Tag Archives: workmans compensation

The 6 Acute Needs in Workers’ Comp Cases

Everybody has needs. These six are acute for parties in workers’ compensation:

1) The Need to Be Heard
Applicants need to tell their story. At the Workers’ Compensation Appeals Board (WCAB), applicants are sitting in the waiting room or cafeteria, if they are there at all. Mediation may be the only time an applicant can tell his needs to a neutral person and know he has been heard. This emotional release is a first step toward resolution. The employer’s representatives also need to vent. Folks on this side of the table can be just as emotional as the applicant. Mediator feedback can help both sides.   
2) The Need for Validation
Good-faith participation in mediation demonstrates respect for the other side and its position. Parties need to show that respect in their words and body language.
3) The Need for Revenge
Each side may blame the other for acrimonious litigation. The response may be to ratchet up the aggression. Finally, the two sides may not be able to talk to each other. The mediator can interpret negotiations between the parties without animosity getting in the way.

4) The Need to Create Meaning
Like the blind men feeling different parts of the elephant, parties may not be seeing the whole picture. Mediation sometimes reveals misunderstanding of the other side’s primary concerns. Mediation can help parties make sense of the conflict.  
5) The Need for Vindication
When a party feels wronged, that hurt can make her keep fighting. Because the mediator is the communication intermediary, a mediated settlement can help a party feel the wrong has been righted.   
6) The Need for Safety
Any resolution must assure both sides that the settlement protects them. The applicant must feel confident that the money on the table is reasonable after consideration of all contingencies. The employer’s side may require protections such as inclusion of a Medicare Set-Aside with custodial administration.

Affordable Care Act Can Help Close Workers’ Comp Claims

The Affordable Care Act can help workers’ compensation professionals close claims.

Now that injured workers can buy private health insurance regardless of pre-existing conditions, parties can calculate case value according to the cost to fund health insurance premiums. Uncertain about the cost of future premiums? You’re an old hand at this — the cost of future medical care is an issue you’ve always dealt with in settlements. Consider likely future use changes and inflation. Use all the resources you have and negotiate.

The big objection to closing out future medical is uncertainty about the future. Expanded Medicaid, available in 27 states and the District of Columbia, provides a safety net. Expanded Medicaid (Medi-Cal in California) does away with resource rules. Individuals aged 19 to 64 who have modified adjusted gross income less than 138% of the federal poverty level can access public health benefits, no matter how much money they just received to settle their claim. Expanded Medi-Cal enrollees cannot be Medicare beneficiaries, pregnant or incarcerated, and they must meet their state’s citizenship requirements. For some types of injuries in California, this may include undocumented workers. Read more.

Although the term “Obamacare” is a nickname for the Affordable Care Act, many people think those are two separate things, and politics gets in the way of clear thinking. When discussing settlement with counsel and clients, talk about using “The Affordable Care Act” to avoid the emotions the term “Obamacare” triggers.

Make sure you mediate with someone who understands all the options for replacing medical benefits in our new healthcare environment.

State of the State: Workers’ Comp in California

On Aug. 5, 2014, the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) released its first-ever “State of the System” report. This was an outstanding, in-depth look at the trends and cost drivers in California workers’ compensation. I encourage you to read the full report here. Given that California now constitutes 25% of the total nationwide workers’ compensation premiums, these issues have a significant impact on larger employers that do business in the state.

I have been involved with California’s workers’ compensation system for years, including participating in many discussions on potential legislative reforms. One thing I have always found frustrating is that California has a tendency to evaluate progress on workers’ compensation issues based on its history, alone, without comparing itself to other states. That’s why I found the most compelling information in the report to be the comparative analysis of California to other jurisdictions. This did not paint a pretty picture.

According to 2009 data, California ranks eighth in indemnity claim frequency per 1,000 employees, more than 46% higher than the median state. The recent trend makes this even worse because, since 2009, the nationwide trend has been a decrease in frequency rates while California has been increasing.

