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Wanted: Workers’ Comp ‘Warriors’

Employers need to define and fortify the position of workers’ comp manager. It is a sad reality that this job often falls short of the impact and respect it deserves. It owns no distinct professional standard as compared with the role of risk manager, HR manager, safety engineer or even production supervisor, and the role is often added to those positions as an afterthought. Worst of all, employers freely allow vendors (third-party administrator or broker) to assign this job’s process and tasks. I say we retire the current notion of the “workers’ comp manager” and unleash the “workers’ comp warrior.”

Why? Because “warrior” recognizes what should be the employers’ daily fight against a WC system that puts data-driven process and so-called efficiency above personal service and intervention. The term “warrior” does not imply a negative position that simply fights fraud and bad actors… Rather, this is a noble fight that seeks the best and fastest route to employee healing and return to productivity.

Consider that “healing and return to productivity” as an endeavor has been dumbed down by our industry. Vendor preferences in the name of best practices would have you believe the task is met by simply reporting a new loss and leaving the employee at the whim of the claims and managed-care team. In reality, healing and return to productivity is an extremely complicated and personal process that is easily thwarted by the insult and cross-purposes of a claims team seeking “fast track” method while a managed-care team seeks “savings” based on a rigged system of medical reimbursement. Our industry-wide elephant in the room — churning WC claims — evidences a dire lack of ability to “heal and return to productivity.”

A WC warrior fights to ease the gauntlet for employees. She proclaims the hub-position in a turning wheel of WC action while establishing vendors and other aspects as spokes. Other wheel-spokes include employee expectation and responsibilities, supervisory role, top management support and resources, experienced-based allocation of costs, return to work (RTW) culture, medical providers, cooperation, etc. No two employer-wheels are completely alike, but all need a workers’ comp warrior at the center. No single vendor can re-create or support such a turning wheel. Most critically: In practical application, no employee skips the ride to a quality medical healing and return to productivity; however, any ill-intended employee who jumps off early is easily spotted.

Quick Tip: Raise the Bar and Redefine an Employer-Based “Warrior” Position

Key aspects of a “workers comp warrior” include:

– Emphasis on employee advocacy above all else

– Technical knowledge and experience in all the processes and interactions of WC

– Claim-by-claim insight otherwise not available via the common process

– Solutions, options and strategies tailored to each situation

– Real-time interaction, not adhering to adjuster diaries

– Inclusive program with company-wide involvement and awareness

– Learning opportunities seen in a poor claim outcome

– Accepting inevitable frustrations without blaming adjusters, doctors, state laws or employees

– Not falling for the perfect-world bubble that a broker or other vendors might try to claim exists

Thought Leader in Action: At Walmart

How do you manage risk when your company is the biggest employer in the U.S. other than the federal government? Very carefully — and very well, if you’re K. Max Koonce II, the senior director of risk management at Walmart, until recently, when he took a senior position at Sedgwick. You do that partly by taking advantage of an extraordinary amount of data to identify potential problems, to use outcomes analysis to greatly shrink the number of litigation firms you use, to be highly selective about doctors used for workers’ comp and even to set up a full-sized, in-house third party administrator.

But let’s begin at the beginning:

Koonce was born in Mississippi, but his family moved to Bentonville, AR, where he has lived most of his life with his wife and family. He attended Harding University, a private liberal arts university located in Searcy, AR, where he graduated with a BBA in economics. Thinking that economics was not as challenging a career as what he aspired to, Koonce attended the University of Arkansas William Bowen School of Law to obtain his J.D.

He was immediately hired by Walmart upon his graduation in the ’90s and was given the responsibility to set up Walmart’s internal legal defense system for the roughly 30,000 Walmart employees at the time. He and his in-house team of legal aides handled all of Walmart’s workers’ comp and ultimately much of its liability claims. The program worked so well that the governor of Arkansas appointed Koonce as an administrative law judge for the state workers’ comp commission in 1997, with Walmart’s blessing. With Koonce’s departure, Walmart eliminated the internal legal program and transferred its litigation to outside legal firms.

koonce
K. Max Koonce II

By January 2000, Koonce was appointed by the governor to the Arkansas Court of Appeals. With a vacancy in the State’s Supreme Court, Koonce ran for State Supreme Court in a partisan election. During the campaign, he shared fond memories of attending all kinds of civic events, fundraisers and county fairs around the state. When he failed to get elected, Walmart brought him back to head its risk management program that same year. The program grew dramatically with his return.

