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Settlement of High-Exposure Workers' Comp Claims: Part One

In nearly every workers' compensation program, cases that are referred to as “legacy files,” “dog files” and a myriad of other names (some of which are not appropriate for print) represent high-exposure claims that drive costs. Identifying and resolving these cases early can reduce exposure and overall costs.

The first part of this three-part series will look at what can trigger those important cases. 

Identification

Generally speaking, a few cases represent the vast majority of the cost of a workers’ compensation program. Many are driven by the medical treatment necessary to cure or relieve the effects of the injury. While the indemnity aspect (permanent partial and permanent total disability) can be important, typically it is much easier to quantify these benefits than it is to determine the medical costs.

The high-exposure claims fall into two categories: acute and chronic.

Some examples of acute cases are quadriplegics, paraplegics, severe burns, amputations and head traumas. These injuries are severe and occur immediately as a result of the initial injury. In most instances, there is a significant initial cost, and the continuing care is substantial.

Chronic catastrophic cases, on the other hand, are much more difficult to identify. They typically start off in benign fashion (lumbar strain, knee strain, etc.) and deteriorate into multiple surgeries, lengthy periods of lost time and permanent disability. Chronic cases typically develop about five years after the injury.

A variety of metrics can be used to identify these cases and bring them to the forefront of a settlement initiative. 

Co-Morbidity

A case review can reveal numerous medical conditions that affect potential future exposure, including hypertension, obesity, diabetes, nicotine usage and excessive alcohol consumption. In many instances, these conditions are considered non-industrial and are not identified as cost drivers for the workers’ compensation claim. They are, nonetheless, extremely important in the healing process.

For example, the failure rate of spinal fusions is 20% to 30% in cigarette smokers, nearly double that in non-smokers. The failure of a spinal fusion typically results in one or more additional procedures, including: 1) a repeat fusion; 2) trial/implantation of a spinal cord stimulator; or 3) trial/implantation of an intrathecal pump (commonly referred to as a morphine pump). The costs associated with a failed fusion are payable by the claim, significantly increasing its duration and the cost. 

Similarly, high glucose levels in diabetics can cause poor circulation, diabetic neuropathy and deficiencies in the immune system–all factors in recovering from injuries and surgeries. When an injured worker needs lower extremity surgery (foot, ankle, knee, etc.) and his diabetes is not well-controlled, significant medical problems can develop, including delayed recovery, infections and, in extreme cases, amputation. Again, whether or not the diabetes pre-dated the industrial injury, it can drive medical, indemnity and expense costs. Further, in some jurisdictions, a defendant may become liable for treatment of the diabetic condition if there is evidence that the condition was exacerbated or “lit up” as a result of the industrial injury.

These are just two examples of many nonindustrial co-morbid conditions that can have a significant impact on the cost and duration of a claim.

Life Expectancy and Inflation

In identifying cases that may become high-exposure claims, it is critical to determine the life expectancy of the injured worker. According to the Department of Labor, the median age of the workforce today is 42 years. Based on figures from the National Center for Health Statistics, that would result in a remaining life expectancy of 38 years, on average between men and women. So, it could be necessary to provide medical benefits for an extended period.

The rate of medical inflation is typically 8% a year, so the cost of medical care for an individual will double approximately every eight years.  We refer to this as The Rule of 8.  If an individual is consuming $5,000 a year in treatment today, a doubling every eight years would mean the medical cost would exceed $80,000 annually as he approaches the end of life (see Chart I below). The figures do not consider any deterioration in the medical condition.

Medications

Prescription and consumption of medications is escalating. In severe cases, the individual becomes dependent, and the physician is left with few other treatment options. We see instances where medications are prescribed, then additional prescriptions are viewed as necessary to counteract side effects.