California ranked seventh in 2009 in the percentage of indemnity claims with permanent disability benefits paid – 13% above the median. Once again, the trend makes this much worse as every state that ranked higher than California has passed legislation aimed at reducing workers’ compensation costs. SB 863, passed in California two years ago, increased permanent disability benefits, and there has been a corresponding increase in the percentage of claims receiving these benefits.

Finally, California rankedthird in incurred medical benefits per indemnity claim, with costs that were more than 70% higher than the median state. SB 863 focused on reducing frictional costs to the system caused by medical treatment and billing disputes. It did nothing to change the physician behaviors that continue to drive medical costs higher. According to WCRI and CCWC research, nearly half of all pharmacy prescriptions were physician-dispensed, and prescriptions for Schedule II and Schedule III opioid pain medications have continued to rise.

Employers looking to open a new manufacturing or distribution facility are looking at comparisons between different state workers’ compensation systems, and other states are using workers’ compensation reform to make their states more attractive to businesses and job growth.

My hope is that the WCIRB report serves as a starting point for California to compare itself to other states when evaluating the workers’ compensation system and where reform is needed. We need to move past the thought that things are just done differently in California because that is the way it has always been.

Finally, the WCIRB study provides a great lead-in for the California Workers’ Compensation & Risk Conference, which is Sept. 10-12 in Dana Point. You can view the conference agenda here. I will be moderating the opening panel at this conference, which features a variety of stakeholders debating the impact of SB 863 and offering suggestions for improving California’s workers’ compensation system.

‘Montana Model’ for Workers’ Comp Fees

Policymakers in many states increasingly enact medical fee schedules in the quest to limit the growth of hospital costs. They often seek a reference point or benchmark to which they can tie reimbursement rates. Usually, that benchmark is either Medicare rates in the state or some measure of historic charges by the hospitals. Medicare rates are usually seen by healthcare providers as unreasonably low; charge-based fee schedules are often seen by payers as unnecessarily high.

This study examines an alternative benchmark for workers’ compensation fee schedules—prices paid by group health insurers. In concept, this benchmark has certain advantages. Unlike Medicare, the group health rates are not the result of political decisions driven by the exigencies of the federal budget. Rather, these rates are the result of negotiations between the payers and the providers. Unlike a charge-based benchmark, group health rates are what is actually paid to providers. This is important given the growing public attention to the arbitrariness of many hospital charges.

The major limitation of using group health prices paid as a benchmark for workers’ compensation fee schedules is that these prices are seen by group health insurers as proprietary. However, one state, Montana, has adopted a fee schedule based on group health prices paid and implemented relatively straightforward processes to balance the need for a fee schedule and the need to protect the proprietary information of the group health insurers.

This article does the following: (1) describes the major findings of the study, (2) suggests a framework for thinking about whether prices paid by workers’ compensation payers are too high or too low, and (3) discusses the Montana approach.

Major Findings

What do we find when we compare the prices paid to hospital outpatient departments by group health and workers’ compensation payers? Among the major findings of this study are:

  • In many study states, workers’ compensation hospital outpatient payments for common surgical episodes were higher, and often much higher, than those paid by group health. For example, in half of the study states, workers’ compensation paid at least $2,000 (43%) more for a common shoulder surgery (see Figures 1a and 1b).
  • The amount by which workers’ compensation payments exceeded group health payments (“the workers’ compensation premium”) was highest in the study states with either no fee schedule or a charge-based fee schedule (Tables 1a and 1b).







Are Prices Paid By Workers’ Compensation Payers Too Low or Too High?

The comparison of workers’ compensation and group health hospital outpatient payments raises the question in many states as to whether workers’ compensation hospital outpatient rates are higher than necessary to ensure injured workers access to good quality care. For example, in Indiana, hospital outpatient services associated with shoulder surgery were, on average, reimbursed $9,183 by workers’ compensation as compared with $7,302 by group health. Is this differential of $1,881 necessary to induce hospital outpatient departments to provide facilities, supplies and staff to treat injured workers in an appropriate and timely manner?