Apart from the U.S. government, Walmart is the largest employer in North America. Nearly 20 million people shop at Walmart every day, and 90% of the U.S. population lives within 15 minutes of a Walmart. If Walmart were a country, it would be the 26th-largest economy in the world. Walmart manages 11,500 retail units in 28 countries; generates $482 billion in annual sales; and has 2.2 million employees (1.4 million associates in the U.S.). Koonce exclaimed that there was no other retail company to benchmark to, so his risk management department had to make up its own risk benchmarks. Interestingly, with a tightly managed work culture and such huge numbers to work with, Walmart’s risk management statistical and actuarial claim calculations have proven to be consistently accurate for many years.

Walmart’s risk management department has grown over the years to more than 40 risk management support personnel. Walmart divides its risk portfolio by working with two competing insurance brokers. Koonce said he had an incredibly talented and dedicated team of risk management professionals working at headquarters in Bentonville. “The analytics and metrics achieved by my experts,” he said, “were as good as any in the insurance industry.” He said that no relevant risk factors in Walmart’s operation went unnoticed.

Walmart’s workers’ comp program is designed to include specific doctors and medical facilities to ensure consistent care of any injured workers. Walmart manages detailed feedback from all of its employees to continue to fine tune its workers’ comp program. Koonce stated that risk management has always been a part of the Walmart culture, going back to its founding by Sam Walton in 1962; Walton wanted to help individuals and communities save money while ensuring that the company’s operations adhere to ethical decision making, good communication and responsiveness to employees and stakeholder.

Using an “outcomes-based” approach to litigation management, Walmart’s team relies on claims data analysis and metrics to choose, evaluate and consolidate the number of workers’ comp attorney firms. Max notes: “This approach forms tighter relations with a smaller number of lawyers to create a ‘one team’ approach to litigation.” In California alone, for example, the mega-retailer reduced the number of legal defense firms from more than 20 to three. The outcomes-based litigation strategy relies on a multivariate analysis using Walmart’s own claims data. Metrics are used to benchmark attorney performance and align specific lawyers with cases depending on claim facts and knowledge about an attorney’s unique skills and experience. At Walmart, claims examiners generally choose specific defense attorneys to maintain a continuing team relationship.

Besides retail store risks, Walmart also manages the largest private trucking firm in the U.S. and delivers more prescriptions than any other retailer. Asked if he had experienced any highly unusual claims during his tenure at Walmart, Koonce said that Walmart is all about awareness, control and consistency and that claims were nearly always within an expected parameter (i.e. slip-and-fall claims) and not horrific, as some employers experience. Each store location, including Sam’s Clubs, have conscientious safety response teams that sweep the stores periodically during their shifts and respond immediately to any safety hazards like floor spills.

A unique feature of Walmart is its subsidiary, a third party claims administrator (TPA) called Claims Management Inc. (CMI), at which Koonce served as president. Located in nearby Rogers, AR, CMI administers the casualty claims, including workers’ compensation, for all Walmart stores. Although most companies with national operations use insurer claims administrators (for non-self-insured operations), or multiple regional TPAs, Walmart’s CMI operation is a sizable TPA of its own with 600 employees. As Koonce explains, “CMI provides the claims oversight the company feels is desirable to maintain good control, communication and consistency.”

Unlike most national companies, Walmart has been able to maintain a highly efficient and focused risk management program through a tight-knit organization consisting of mostly local or regional employees who live and work in Benton County, AR (pop. 242, 321). Most of Walmart’s managers have been employees who have worked their way up the corporate ladder. Sam Walton once said: “We’re all working together; that’s the secret.”

Koonce left Walmart in September to serve as senior VP of client services for Sedgwick Claims Management Services. He was succeeded by Janice Van Allen, director of risk management at Walmart, who started as a store department manager in 1992. Koonce said he’s doing what he loves most at Sedgwick — helping risk managers achieve success with their internal programs.

Unnecessary Surgery: When Will It End?