New medications are approved by the FDA on a regular basis and are often prescribed in workers’ compensation claims.  More and more, a physician will prescribe an “off label” medication (one that has been approved by the FDA for a specific condition or purpose not consistent with the diagnosis).  Because of patents, there are no generics, and the medications can be costly. An example is Actiq.  This medication was approved by the FDA for the treatment of pain in Stage IV cancer patients.  But, in recent years, physicians have prescribed Actiq for the treatment of chronic spine pain.  The medication can cost upward of $4,000 to $6,000 a month. 

Addition of Body Parts

We all remember the old “Dem Bones” song: “The knee bone’s connected to the thighbone, the thighbone’s connected to the …”  Well, nothing could be more accurate in the world of workers’ compensation.  In catastrophic cases, additional body parts are almost universally alleged as part of the industrial injury. A cervical injury expands into the upper extremities. A knee injury expands to the back and ankle because of an altered gait.  Medications prescribed for chronic pain cause internal complaints.

Identification Process

These triggers, and others, can make a case spiral into a high-exposure claim.  Part II of this series will discuss, in detail, approaches that can be used to assess these types of cases and focus on strategies to mitigate the exposure and move the cases toward resolution.

Better Management of Soft-Tissue Injuries: A Case Study

The Gatesway Foundation, a nonprofit organization in Tulsa, OK, had seen an increase in its work-related musculoskeletal (MSD) cases, which the U.S. Department of Labor and Occupational Safety and Health Administration (OSHA) define as injuries of the muscles, nerves, tendons, ligaments, joints, cartilage and spinal discs. These types of disorders, commonly referred to as soft tissue injuries as well as sprains and strains, most often present as injury or pain of the back, neck, shoulder or knee and are a major source of disability. According to the 2010 report by the Bureau of Labor Statistics, the disorders account for 29% of total cases.

The Gatesway Foundation was experiencing both an increased frequency of claims and a rise in the cost of treatments, so, in 2012, the foundation began employing the EFA’s soft-tissue management program to compare pre- and post-loss data to accurately distinguish if there is acute pathology after a work-related injury. The program determines if pathology arises out of the course and scope of employment. A baseline test is conducted at the time of hire and compared with post-incident tests. State workers’ compensation laws may have many differences but have one thing in common: The employer is only responsible for returning the individual to pre-injury status. 

In the past, determination of pre-injury status, especially for soft tissue injuries, was often guess work.  Having objective findings can prevent costly misdiagnosis, unnecessary or inappropriate surgery, prolonged treatment periods and fraudulent claims. Employees also receive better treatment for compensable conditions.

The Gatesway Foundation began its program in April 2013 and had no MSD claims or OSHA recordables until Sept. 17, when a 52-year-old health care provider reported that a patient had fallen on her.  Initially, her complaints included her arm and shoulder. By the time she saw a doctor, her pain included her back.  The physician ordered a post-loss test for comparison with the baseline test.  The comparison showed a minimal increase in lumbar muscle spasms that decreased with stretching.  Two sessions of physical therapy were prescribed, and the employee has returned to work.

In the adjuster’s words, “This could have involved a great deal more expense and possible lost time without this information” from the baseline test. The program enabled the physician to have objective information and allowed the injured worker to receive appropriate care.

The program has drastically reduced the Gatesway Foundation’s soft-tissue-related workers' compensation claims.  The year prior to initiating the program, the foundation’s developed losses were $1 million. In the first six months of the policy year, before starting the program, the developed losses were $500,000. With the implementation of the program, the developed losses in the last six months of the policy year were $30,000.

A detailed analysis of the data revealed a dramatic decrease in the cost per claim when a baseline test was conducted.

Average Cost of Sprain Strain Claim Since Sept 2011
Without Baseline $18,794
With Baseline $2,241
% Reduction With Baseline 88%

This resulted in a dramatic return on investment (ROI)

Reduction in Claims Cost $316,544
Total Program Cost $9,200
ROI (Impact to Claims) 3,441%

The utilization of this book-end strategy allows for unprecedented access to information and allows for better treatment.

Zero Injury: A Cultural Imperative for the Construction Industry

If there is a silver lining in the protracted downturn and delayed recovery in the construction economy, it is that “fatal construction injuries are down nearly 42% since 2006,” according to the BLS National Census of Fatal Occupational Injuries in 2011.

