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Five Costly Mistakes

April 1, 2008
By Frank Pennachio While Workers Compensation Managed Care (WCMCO) is widely viewed as a means of controlling expenses, the results are sometimes different.

By Frank Pennachio

While Workers’ Compensation Managed Care (WCMCO) is widely viewed as a means of controlling expenses, the results are sometimes different. Here are five common mistakes that are often made when working with WCMCOs.

1. Employers assume the goals of the WCMCO are aligned with their goal of safely returning the employee to work as quickly as possible.

While WCMCOs share the employer’s return-to-work goal, they also have to make a profit. When WCMCOs recruit physicians, they negotiate fees lower than those mandated by the state, bill at the mandated price and pay the discounted fees to the physician. The WCMCO is paid a percentage of the savings, and the balance is reported as a savings to the employer.

This arrangement means that top doctors are not attracted to the network. Second, it encourages increased utilization to make up for the loss of income. The more treatments, the more that is billed, and the more the WCMCO earns.

2. Employers engage a WCMCO that does not have physicians who are properly trained in occupational medicine.

In workers’ compensation cases, there needs to be an understanding of the functional requirements of the job; communication with the employee and employer; a knowledge of the how the employer can accommodate an injured worker; and a grasp of the psychosocial factors involved in returning to work.

A study of Louisiana workers’ compensation claims showed how a network of occupational-medicine physicians, with experience in treating workers’ compensation patients, resulted in significantly fewer lost days and 40% lower costs of care.

3. Employers don’t realize the importance of evidence- based guidelines.

It makes sense to have medical protocols for injuries so that the right treatments can be applied with the right schedule to get the injured worker back to work. While these protocols exist, many WCMCOs do not use them. Since the present system financially rewards the networks when a claim goes bad, there is a reluctance to adopt these measures.

A study in the Society of Occupational Medicine, “Evidence-based Care for Low Back Pain in Workers Eligible for Compensation,” concludes that workers who had evidence-based care had less time off work, spent less time on modified duty and had fewer reoccurrences, compared with those who had usual care.

Frank Pennachio

4. Employers don’t engage in relationships with medical providers.

So much of managing the cost of disability claims is working with the right doctor who can diagnose the injury correctly, knows the protocols for workers’ compensation injuries and is able to put in place proper guidelines for medical care and return to work. Rather than relying on discounts, employers should provide incentives by extending the scope of services to include post-offer employment screening, drug testing and maintaining work wellness. An appropriate fee schedule, combined with evidenced-based guidelines, will ensure quality healthcare for injured workers, while reducing costs to employers.

5. Employers don’t require quantitative measures of results.

Employers need to be proactive and insist that they receive:

  • Qualifications of the physicians and nurse case managers.
  • Timely and appropriate care.
  • Outcomes—duration of disability, reduction in medical and indemnity costs, return to work, employee satisfaction.
  • Disability prevention. Is there a program to match fitness to job requirements, post-offer employment screening, etc.?

All too often, the current system, as structured, produces unintended bad results. Employers need to turn their attention to the way workers’ compensation organizations think about, implement and measure their performance.

Frank Pennachio, CWCA, is a co-founder and director of learning at the Institute of WorkComp Professionals, an organization that tests and certifies insurance professionals. He can be contacted at [email protected].

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