Employers appear resigned to inflationary-plus medical costs in workers' compensation or have accepted the lack of high impact industry solutions. Depending on which report we read or who we interview, medical cost inflation in workers' compensation was 5 to 7% last year compared to the 2012 consumer CPI of 1.6%. It seems to be this way every year.
In our last post we began a discussion about changing the medical model to think beyond historical utilization managment methods. Medical cost inflation has risen 6% or more annually for a decade, and it constitutes the majority of workers comp costs across the country. New Hampshire just reported nearly 75% of workers' compensation costs in that state are medical (nhbr.com/news/993004-395/ Bob Sanders, February 8, 2013).
What's the answer?
Industry expert Joseph Paduda wrote recently that "workers' comp is an industry where claims does not adequately consider medical." The most prevalent response by payers has been to build or enlist capabilities in medical bill review and predictive claim modeling, the latter embraced by large insurance carriers and third party administrators (TPAs) to identify high cost claims earlier and respond with pricing review, utilization review and other medical management interventions.
Predictive modeling will bear fruit over time, but it is complex, involves a myriad of social causes, is slow (analytics are fueled by retrospective claims) and costly; such analytics are not practical for many self-insured business TPAs or small to mid-sized workers comp insurance carriers.
As a former partner in a (successful) TPA, we learned some important lessons about changing medical service behaviors. Here are a few timeless ideas that carry opportunity to improve workers' compensation medical costs.
Manage Activity Real-time. As a claim clearinghouse partner, we occasionally have prospects tell us that cutting a few weeks off their payer receivable is only marginally valuable. We like to discuss with them the value of prompt bill submission goes beyond accounts receivable to impacting (perhaps substantially) medical. It's like balancing your checkbook; you can do it quickly and easily every month or face a complex task months down the road. Prompt claim intervention is high impact, so the earlier the bill is accepted by the payer the earlier it can be worked.
Claim Integration Matters. All parties agree prompt claim intervention is high value. The faster the bill is accepted by the carrier or TPA the better it can be coordinated with whatever bill review process the payer uses and the better the medical outcome; better outcomes lower cost. 'Leakage' in this process involves slow or manual movement of claim information between providers and payers (the bill), insurer and bill review (internal or bill review partner), and the payer and provider (acknowledgement, explanation and payment). We've built our business solving the bill and medical documentation integration challenge, but workers' compensation still greatly lags health in electronic bill-plus-medical submission, and it needn't be the case.
Seeing is Believing. One of the reasons for our enviable customer retention (98%) is great user interface and graphic visualizations supporting provider bill submission and management. Graphics and design shorten the time for understanding and acting. The iPhone and Samsung Galaxy prove it's still true: clarity matters.
In our world the best solution is not one product or service but the best integration of multiple processes required in a highly complex industry. It's where we're chosing to invest our resources to make a difference.
We'd love to hear your comments, contact us: Rexford Cattanach 612-819-4730 or email@example.com
The well-publicized 50th anniverary of the Golden Gate Bridge took place on May 24, 1987 with a celebration permitting only pedestrians to cross the Bridge between 6:00 and 8:00 a.m. Organizers expecting 50,000 people saw an estimated 800,000 arrive instead. Human gridlock between the main support towers created what Michael Moritz, Chairman at Sequoia Capital, called "perilously close to the largest accident in American history.
Former supervising engineer, Charles Sein, stated at the time, "The Bridge had the greatest load factor of its 50-year life" and clearly exceeded design loads, but he wasn't worried in the slightest.
Perhaps he should have been.
Subsequent engineering studies of the event conclude that unforseeen concentration of weight in the Bridge center caused "suspension cables at the center [to be] stretched as tight as harp strings, while cables near the towers seemed to flap in the wind." [S. Pollalis and C. Otto, The Golden Gate Bridge 50th Anniversary Celebration, Graduate School of Design, Harvard University]
This history provides a cautionary tale for those of us in workers' compensation. We're engaged in a group rush to develop predictive modeling of workers' comp cases. The goal of predictive analytics is sound: By analyzing claims, high utilization and high cost profiles will result in early intervention and, ideally, prevention.
The Care Model. Profiling workers' comp cases is step one. Now what do we do? Employers paying the bill for injured workers are not giving sweeping endorsements of most case management programs. In most communities we haven't changed the health care model very much. Where directed health care network models are permissible, networks are built mostly on price and not value outcomes. Analyzing claims to profile the best providers is gaining ground and has huge potential to improve injured worker care and lower cost. But more work is needed in this area.
Human Motivation. It's well documented that worker motivation and behavior have great bearing on workers' compensation fraud, health costs and duration of disability pay. Blogger Bob Foster credits broadcast executive George Jones with teaching him that, "Understanding human motivation allows you to make things happen."
Does your insurance business analytics specifically address understanding human behavior? Does your organization understand utilization?
While consultants ply their trade building big data analytics, we should all be reminded the best sources of data intelligence for workers compensation cases just might be providers and the injured workers themselves. We should be using paying attention.
Before my career was a decade old, I received a lasting business lesson at a time when pre-authorization, bill review and other case management programs had begun to ply the field of workers compensation and health services.
A well-known managed care executive was speaking to a trade group touting managed benefit plans for their quality and cost advantages. Attending was a surgeon of large stature and national reputation, wanting no part of a managed care message. He stood up, denounced the speaker and his content and proceeded to walk out of the room - with all of his medical residents in tow.
It was my first exposure (I had many more) to author Paul Starr's 1949 description of the Rise of Medical Authority, which was required reading for my college program (The Social Transformation of American Medicine).