That same report observed that “fatal work injuries in the private construction sector declined to 721 in 2011 from 774 in 2010, a decline of 7% and the fifth consecutive year of lower fatality counts.”

However, as the general economy stabilizes and construction spending and project volumes increase, it will not be long before hiring pressures mount throughout the industry.

With an increase in hiring comes an opportunity to institute increased emphasis on safety through employee selection standards, substance abuse testing, new employee orientation and training processes, as well as job safety analyses and daily “huddles” to address project safety requirements.

There is no better time than now for construction company owners and construction financial managers to focus on systematic injury prevention by adopting a zero injury vision and strategy and begin a transformation into a zero injury culture.

Reality Check: Stop Rationalizing Construction Injuries & Fatalities As A Cost Of Doing Business

Stop for a moment and reflect on the hard fact that many construction workers are injured, disabled, and killed at work each year. It is widely recognized (or rationalized) that construction is a hazardous industry, accidents happen, and jobsite conditions are constantly changing and difficult to control.

The reality is that the overwhelming majority of injuries and fatalities are preventable. A common trait we’ve observed among companies that have adopted a zero injury culture is an underlying philosophy and belief that all injuries and fatalities can be eliminated.

What is required to make this philosophy a reality? Leadership resolve to change the prevailing attitude that rationalizes fatalities and injuries as an unfortunate aspect of the construction industry and a cost of doing business and a culture shift that changes the attitudes, beliefs, and behaviors of all industry stakeholders.

This shift to a zero injury culture instills a true belief that injuries and fatalities are not acceptable, should not be condoned, and cannot only be reduced, but actually prevented. This culture shift is necessary at the project, company, and industry levels, as well as in the thoughts and actions of each construction employee.

Zero Injury Culture Is For All Companies

Culture shapes the performance expectations of such key workplace attitudes as the importance of punctuality, wearing proper attire, and how hard to work (or not to work). It directly influences safety attitudes and behaviors, including whether employees wear protective equipment, ignore training instructions, and/or take safety shortcuts to finish work faster.

Therefore, culture determines if a company or work crew will act with a safety-conscious and risk-averse set of values or accept “at-risk” attitudes and behaviors as the prevailing norm.

With the emphasis on zero injury or zero incident culture by large contractors, many small- and medium-sized contractors are wondering if this is a suitable strategy for them as well. We believe all companies can benefit from adopting a zero injury vision and strategy.

The success of a company’s drive to attain a zero injury culture hinges on a company’s owners and senior leaders who must instill, reinforce, and sustain the core building blocks of a zero injury safety culture shown in Exhibit 1 below.

Exhibit 1: Zero Injury Safety Culture Building Blocks
Representative Examples
Attitudes

Zero Injury is attainable on every shift and every project.

Zero injury culture needs to permeate all company activities and not be viewed as a separate process.

Beliefs

All levels of the organization believe that zero injury is achievable — from company executives to all craft/trade employees.

 

All employees accept personal responsibility and accountability for zero injury.

 

Values

The company values the health and safety of all employees.

The company is committed to employees going home safe at the end of every work day.

Assumptions

Employees are not taking unnecessary risk.

New employees accept safe work practices as the expectation.

Norms

Employee behavior on projects rejects shortcuts and recognizes that unnecessary risk-taking is not acceptable.

Zero injury is ingrained in the way the company builds every construction project — regardless of size, location, company division, manager/supervisor, and/or schedule.

How To Institute A Zero Injury Culture

Companies that have adopted a zero injury culture generally have instituted the measurement of leading indicators in addition to traditional lagging indicators (which are discussed in Risk Performance Metrics). Leading indicators focus on the prevention-based activities that drive improved safety expectations and performance outcomes.

Exhibit 2 outlines a life cycle process for the development of a zero injury safety culture. We have high-lighted five distinct phases and delineated key steps and milestones for each phase. The five-phase model is presented to provide a useful framework for monitoring the progress of the evolving process.