Unnecessary surgery: When is it going to end? Not any time soon, unless a documented and proven approach is used by health benefit plan sponsors.

I began my healthcare career 35 years ago when, as a graduate student at Columbia University School of Public Health, I was awarded a full scholarship as a public health intern at Cornell Medical College in New York City. Dr. Eugene McCarthy at Cornell was the medical director of a Taft-Hartley joint union/management health benefits self-administered fund at the time and my mentor. I worked on the Building Service 32 B-J Health Fund, which was the focus of an eight-year study sponsored by the then-Department of Health, Education and Welfare (now Health and Human Services, or HHS) and which was the first study on second surgical opinions.

The study (1972-1980) followed union members and their families who were told they needed elective surgery and documented that roughly 30% of recommended surgeries turned out to be medically unnecessary. The study found 12 surgeries that generated the most second opinions that didn’t confirm the original diagnosis. This list comprises: back surgery, bone surgery and bunions of the foot, cataract removal, cholecystectomy, coronary bypass, hysterectomy, knee surgery, mastectomy, prostatectomy, hip surgery, repair of deviated septum and tonsillectomy.

What has changed on this list 35 years later? Very little, if anything.

USA Today on March 12, 2013, reported on a study that found that; “tens of thousands of times each year patients undergo surgery they don’t need.” After the release of this study, a former surgeon and professor at the Harvard School of Public Health stated that: “It is a very serious issue, and there really hasn’t been much movement to address it.”

A CNN special on March 10, 2013, reported that the U.S. spent $2.7 trillion on healthcare per year and that 30%, or roughly $800 billion, was wasted on care that did not improve outcomes. Sound familiar? The Cornell study said the same thing 31 years earlier.

Public and private employers, health, disability and workers’ comp insurers and state and federal programs such as Medicare and Medicaid are doing very little, if anything, to effectively address this problem. The solution to preventing unnecessary care and surgery is not in raising co-pays and deductibles and other out of pocket costs unless they are tied to consumer education and well-designed second-opinion programs.

In response to the USA Today article, a leading medical expert said, “You can shop for a toaster better than prostate surgery, because we don’t give patients enough information.” Another leading surgeon stated; “Far too many patients are having surgeries they don’t need, with associated major and severe complications such as long-term disability and even death.” Furthermore, “I see patients with neck and back problems, and at least 1/3 are scheduled for operations they don’t need, with no clinical findings except pain.”

What is the principal focus of today’s multibillion-dollar managed care industry, especially in workers’ compensation? Provider discounts, that’s what. But how is it a savings if the patient receives a discount on an operation he doesn’t need?

Most often, when I ask that question I am met with blank stares.

The New England Journal of Medicine in 2009 stated that a common knee surgery for osteoarthritis “isn’t effective in treating patients with moderate to severe forms of the disease.” Yet, according to federal researchers, 985,000 Americans have arthroscopic knee surgery each year, and 33% (more than 300,000) are for osteoarthritis “despite overwhelming medical evidence that arthroscopic surgery is not effective therapy for advanced osteoarthritis of the knee.”

According to the chairman of cardiovascular medicine at the world-renowned Cleveland Clinic, the U.S. health system is “doing a lot of heart procedures that people don’t need.” For example, angioplasty stent surgery in heart patients will likely relieve pain but “will not help a person live longer and will not protect against having another heart attack… What’s worse is that many of these surgeries will lead to bad outcomes.” He said, “This procedure should be performed for patients having a heart attack, but 95% of patients who have angioplasty surgery are not the result of a heart attack.”

The estimate on the direct medical costs to American businesses for low back pain is $90 billion a year; this doesn’t include workers’ compensation indemnity and litigation costs, disability costs, sick days and indirect costs such as lost productivity. As reported in my previous article, The Truth about Treating Low Back Pain, the Journal of the American Medical Association (JAMA) estimated that 40% of initial back surgeries, which amounts to more than 80,000 patients per year, have “failed back surgeries.” These unsuccessful back surgeries most often lead to a lifetime of debilitating back pain and billions more in long-term disability and Social Security Disability Insurance (SSDI) costs. These patients — four out of every 10 — all wish they had received a second opinion now. Yet when I recommended a second-opinion program to a union health fund in New Jersey, the manager said: “I am not going to tell my union members they need to get a second opinion.” True story.

