increased from $30.4 billion in 2007 to $74.6 billion in 2012, a 145% increase. As state unemployment benefits and other backstop programs cover more people for longer periods, the pool of future workers’ compensation claimants likely to file claims shrinks. When individuals leverage government backstop programs and choose not to work, workers’ compensation insurers benefit.

Older workers not retiring

People are working longer. For the manufacturing industries, this most likely means a dramatic reduction in the number of new employees entering the workforce. Although older workers have higher claims severity, new workers have significantly higher claims frequency.

Workplace health and safety efforts

The risk management and environmental, health, and safety departments of companies continue to focus on enhancing return-to-work programs, promoting workplace wellness, and improving workplace safety. These efforts continue to bear fruit, especially as the workforce ages and the adverse impacts of obesity receive more attention.

Part-time to full-time bias on frequency

Workers’ compensation frequency is often calculated as a ratio of the number of lost-time claims per an adjusted payroll amount. To the extent that recent payroll increases have been driven by more part-time workers converting to full-time work, the doubling of exposure for current workers isn’t the same as doubling the number of workers. In the short term, a heavier reliance on existing employees working longer hours very likely will help make frequency statistics look better. This trend could reverse if smaller employers keep their head count under 50 employees or reduce employee hours to part time (under 30 hours) to mitigate the impact of the employer mandate in the Affordable Care Act (ACA). Newly added part-time workers are likely to bring higher claim frequency, while workers taken below the 30-hour threshold to avoid employer-mandated health care might have an increased incentive to shift claims to workers’ compensation.

SEVERITY—A number of coalescing factors could drive medical and indemnity severity higher in the years ahead, including:

Rising interest rates

With the Federal Reserve finally winding down its quantitative easing programs, interest rates will be heading higher. To the degree that this coincides with an improving economy, indemnity severity is likely to tick up with rising wage pressure. Medical severity, which historically has run at roughly double the medical consumer price index, is likely to rise from the 3% levels we are experiencing today. Severity trends in the 6% to 7% range may be manageable in light of today’s rate increases, but it will be difficult to expand profit margins over the long term if medical inflation returns to double-digit levels.

Claims predictive modeling

Companies increasingly are using advanced analytics to identify claims for triage as early as the first notice of loss. By identifying the highest severity claims, assigning the appropriate resources for triage, and doing a better job on referrals from special investigative units, companies are favorably affecting the duration and severity of claims.

Obesity

The obesity statistics are staggering. The Centers for Disease Control and Prevention (CDC) estimates that in 2010, 36% of Americans age 20 or older were obese. The Robert Wood Johnson Foundation in a 2012 report predicted that obesity rates for adults over the next 20 years would reach or exceed 44% in every state in the United States, and exceed 60% in 13 of those states. Recent NCCI studies show that the ratio in the medical costs per claim of obese to nonobese claimants at the end of five years is 5.3, and the duration of obese claimants is five times that of nonobese claimants. Given the fact that workers of all ages are struggling with maintaining a healthy weight, workers’ compensation costs will only increase as other comorbidities associated with obesity increase costs.

An aging workforce

As workers age, gradual changes in hearing, vision, strength, and balance may lead to increased probabilities and durations of workplace injuries, including sprains, strains, slips and falls, carpal tunnel syndrome, knee and shoulder problems, hip replacements, and back issues. A 2012 NCCI study, however, concluded that an aging workforce appears to have far less of a negative impact on workers’ compensation claims costs than was previously thought. Although there’s evidence that injured workers older than 35 years have higher costs than those younger than 35, costs associated with injured worker cohorts older than 35 tend to be quite similar. And while older workers have more costly injuries, the NCCI observed that such injuries are becoming more prominent in younger workers.

While the NCCI has presented conflicting data on the claim costs of older workers, we know that the number of older workers in the workforce will nearly double in the next 15 to 20 years. The U.S. Department of Health and Human Services estimates that the 39.6 million persons age 65 years or older today will increase to roughly 72.1 million by 2030. That equates to roughly one in every five Americans being 65 or older. While the jury is out on the precise impact of an aging workforce on claim frequency and severity, an aging workforce increases the likelihood of more severe injuries and longer claim durations.

LONG-TERM TRENDS—On the plus side, several trends are emerging that could benefit workers’ compensation insurers in the long run, including:

Price transparency

When the Surgery Center of Oklahoma in Oklahoma City started posting its prices online four years ago, it forced competing area hospitals to follow suit. Although it will take time to catch hold across the country, greater price transparency in the delivery of health care could benefit workers’ compensation insurers. Running counter to this trend is the pace of consolidation in health care. The ACA, with its focus on accountable care organizations (ACOs), electronic medical records, and other coordination-of-care rewards, is fueling consolidation in health care at an unprecedented rate. With increased consolidation comes increased local pricing power, and workers’ compensation insurers could find themselves on the wrong end of that pricing pendulum.

Opioid use

The epidemic of opioid abuse that had swept the nation is finally starting to abate. State governors, attorneys general, and legislatures are passing laws to toughen criminal and administrative penalties for doctors and clinics, establishing standards of care for doctors who prescribe narcotics, increasing the reporting and tracking of prescriptions, and limiting reimbursements to physicians who dispense prescription drugs to no more than a certain percentage above cost. State agencies, local agencies, and the U.S. Drug Enforcement Administration also are aggressively prosecuting individuals involved in illegal prescribing activity and “pill mills,” causing physicians, nurse practitioners, and pharmacies to surrender their federal licenses to dispense controlled substances. In the most serious cases, the offenders have had to surrender their medical licenses to state medical/pharmacy boards. Physicians and medical boards also have developed resources to guide physicians on responsible opioid prescribing, and there’s been a rise in the number of physicians who have had their licenses suspended by state medical boards for the unlawful distribution of controlled substances and for prescription drug fraud. Organizations like the Federation of State Medical Boards and Physicians for Responsible Opioid Prescribing also have joined the fight.