For simplicity, Exhibit 2 summarizes key challenges, major milestones, and process outcomes in each of the five phases of the zero injury culture development life cycle. Similar to safety culture development, rarely is a one-size-fits-all approach appropriate for any organizational process or practice. Company culture is unique and will grow and change in its own way.

Building an organizational safety culture can be a slow and messy process, and it does not necessarily follow a linear progression. Sometimes the adage of “one step backward to go two steps forward” is necessary advice.

A model of organizational transformation that we found relevant and realistic to instituting zero injury culture is “Journey of Transformation: The CFO’s Perspective” (by Renee Beaulieu, Skip Perley, Dr. Perry Daneshgari, and Heather Moore in the May/June 2012 issue of CFMA Building Profits), which describes the Strategic Breakthrough Process Improvement.

Many of the companies adopting a zero incident or zero injury culture often describe their process of doing so as a journey.

Safety Culture Development Challenges

The 10-question Safety Culture Health Check in Exhibit 3 can provide your company’s leadership with an assessment of their personal and organizational readiness for instituting a zero injury culture.

Exhibit 3: Safety Culture Health Check

The following 10 questions are designed to provide a quick assessment of your company’s current safety culture. Even though this health check cannot provide insight as deep as a comprehensive, systematic safety perception survey, it is a useful tool for gauging the need to expand safety awareness and accountability.

  1. Does your company’s senior management team operationalize safety commitment and show demonstrable involvement in managing the process by addressing safety as a core strategic discipline that positively impacts the execution of company and project performance?
  2. Do your company’s supervisors and employees fundamentally believe that all accidents and injuries are preventable, or do they believe that accidents and injuries are part of working in the hazardous construction industry?
  3. Is your company known for having a robust safety program with rigorous attention to safety, or is safety known to take a backseat to production pressures?
  4. Does your company’s prevailing attitude toward safety regard it as a necessary evil that decreases productivity or as a vital process that positively impacts productivity and profitability by maintaining a healthy workforce?
  5. Is safety performance viewed as the responsibility of a corporate safety officer, or is adhering to safe work practices the responsibility of every employee?
  6. Does your company have a culture that condones or eliminates safety shortcuts?
  7. Does your company engage all employees in safety processes, including conducting safety observations to identify and correct unsafe conditions and “at-risk” behaviors?
  8. What is your company’s reputation for safety among peer group companies and among the recognized industry leaders?
  9. Is safety an important aspect of your company’s brand image and reputation?
  10. Is your senior management team willing to go “all-in” for the safety and welfare of its employees by making it a core value of the company?

It is crucial that the zero injury culture process be well conceived with thoughtful consideration of how to communicate the company’s commitment, secure employee engagement, and implement functional support structures to reinforce and sustain the process.

It is important to recognize that employees will intuitively know if the company leadership sincerely wants to adopt a zero injury culture. Employee skepticism will run high if the company has a history of initiating and quickly abandoning “fad of the month” safety programs.

A final “gut-check” question is necessary to determine your company’s readiness and resolve for adopting a zero injury culture: Is your company ready and willing to commit to adopting, instituting, and sustaining a zero injury culture? In honestly evaluating this question and its implications, it is natural to consider the challenges in doing so and identify the obstacles to overcome for your company to be successful.

Benefits & Outcomes

Once implemented, the benefits of a zero injury safety culture will be realized through reduced claim severity and frequency, increased productivity, and improved profitability. Once a zero injury safety culture is achieved, your company will:

  • Become an employer of choice, reduce voluntary attrition, and improve morale among existing employees
  • Increase productivity by decreasing time spent investigating employee injuries and reducing idle equipment, thereby increasing potential for improved margins
  • Decrease direct and indirect costs associated with employee injuries, thereby reducing your company’s total cost of risk
  • Demonstrate improvement in project owners’ prequalification metrics (e.g., total recordable cases (TRC); days away from work, job restriction, or transfer (DART); Workers’ Compensation Experience Modification Rate (EMR), etc.), thereby remaining on eligible bidder lists and increasing opportunities to bid desirable projects
  • Align zero injury culture with other strategic zerobased risk management objectives: zero defects, zero crashes, zero equipment breakdowns, zero defaults, zero IT downtime, and zero disruptions (For more information, read “Zero Disruptions: Preparing for Unexpected Business Interruptions & Protecting Your Assets” by Calvin E. Beyer and Brian J. Cooney in the May/June 2011 issue.)
  • Attain respect among peer competitors and establish a positive reputation in the industry

Management Safety Culture Assessment

Various survey instruments have been developed to measure perceptions of safety management culture. The Management of Safety Culture Assessment is based on the Determinants of Safety Culture Model, which assesses the measurable capacity and performance ability of companies to minimize accidents, injuries, and related costs.

According to Dr. Christopher Garrabrant, the Management Safety Culture Assessment and Determinants of Safety Culture model are founded on Charles Perrow’s 1994 discussion of Normal Accident Theory and High Reliability Theory, both of which correlate to reducing losses.

Garrabrant asserts this Management Safety Culture Assessment identifies and measures 15 factors within five broad categories that contribute to the success of a company’s safety culture, as shown in Exhibit 4.

Exhibit 4: Management Safety Culture Assessment
  Assessment Category Assessment Factors
1. Organizational Leaders Operationalize Commitment

Demonstrable senior leadership participation and involvement

Resource allocation

Core processes and results measured

Accountability system for safety at all levels of the organization

2. Identify Safety and Reliability as Goals

Safety as a goal is consistently and clearly articulated

Multiple and independent channels of communication

Decentralized decision-making authority

3. High Levels of Redundancy in Personnel and Technical Safety Measures

Continuous operations and training

Job hazard analyses are owned, continuously reviewed, and updated

4. Organization Strives for a “High Reliability Culture”

Presents optimism toward a desired future state

Consistent communications

Adaptability to change

5. Sophisticated Forms of Trial and Error Organizational Learning

Capacity to learn and act

Accident investigations are blame-free and pursue systemic improvements

Hazard analysis occurs before accidents

A company demonstrates the necessary values within its culture to promote the health and well-being of its employees. The culture demonstrates behaviors that can be expected to result in fewer workplace accidents and achieve a more rapid return to work should an accident occur. The assessment is intended to validate a company’s ability to exceed industry expectations of safety performance.

Importance Of A Zero Injury Mind Shift In The Construction Industry

We recognize that for a true zero injury culture to occur, the mindset of zero injury needs to reach beyond the individual company culture and become the norm for the construction industry as a whole, since many contractors use the same subcontractors, vendors, and workforce. Therefore, until the industry – including all owners, contractors, and employees – takes a unified stance against unsafe behaviors and acts, each individual company will obtain limited success as a zero injury culture.

We envision a construction industry with the shared culture where workers have the same positive experience at every project where they are asked to put in an honest day’s work without taking any unnecessary risk and where they safely complete their work each day.

In order to do that, we are encouraged to see general contractors and subcontractors band together with insurers to start working as an industry to change the norm for all workers to complete each work day safely.

Please take a moment to think about whether you are willing to do what is necessary to help make zero incidents, injuries, and fatalities a reality in your company and the construction industry.

Challenge the conventional thinking about the construction industry being hazardous and help make the vision of a zero injury culture within this industry a reality.

We appeal to every stakeholder of the construction industry to join the cause of making zero injuries a reality. There really is no higher calling for the construction industry – the time is now for zero injuries to be the expectation, the norm, and reality.

Web Resources

1. BLS Economic News Release: Census of Fatal Occupational Injuries Summary, 2011.

2. Zero Injury Techniques, University of Texas at Austin, Construction Industry Institute.

3. Safety Plus: Making Zero Accidents a Reality. University of Texas at Austin, Construction Industry Institute.

A Brief History of Zero Injury Culture in Construction

The concept of zero injury in construction has existed at least since 1993 with the publication of the Construction Industry Institute’s (CII) Zero Injury Techniques. The 1993 study highlighted 170 techniques that construction companies used for injury prevention. The CII’s follow-up study in 2003, Safety Plus: Making Zero Accidents a Reality, further popularized the term and increased awareness of the benefits of a zero injury culture.