Although we were scheduled to have an informal lunch meeting, after I recommended the fund consider a second-opinion program the “lunch” part of the meeting disappeared, even though I had driven two hours to get there. Maybe that is where the expression there is “no such thing as a free lunch” comes from? The health fund manager was downright indignant about my suggestion even though the first-second opinion program was conducted on behalf of a union health fund and was overwhelmingly successful.

He did describe, however, how upset he was about the fund’s rising healthcare costs. I guess he just wanted to be able to complain about it instead of actually doing something about it on behalf of his members. (The president of the union confided in me afterward that he had failed back surgery many years ago and wished he had gone for a second opinion.)

A colleague of my mine who is a senior vice president of product development for a leading third-party administrator (TPA) confided that insurance companies and TPAs will not implement programs that I could design and implement for their clients because they would never admit it was a good idea, given that they didn’t invent it.

I also hear all the time from so-called experts that second surgical opinions don’t work and don’t save money.

But large self-insured employers and health, disability and workers’ comp insurers should follow the lead of the top sports teams who send their top athletes for second opinions all the time to places like the Hospital for Special Surgery (HHS) and New York-Presbyterian Hospital/Columbia Medical Center in Manhattan or UCLA Medical Center in Los Angeles.

When I send client employees or friends and neighbors for second opinions, they often tell me that their appointment was with the same doctor Tiger Woods or Derek Jeter went to. My response is, “exactly.” Very often, conservative treatment is recommended and produces great patient outcomes, especially for back injuries and diagnoses for conditions like carpal tunnel syndrome. (See Carpal Tunnel Syndrome: It’s Time to Explode the Myth.)

Most, if not all, top surgeons I have met welcome second opinions for their patients because, when surgery is recommended, they want their patients to be assured that another expert also believes it is in their best interests.

I interned at the first second-surgical opinion in the country. I wrote my master’s thesis at Columbia on what I learned and how to improve upon the design and administration of the very successful Cornell program. Although the phrase, “I want a second opinion,” is now common terminology in America from auto repair to surgery, it has not reduced the overall amount of unnecessary surgery. If your program is not successful or not saving money it is because there is a serious flaw in the design and administration.

What I have documented since I designed or administered the first corporate second-opinion benefit programs back in the early 1980s are several key components of a successful program. First, it must be mandatory for the plan member to receive a second opinion for selected elective surgeries. Remember, elective surgery, by definition, means scheduled in advance, not for life-threatening conditions. Second, the second-opinion physician must not be associated with the physician recommending surgery. The physician must truly be an independent board-certified expert. Third, the second-opinion physician cannot perform the surgery; this provision removes any conflict of interest.

In addition, although a plan member should be required to receive a second opinion to receive full benefits under the health plan, the decision on whether to have surgery is entirely up to the patient. The whole idea is to educate the patient on the pros and cons of proposed surgery and the potential benefits for non-surgical treatment or different type of surgery (lumpectomy vs total mastectomy, for example). (I also developed a process of administrative deferrals for instances when it would be impractical to obtain a second opinion or when the conditions were so overwhelming that the need for a second opinion could be waived.)

It is only by helping to make patients truly informed consumers of healthcare and educating them on the benefits of alternative surgical treatments that a program can be successful. Voluntary programs simply don’t work. Rarely do patients seek second opinions on their own, and most often do not know where to obtain and arrange for a top-notch second opinion. In addition, they often feel uncomfortable and do not want to tell their physician they are seeking a second opinion. That is why I found that a program only really works when patients can state that their “health plan requires that I get a second opinion.” The mandatory approach reduces unnecessary surgery dramatically and saves the plan sponsor money with at least 10:1 return on investment.

The most amazing reduction of unnecessary surgery and resulting savings to the plan sponsor comes simply by implementing and communicating the benefits and requirements of the program design that I outlined above. The reason is known as the “Sentinel Effect.” What the original Cornell study and others have documented is at least a 10% reduction in the amount of recommended elective surgery simply from announcing the program is now in effect. No need for an actual second opinion; merely require one!

Now that is cost-effective!