Given the high-profile nature of these efforts to define the proper use of opioids in treating injured workers, it’s likely the workers’ compensation line will see an effect. With medical expenses exceeding 60% of workers’ compensation costs, 20% of that going toward prescription drugs, this would be a welcome development.

Medical tourism

Medical tourism continues to grow as an option for patients all across America. An airline magazine recently had advertisements from hospitals outside the United States showing savings of 50% to 80% on procedures such as knee and hip replacements that are common in workers’ compensation. The general cost in the United States for a knee replacement was shown at $34,000, versus the overseas cost of just $10,000. A hip replacement was listed as $35,000 versus the overseas cost of just $11,000. Even with the cost of airfare, transportation, and hotel accommodations, the potential savings are significant (acknowledging that we aren’t attempting to control for quality or safety differences). With several companies and health insurers investigating offering medical tourism options to their employees and insureds, there could come a day when workers’ compensation insurers could leverage these tremendous savings to help drive down severity for certain procedures. While businesses may welcome the cost savings, we recognize that persuading state legislatures and injured workers to agree to these practices could be difficult.

The ACA

Several economist and workers’ compensation industry stakeholders have predicted that the ACA will create shifts in the workers’ compensation industry. But exactly how isn’t clear. Many refer to the Massachusetts Health Care Reform Act to bolster the argument that the ACA will lower overall health care costs and workers’ compensation costs. Under Massachusetts health care reform, costs within the workers’ compensation system decreased. Although ACA is more complex, similar provisions in the two laws allow a comparison of the impact on the workers’ compensation system. Analysis by RAND in 2012 found that expanding coverage to previously uninsured individuals resulted in a drop in workers’ compensation costs in Massachusetts. Finding an association between being insured and the frequency of workers’ compensation claims, RAND concluded that expanding the population holding group health insurance could reduce cost shifting to workers’ compensation.

In a May blog posting, Joe Paduda, a principal at Health Strategy Associates, affirmed his belief that the overall effect of the ACA on workers’ compensation would be positive, citing among other things, that it would lessen the motivation for cost shifting and fraudulent claims. Others have argued that increasing access to care and expanding preventive services, coupled with employer-sponsored wellness initiatives, should make the working population healthier overall, leading to a reduction in claim frequency and faster recoveries when injuries do occur.

On the other hand, some speculate that the ACA will increase workers’ compensation costs over time by straining already scarce primary care resources and causing longer wait times for treatment. The projected shortage of primary care physicians could make it more difficult for injured workers to find a physician. This, in turn, could lead to increased costs because of extended disability durations while waiting to see a physician. Others have pointed out that a decreasing supply of physicians and increasing patient demand could drive costs higher. Other factors that could affect cost shifting are significant increases in copayments and high-deductible health plans—costs that employees must bear. This could motivate some employees to file workers’ compensation claims for nonoccupational injuries.

According to findings from a recent study by Assured Research, a connection between increased health insurance coverage and decreased workers’ compensation costs isn’t supported by the data. The study evaluated health insurance penetration rates by state from 1999 to 2011 and corresponding statewide workers’ compensation loss ratios. After adjusting for national workers’ compensation trends, the results showed 31 states with rising health care penetration that resulted in decreased loss ratios. On the other hand, 20 states with rising health care penetration experienced increased loss ratios.

Immigration reform

There are approximately 11 million undocumented people living in the United States. Many don’t file workers’ compensation claims for fear of being deported. The general consensus is that legalizing undocumented immigrants will increase workers’ compensation claims. At the same time, immigrant workers are more prevalent in high-risk sectors such as agriculture, construction, and landscaping. With an influx of workers into a high-risk injury class, the potential impact on frequency and severity in the workers’ compensation system can’t be overlooked.

Anticipate and Plan

British Prime Minister Benjamin Disraeli once quipped, “What we anticipate seldom occurs, what we least expect generally happens.” Still, it’s important to anticipate and plan for the future risk. There’s little doubt that change is looming for workers’ compensation insurers and that actuaries have a key role to play in identifying and managing the transformation.

Authors

Denise Gillen-Algire and Kevin Bingham collaborated with Bill Van Dyke and William Wilt in writing this article.

Bill Van Dyke, an associate of the Casualty Actuarial Society and a member of the Academy, is a specialist leader at Deloitte Consulting LLP in Hartford, Conn. He has extensive actuarial experience in managing and performing workers’ compensation unpaid claim reserve and pricing analyses for state funds, insurers, reinsurers, state agencies, municipalities, self-insured corporations, and captives.

William Wilt, a fellow of the Casualty Actuarial Society, is president of Assured Research, a research and advisory firm focused on property/casualty insurance. Prior to forming Assured, he held diverse roles as an actuary, as a credit and equity analyst, and in corporate development.

This article first appeared in the November | December 2013 issue of Contingencies Magazine and is © 2013 American Academy of Actuaries. Reprinted with the permission of the American Academy of Actuaries.  All Rights Reserved.