The 2003 study quantified a significant demonstrable improvement in safety performance of companies adopting nine high-impact, zero injury techniques:

  1. Demonstrated management commitment
  2. Staffing for safety
  3. Planning (pre-project and pre-task)
  4. Safety education: orientation and specialized training
  5. Worker involvement
  6. Evaluation and recognition/reward
  7. Subcontractor management
  8. Accident/incident investigations
  9. Drug and alcohol testing

Since the two CII studies, a growing number of construction companies, many of which have more than $250 million in annual revenues, have adopted the vision of creating a zero injury culture. In the past couple of years, a cadre of such companies (known as The Incident & Injury Free CEO Forum) emerged to provide leadership by example on the benefits of zero injury culture.

Members of this group include American Infrastructure; Baker Concrete Construction; BMW Constructors, Inc.; Cal Dive International; Gilbane Company; Great Lakes Dredge & Dock; Hunter Roberts Construction Group; Jacobs; JMJ Associates; Lend Lease; Limbach Facility Services, LLC; Manson Construction Co.; Nicholson Construction Company; Skanska; Terracon; and Weeks Marine.

These companies are collaborating to expand awareness of zero injury techniques and have been engaging with representatives from major construction insurance carriers and brokers to foster greater adoption of zero injury culture throughout the construction industry.

Zero Incident
Many large companies have adopted programs with a more stringent focus of attaining zero incidents instead of merely zero accidents. The rationale is that incidents are “near hits” that could have resulted in injuries or fatalities and near hits are early warning signals of an underlying hazard that warrants attention and correction.

One of these companies distributed Safety 24/7: Building an Incident Free Culture to all its subcontractors. This book is recommended for any owner or strategic leader seriously interested in instituting a safety cultural change.

Authors
Cal Beyer collaborated with Eric Lambert in the writing of this article. Eric Lambert, CRIS, ARM, CHST, is National Director of Construction Quality and Safety for Zurich North America Commercial in its Boston, MA office. Eric has worked in the construction industry for the past 20 years to save lives, reduce loss, and make companies better. For the past 11 years, Eric has worked to make a zero injury culture a reality. Eric has participated in many construction industry roundtables and committees to learn from and provide input to improve the industry’s safety culture and practices.

© 2013 by the Construction Financial Management Association. All right reserved. This article first appeared in CFMA Building Profits. Used with permission.

California SB 863, A Guide For Building And Monitoring Networks With Intelligence, Part 2

This is Part 2 of a multi-part series on building and monitoring networks with intelligence. Part 1 can be found here. Part 3 will be published soon.

California has defined how medical networks in Workers' Compensation should be structured and managed. Part 1 of this series described how California's SB 863 LC 4616 (b) (2) and LC 4616 (b)(3) takes medical provider network directives to a new level. The key imperative is, “Every MPN must establish and follow procedures continuously to review the quality of care, performance of medical personnel, utilization of services, facilities, and costs.”

California SB 863
The emphasis on network review is a chief imperative of SB 863, effective January 1, 2013. Many directives in the bill require continuous data monitoring to discover provider and network compliance and non-compliance. Some of the directives that require continuous attention are:

  • Chiropractors are limited to a 24 adjustment maximum [LC 4600(c)].
  • MPN's must have geo-coding of network physicians, updated every four years to insure access requirements are fulfilled.
  • LC 4616 (b)(2) and LC 4616 (b)(3) state every MPN must establish and follow procedures continuously to review quality of care, performance of medical personnel, utilization of services, facilities, and costs.
  • Anyone can complain, initiate an investigation, and petition to suspend or revoke an MPN.
  • Injuries while under unapproved, non-MPN care are no longer compensable!
  • Multiple conditions of escaping the MPN, non-MPN payment, and disputes must be monitored.
  • Home Health Care must be prescribed by an MD or DO.
  • MPN's are approved for four years from date of the most recent application or modification.