7 Ways to a Better Work Comp Plan

Although some improvements in workers’ compensation claim results require large investments, resources and complex implementation phases, others require more commitment than dollar investment and are simple in execution yet sublime in positive impact. The seven suggestions that follow are field-tested and proven effective. These seven will not only improve the results of your work comp program but will enhance workers’ respect for their jobs and increase cooperative attitudes. Best of all, these seven can be initiated quickly and with moderate to low effort:

Quick-Tip: Seven Suggestions + Negligible Resources = Zero Excuses

1) Before and after each shift, supervisors can ask if anyone is hurt. This is easy to implement where crews already have before and after meetings. By asking the question, supervisors remind employees that proper work comp reporting is a job requirement. The question also discourages workers who arrive with an existing problem from making it worse on the job or blaming it on the job. This can also reduce late reports. If any injury or illness is identified, then it can be managed immediately.

2) Provide injured employees with a “rights and responsibilities” manual that is branded with the company logo. Many state WC offices provide adequate templates for this purpose. The manual serves as a reminder to employees that the WC process is connected to their employer and their job.

3) Devise a simple monthly WC/safety summary report that goes to executive management. Place a copy on public bulletin boards so staff is aware that executives monitor the related programs. This promotes the seriousness of WC and safety.

4) Work with your third-party administrator (TPA) or insurer to institute a “no fill” list of dangerous narcotic prescriptions that will automatically trigger a refusal and review by appropriate medical resources. Most claim organizations have such lists already. It is a matter of demanding this level of service from your claims or managed care vendor.

5) Require supervisors to make weekly calls to employees out on temporary total disability (TTD) and have weekly chats with employees on modified duty. This would be a simple general talk to ask how they are doing and if they need anything. This is a powerful motivator and reminder of the employee’s value and the fact that a return to their regular job is anticipated. It can also identify problems in the claim that need to be addressed.

6) Write a simple standard “Return to Work (RTW) Expectation” letter that will immediately be given to every claimant’s treating doctor. This will cause doctors to recognize your transitional duty program, understand their expected role and enhance cooperation. The letter will reduce the likelihood of a claimant’s refusal to participate in early RTW and reduce the reliance of doctors on a claimant’s version of RTW opportunities.

7) Make employees aware of WC costs in personal terms. “Dollars” are not as meaningful as referring to units produced or operating time. For example, if employees are aware they work the first 45 minutes of every shift or produce a certain number of pieces per shift, week or month just to cover WC costs they will relate to the problem. Track costs creatively to have impact.

Give these a try. Commit to changing the WC perspective in your organization. My experience says it will pay off.

Alternative Strategies for Provider Networks

In this second article regarding sustainability of provider networks and managing health plan costs, we will focus on carve-out programs, integration of provider delivery models and direct contracting.

As referenced in the first article, the Affordable Care Act (ACA) has hurt re-pricing through preferred provider networks (PPNs). Claim amounts being billed by specialty and institutional providers has escalated to such a level that preferred provider organizations (PPOs) have lost much of their appeal. As a result, the introduction of commercial accountable care organizations (ACOs), direct employer/provider contracting, narrow network arrangements and cost-to-charge methodologies have gained significant market share.

While the self-funded industry has begun applying many of these alternatives, a high percentage of employers are unwilling to fully embrace some of these changes. Instead, we are seeing intermediate steps through the application of network carve-outs, integration of existing PPOs with specialty care vendors and limited direct contracting.

What outcomes do these intermediate steps offer an employer? To start with, a better control of healthcare consumption and lower overall claim costs.

Let’s explore the basics of network carve-out programs. The simplest carve-out is an organ transplant product that removes claims from the underlying medical excess coverage and places them with a separate policy. In most cases, the transplant policy includes a centers of excellence network where the procedure must be completed for 100% of the claim to be eligible for reimbursement. When a non-participating facility provides the service, reimbursement may be limited to a lower percentage of the bill and will in many cases have caps. These products may include individual deductibles, waiting periods and lifetime maximums.

Less common carve-out solutions are non-risk bearing and target specific treatment types, such as renal dialysis or surgical events. A renal or surgical carve-out is accomplished through a change in plan document provisions that move the service to a non-network benefit. This can be a challenge when dealing with national PPOs, which typically include these service providers in their networks.