Consider the following framework for analyzing the question. If hospital outpatient departments were willing to provide timely and good-quality care to group health patients at the prices paid by group health insurers, then two questions should be answered by policymakers:

  • What is the rationale for requiring workers’ compensation payers to pay more to hospital outpatient departments than group health insurers pay for the same treatments?
  • If there is such rationale for higher payment, is a large price differential necessary to get hospital outpatient departments to treat injured workers?

In addressing the first question, let’s say that the hospital outpatient department provided identical treatment for a group health patient and a workers’ compensation patient. If the care was identical—same facilities, supplies and staff—and workers’ compensation imposed no unique added costs on the hospital outpatient department, then there is little rationale for workers’ compensation payers to pay more than the group health payers.

Healthcare providers often cite a special “hassle factor” in workers’ compensation that does not exist in treating or billing for the group health patient. Common examples of the alleged hassle factor include longer payment delays, higher nonpayment rates (where the compensability was contested or where care given was not deemed appropriate), more paperwork, more missed appointments, lower patient compliance with provider instructions and so on. If these hassles are unique to workers’ compensation patients, then this forms a potential rationale for workers’ compensation paying higher prices than group health, for the same care. Let’s assume that this accurately describes the real world.

Then the question becomes: Are the unique costs imposed on hospital outpatient departments large enough to justify workers’ compensation payers having to pay $2,000-$4,000 more per surgical episode than group health payers pay for the same care? If the costs of these hassles total less than, say, $2,000, then workers’ compensation fee schedules could be lowered without adverse effects on access to care for injured workers. In other words, the large price differentials observed in this study can only be justified by the large costs of these hassles that are unique to workers’ compensation.

In applying this framework to different types of providers, where these hassles exist, some types will be larger for some kinds of providers than for others. For example, the first doctor who treats may be more exposed to nonpayment risk than other providers who treat later in the claim; or the hospital outpatient departments’ use of the operating and recovery rooms would be less affected by paperwork but exposed to payment delays. Because the majority of payments to hospital outpatient departments are for physical facilities (e.g., recovery room), equipment (e.g., the MRI machine but not the radiologists’ professional services) and supplies (e.g., crutches), it is more likely that hospital outpatient departments are more exposed to billing delays, nonpayment risk (at emergency rooms for initial care) or canceled appointments and less exposed to time-consuming paperwork hassles or patient compliance issues.

Moreover, if the additional burden that the workers’ compensation system places on hospital providers (e.g., additional paperwork, delays and uncertainty in reimbursements, formal adjudication and special focus on timely return to work) is sizable, policymakers have two choices. The first is to adopt a higher-than-typical fee schedule that embraces large costs for the hassle factor. The alternative is to identify and remediate the causes of the larger-than-typical hassles — especially where these are rooted in statutory or regulatory requirements.

The Montana Approach

The major limitation of group health as a benchmark for workers’ compensation is that the group health rates are the proprietary competitive information of commercial insurers. The Montana legislature found a way to use group health prices as a benchmark for its workers’ compensation fee schedule while respecting the confidentiality of the commercial insurers’ price information. The approach used is to obtain the price information (conversion factor) from each of the five largest commercial insurers and group health third-party administrators (TPAs) in the state and compute an average. The average masks the prices paid by any individual commercial insurer or TPA. In addition, the statute guarantees the confidentiality of the individual insurers’ information.


This study raises a number of concerns about whether fee schedules are too high or too low. There are two key pieces of information needed to address this — (1) how much other payers in the state are paying, and (2) whether there is a unique workers’ compensation hassle factor.

This study addresses the first question for common surgeries done at hospital outpatient departments. A related WCRI study does the same for professional fees paid to surgeons and primary-care physicians.

Quantifying the presence and magnitude of any unique workers’ compensation hassle factor remains to be done. However, in some states, these studies show that workers’ compensation prices were below those paid by group health. For those states, policymakers may want to inquire about access-to-care concerns, especially for primary care. For other states, the workers’ compensation prices paid were so much higher than prices paid by group health insurers that policymakers should ask if the large differences are really necessary to ensure quality care to injured workers.