Provider Performance Analysis
Medical provider performance must be analyzed and monitored not only for compliance with SB 863, but also for acknowledgement of the nuances of Workers' Compensation in the treatment process. Work loss and disability payments, return to work and modified work, claimant legal involvement, along with frequency, duration, and costs of medical services should be analyzed and scored for individual providers, groups, and facilities, whether in California or another jurisdiction.

Provider Data Issue
A problem confronting many organizations is that their medical provider data is insufficient, making accurate analysis impossible. Unfortunately, most provider records in claim systems and bill review systems is severely lacking in quality and comprehensiveness.

Until now, these records were used only to pay bills, consequently, name, address, and FEIN (Tax ID) were adequate. Now, however, because of SB 863 and increased attention to the medical portion of claims nationally, much more information is needed.

Duplicate Records
Most systems contain duplicate provider records. Slight differences in data entry create multiple records for the same provider, each associated with different claims. Under those conditions, provider analysis is inaccurate and incomplete. Such duplicate records must be scrubbed and merged before beginning performance analysis.

Medical Specialty
Medical specialty or specialties should be included in provider records in the data. Those providers certified in a specialty should be compared with others who are similarly certified. Without the provider's specialty, analysis of performance is non-specific and often misleading.

For instance, pain management doctors' performance should be compared to that of other pain management doctors, rather than dermatologists or internists. Pain management physicians often receive cases when they are growing more complex and already costly. Analyzing providers of similar specialties is a matter of comparing “apples to apples.”

Differentiating Individuals
Medical providers who are members of groups or facilities should be analyzed and selected for networks individually even if the group or facility is approved. Some believe all members of a group should be included in the MPN when the group is approved. Actually, individual members might be problematic and automatic approval should not be guaranteed.

Currently many doctors and other providers submit bills under a single Tax ID. Measuring collective performance quality is not acceptable for a network with intelligence. The way to differentiate individuals is to analyze their unique performance using specific identifiers such as the state medical license number or NPI (National Provider Identification).

Networks With ROI
Whether complying with California SB 863 or building Workers' Compensation medical networks anywhere in the country, developing quality networks will return huge savings. Medical providers, especially doctors who score poorly in comprehensive data analysis, drive complexity, high costs, and poor outcomes. Those should be avoided and injured employees should be directed to best in class doctors to receive the best medical care with the best medical and employment outcomes. The business of developing and managing Networks with Intelligence should be given high priority.

First Steps
The first step in building quality medical networks is to scrub and enhance medical provider data in the organization's systems. The next step is selecting best practice providers based on integrated and comprehensive data associated with the claim. Developing and monitoring medical networks requires analytical knowledge and technical skill. Because internal resources are often limited, a practical solution is to outsource to the experts for provider performance analytics and continuous monitoring.

Authors
Karen Wolfe collaborated with Margaret Wagner to write this article. Ms. Wagner is President and CEO of Signature Networks Plus. She is considered an expert in network selection, monitoring and management, thereby creating Networks with Intelligence™ for clients.

California SB 863, A Guide For Building And Monitoring Networks With Intelligence, Part 1

This is Part 1 of a multi-part series on building and monitoring networks with intelligence. Subsequent parts in the series will be published soon.

Background
Building a medical provider community for Workers’ Compensation can be challenging, regardless of the jurisdiction. Nevertheless, carving out a legislatively-compliant, outcome-based, quality network is doable, and the return on investment is certain.

Injured workers deserve good medical treatment while employers and payers deserve transparent and fair costs. Moreover, industry research clearly shows that poorly performing providers are costly and lead to abysmal outcomes for injured employees, their families, and employers. This article features California SB 863 regarding MPNs (medical provider networks), but the concepts apply to creating intelligent medical provider networks anywhere.