When considering any form of carve-out program, the client should take care to avoid any reference to a specific disease state and mind the gaps that could potentially exist between the plan document, underlying medical stop loss policy and carve-out policy or provision.

The industry is buzzing with the term “transparency,” yet most people are unable to determine the actual cost of service provided to patients. Solutions include the integration of existing PPO networks and specialty care providers through direct contracting and domestic tourism. Additionally, a number of surgical centers are now publishing fee schedules and treatment outcomes online. This disclosure is enticing patients to acquire services in these facilities. The result is a creation of carve-out referral agreements for self-funded employers with fees significantly lower than the most aggressive PPO contract.

If the initial reports are accurate, then, in addition to significant savings, patients are experiencing shorter recovery times and fewer complications than through traditional networks. We are also seeing an integration of specialty care providers with traditional networks as a cost-effective tool. In our experience, clients have integrated direct contracts with oncologists, orthopedists, surgical centers, dialysis centers and pain management clinics to more effectively manage care and cost. This approach may be challenged by traditional PPO networks, but the outcome is worth the effort.

In a number of cases, we have found it effective to integrate PPOs for institutional services only and contract directly with medical groups based on a capitated model. In other situations, we have contracted with a PPO network for professional services tied to the Medicare Regionally Based Relative Value Schedule (RBRVS) and re-priced the institutional claims on a cost-to-charge or referenced-based pricing scenario. We will discuss reference-based pricing more in a coming article. For PPOs to remain relevant, they must adapt to these emerging innovative solutions.

For some, innovation will start with direct contracting on behalf of our client health plans. The process of direct contracting can be relatively painless when working with an independent practice association (IPA) or multispecialty medical group. The purpose of these groups is to establish and oversee patient protocols, referrals and outcomes management on behalf of their member providers with health plans and health maintenance organizations (HMOs). Medical groups typically contract with payers through discounted fee for service, Medicare RBRVS or capitation (pre-payment).

While direct contracting can take many forms, our discussion will focus on provider engagement through capitation arrangements. Since ACA’s implementation, providers have become more receptive to assumption of risk through direct capitation agreements with employer groups. In its purest form, capitation is essentially a monthly retainer paid to the provider for services to be rendered to the covered member. The provider is then responsible to deliver care with a goal to making a profit from the monthly pre-payment. For this to be effective, the provider must have a patient population whose utilization and medical histories support this methodology.

Some may ask how capitation is possible without an HMO license. In some states, such as California, laws allowing the creation of HMOs do not require licensing for pre-payment arrangements when risk-sharing between various medical groups and institutions does not exist. Therefore, if a medical group contracts without sharing in a profit or risk pool with other not-related practices, capitation may be allowed. This approach has been implemented and successfully tested through the Department of Managed Healthcare in California.

With this in mind, I would caution employers from running out to look for a willing medical group. The challenge is to find the right medical group that can meet all of the client’s healthcare needs. Will the capitated approach work with institutional providers? The simple answer is yes, though in our experience the process is difficult because many facilities struggle to clearly identify cost of care, and hospitals do not control direction of care.  In settings where capitated institutional models are not practical, we have utilized hospital-only PPO carve-out and referenced-based reimbursement solutions with varying degrees of success.

Providers are rushing to establish community risk assumption models, resulting in the elimination of traditional insurance contracts. We will address the provider direct model more in the following article.

While we have focused on direct contracting through capitation, I want to briefly introduce another successful approach that integrates current PPO contracting methods with HMO-type protocol management and measurements. The measurements may include average length of stay, bed days per thousand, re-admission and encounter frequency, delivery setting, prescription dispensing and adherence to published standards of care. Practice management providers may participate in profit sharing even in a self-funded plan.

This model is not commonly available through third-party administrators (TPAs) because most systems are not equipped to support the protocol and outcomes management required for risk-sharing models. The TPAs with the greatest potential for administering these programs are those that are owned by hospital or provider organizations and that manage risk on behalf of HMO contracts. That being said, we have identified several TPAs that offer these services to self-funded employer plans.

The topic of provider contracting will be debated for years to come, and the number of opinions are as great as the options they represent. The challenge for us today is to move the needle of cost management and improved outcomes forward.