One way of framing that question using the results of the WCRI studies is as follows: “Workers’ compensation pays $10,000 to hospital outpatient departments for a shoulder surgery on an injured worker, and group health pays $6,000 for the same services. Does it make sense that if workers’ compensation paid $9,000 that hospital outpatient departments would no longer treat injured workers—preferring to treat group health patients at $6,000, or Medicare patients at a fraction of the group health price, or Medicaid patients at prices lower than Medicare?”

Ms. Tanabe is sharing this article on behalf of its authors, Richard Victor and Olesya Fomenko.

MRIs: Part of the Solution, or Problem?

Another study sponsored by Liberty Mutual concludes that early magnetic resonance imaging for diagnosis of back pain leads to higher costs and poorer outcomes.

The study, published in the August issue of the medical journal Spine, showed that when back pain patients went through MRI scans within the first month after injury, they were between 18 to 55 times as likely as the reference group to receive more diagnostic and invasive procedures.

Glenn Pransky, a co-author of the study and director of the Liberty Mutual Center for Disability Research, said that MRIs can put patients in a mindset of trying to find a specific problem in their back and then seeking to fix it.

“People get hung up on thinking, ‘Oh, I’ve got this ruptured disc. That must be the problem. I won’t be well until somebody fixes that ruptured disc,’” Pransky said.

As many of us know, herniated discs and other spinal “abnormalities” are actually quite common.

Pain is complex, and the cause of pain is often illusive.

In an Aug. 20 webinar from managed care company Paradigm Outcomes, two physicians pointed out that pain can come from many places.

“When you look at somebody’s pain, they have the pain sensation — there could be nerve pain, there could be soft tissue-muscle-tendon pain,” said Steven Moskowitz, senior medical director of Paradigm’s pain program. “They could have pain because they’re deconditioned and out of shape and stiff, and so it hurts to be stiff and to move when you’re stiff. And then they can have. . .  emotional components.”

Bowzer’s pain started bending over for his cigar.


In his most recent book, Living Abled and Healthy, Christopher Brigham, MD, no stranger to workers’ compensation and lead editor to the AMA 6th Ed. Guide for Rating Permanent Disability, examines people who have had catastrophic injuries or who grew up “less than able” but overcame these difficulties, and compares them with folks who can’t seem to surmount such obstacles.

[Disclosure — Brigham is a friend, and I contributed a small part to the book.]

Brigham argues that our mind-body connections are surprisingly strong and that people in general discount the effect our emotions, psychology, feelings and perceptions have on our physical being.

“If we believe something is helping us we will likely feel better,” Brigham says. “If we believe something is hurting us, we will likely feel worse. Our attitudes define who we are, and the choices we make determine our destinies.”

Robert Aurbach, an attorney, researcher and international workers’ comp expert now consulting in Australia, has noted that neuroplasticity — the brain’s ability to reorganize itself by forming new neural connections — can play a big role in one’s perception of ability versus disability.

Essentially, continued “training” to be disabled, rather than abled, forms neural connections that reinforce negative associations with pain.

The extent to which early MRIs contribute to the perception and emotion of disability has yet to be fully quantified, but the Liberty Mutual study suggests the connection it is not insignificant.

According to a 2013 report from the Bureau of Labor Statistics, sprains, strains and tears made up 38% of work-related injuries in 2012, making those the most common source of claims. In that category, the back was the most-often injured body part, making up 36% of sprains, strains and tears.

Essentially that means that 1/6th of all work injury claims are related to back pain. How many of those end up worse because of diagnosis and treatment fostered by early MRI findings and might have otherwise been adequately (and perhaps more effectively and efficiently) treated conservatively isn’t known, but I suspect the number is considerable.

The authors of the Liberty Mutual study found that MRI use for patients with lower back pain wasn’t distributed evenly across the U.S., and they hope to continue the study to determine whether certain states are more prone to improper use of the scans.

I think it would also be interesting and beneficial to correlate that study with information about disability rates; my guess is that we (the grand collective “we”) make people more disabled than they otherwise would be in our zeal to use medical technology and attempt to find easy answers to complex problems, like pain and disability.