Traditional Medical Networks
Medical networks in Workers’ Comp are not new, in fact, PPOs (Preferred Provider Organizations) have been around in Workers’ Comp since the early 1990s. Traditionally, the network administrator contracts with all physicians and other treating providers available. The trade-off is that providers exchange their discounted fees for increased patient volume. However, quality of medical care measured by outcomes and acknowledgment of Workers’ Comp nuances such as return to work are not considered. Some jurisdictions have made attempts to modify this practice.

Old SB 899 — LC 4616 Medical Provider Network (MPN)
In April of 2004 the governor of California signed SB 899 into law. It addressed MPNs under section LC 4616 (d) stating “In developing a medical provider network, an employer shall have the exclusive right to determine the members of their network.”

Encouragement to analyze provider performance is clear under section LC 4616.1: “Economic Profiling means the evaluation of a particular physician, provider, medical group, or individual practice associations based in whole or in part of the economic costs or utilization of services associated with medical care provided or authorized by the physician, provider, medical group, or individual practice association.” In other words, quality and costs matter and should be analyzed and monitored.

Direction Of Care
An important opportunity in California and many other states is that employers and payers are allowed to direct care for injured employees to doctors and other medical providers in their medical provider networks. After selecting the best doctors for a network, injured workers can be directed to them, a win-win scenario.

Even in states where direction of care is not permitted, payers or employers who have intelligent networks can give injured employees information regarding who are the best-in-class doctors based on objective analysis. Doing so is a service to employees who will often make use of them in selecting a doctor.

Ramping Up — SB 863
The logic of creating an intelligent network with measureable outcomes was recently fortified with California SB 863, effective January 1, 2013. The old bill is strengthened under SB 863, LC 4616 (b) (2) and LC 4616 (b)(3) “Every MPN must establish and follow procedures continuously to review the quality of care, performance of medical personnel, utilization of services, facilities, and costs.”

Quality Control
In other words, all MPN plans must have procedures in place to continuously review the quality of care and costs for medical providers in the network. The mandate is now even stronger to evaluate and monitor medical provider performance. No longer is it adequate to contract with medical providers, print the list of providers in the network, and forget it.

However, many employers and payers are at a loss about how to analytically select and continuously review provider performance.

Intelligent Networks
Legislative mandates and industry wisdom remove the question about whether to upgrade network quality through outcome analytics and monitoring. Yet, selecting the right doctors and other providers, then monitoring, and managing an intelligent MPN is a business in itself.

Most organizations do not have the appropriate resources and should outsource to companies that focus on intelligent network design, provider selection through analytics, review, and management. The following are some details for building and managing intelligent networks, whether they are legislated or not.

Gather The Data
The way to develop an intelligent network is to select the best in class medical providers determined by analysis of actual performance demonstrated in the data. Historic data must be combined with current and continually updated data to evaluate performance now and going forward. Reviews of updated data should be frequent and regular.

Additionally, the data must be derived from a broad spectrum of sources. Workers’ Compensation organizations typically segment data into bill review data, claims, pharmacy (PBM) and other silos such as UR and Medical Case Management. All are necessary for provider performance assessment. Do not be misled by those who say bill review data is adequate to the task.

Integrate The Data
Integrate the data with claims as the focal point for a complete picture of the claim. Execute algorithms that analyze the data and score provider performance based on multiple performance indicators. Individual medical providers, groups, and facilities should all be analyzed in this regard.

Continuous data update and electronic monitoring insures network and individual provider quality going forward as prescribed in SB 863 legislation. Maximize medical network quality and cost control using analytics, thereby complying with legislation and maximizing positive benefits.

More About Building Networks With Intelligence
Part 2 of this series will add more details of California SB 863 regarding medical provider networks and how to create networks with intelligence using analytics and common sense, an imperative for all medical networks in all states.

Authors
Karen Wolfe collaborated with Margaret Wagner to write this article. Ms. Wagner is President and CEO of Signature Networks Plus. She is considered an expert in network selection, monitoring and management, thereby creating Networks with Intelligence&#153 for clients.