I've thought often of that event since then, for the stark, real-world education, for sure; but also for the reminders of the untapped potential for collaboration to improve workers compensation program cost and care.
Here are a few of the observations I have about where workers compensation industry trends and best practices might be missing opportunities.
- Collaboration is a competitive advantage. The best care I've observed takes place in collegial settings that render strictly rules-based programs inferior. Collegiality in these systems is expected and occurs within and across businesses. Does your company collaborate with care teams, employees, employers and insurers? With case managers, claim managers and attorneys? I wonder if our dash to predict the toughest, most expensive workers comp claims ignores the low-hanging fruit of being easier to work with.
- Give workers unexpected information. Is your first contact in the work place, before or after first injury? A colleague told me CostCo, well publicized for treating its employees well, has not only industry-leading employee productivity and retention but also lower theft. I wonder if this translates to fewer workplace injuries too. It should.
- Communication should be understandable. We work in a complex industry, but it's no excuse for confusing injured workers, physicians and others with our business process. We take pride in our company for timely and clear claim status and error messaging. But I know we can do more, and we are.
- Whole process thinking will win. We operate with a myriad of state rules and mandates, and in a medical care system not designed to address injured persons that might need medical, social and even financial help to get healthy. Is your business thinking out of the box?
The workers comp systems and people that work well together will be more successful at managing the economic risk of workers comp and auto injury claims. [Contact Rex Cattanach at 612-819-4730 or firstname.lastname@example.org]
To Our Valued Customers and Partners:
We've Moved! To serve customers better, iHCFA has moved to larger office space and expanded our telephone system (with a new main business telephone number).
Our new contact information is: iHCFA LLC Corporate Office, 9 Campus Drive, Parsippany, NJ 07054. Main business telephone: 973-795-1641 or Toll Free 888-488-2246
John Maxwell is arguably the most knowledgeable author and speaker on the subject of leadership. In his landmark book, The 21 Irrefutable Laws of Leadership, Mr. Maxwell describes his Law of Priorities. He asks us to challenge our current priorities in search of, "What gives the greatest return" and "What brings the greatest reward." Read this chapter twice. I did.
Prioritizing is hard work. It requires us to do things that are difficult and uncomfortable. The author says it requires us to think ahead to a vision that is different than our business today, and to make often painful decisions to achieve that vision.
For those of us in health and personal injury services, there is a great deal to think about when it comes to choosing priorities and identifying the requirements to achieve them.
If you've coached or had a child participate in youth sports, you'll appreciate Mr. Maxwell's examples. Between three children we experienced almost every sport our schools offered. I recall watching youth practices led, in many cases, by very experienced adult coaches with Division I college or professional experience. During most practices, a girl or boy would run the drill, return to line and wait. Practice was perhaps 20 percent action and 80 percent waiting.
Legendary basketball coach John Wooden, former coach of UCLA, didn't work this way; his practices didn't look anything like youth sports. Wooden was said to put as much time into planning each practice as the practice was long. He planned every drill, minute by minute, to accomplish a specific goal for his players. Years later, he claims to know what drill his team was running on any given day and any hour of practice if asked.
The most telling fact about priorities in that story is that Wooden is said to have never scouted opposing teams. Instead, he focused on getting the most from his own players and that team and not what the other guy was doing.
Do we set priorities based on our present business? Or do we have a vision to be different, to be better? Is our strategy shaped by hot trends in our industry? Or is it guided by what will give us the greatest return and bring us and our customers the greatest reward?
In our business of electronic medical billing, greatest return and reward are shaped by the needs of medical providers, insurers and patients. We know if we play to our strengths in data integration and support, we will lead in this area and our results will follow.
It was not Wooden's goal to prepare for the other team or to win championships. His goal was to develop each player and team to their potential.
If we in the health and personal injury business follow this principle, we will learn the Law of Priorities and will achieve more than otherwise possible.
(Second of two discussions on data analytics investments. Contact us at: email@example.com or 888-488-2246)
Albert Einstein wrote, "Everything should be made as simple as possible, but not simpler."
Wise advice for professionals working to provide quality medical care and good business results in workers' compensation and auto personal injury lines. We all know the billing process should be simplified, but the process is not simple. A workers' compensation insurance carrier described to us their claims adjudicatioin algorythm as having exponential edits using more than 150 variables.
Are we making medical billing harder than necessary?
As discussed in a previous post, our industry is investing heavily in data analytics aimed at 'finding' and 'predicting' high cost cases and matching those with prevention and intervention. This will improve care and cost. But many denied claims are not hard to find.
For billing offices in both medical group practices and insurers, an 'adverse case' really is any claimant submitting a medical bill to a plan where the plan pays less than 100% of the bill after applying deductible and co-payments.
Many studies have measured and found 'adverse cases' account for 40 percent of total claims for personal injury insurance benefits, lower for health benefits. For high value business solutions, look at the most frequent reasons for denied claims. We think about adverse claims in three categories, each with very different causes and solutions:
- Claims with missing, incomplete or (and) invalid information;
- Claimants without insurance coverage (at the time service was provided, or for the specific services received, or with this insurer);
- All other administrative or medical denials or reduction of benefits.
Which denial bucket fills first?
The top rejection codes across health and personal injury claims are for missing or invalid information, bucket #1. Bills are rejected because they are unprocessable. These vary from demographic errors to missing signature or physician authorization.
For workers' compensation, Bucket #1 errors often are the result of missing medical documentation or reports. Given the abundance of paper processing of workers' compensation bills, these errors have costly implications; they can cause additional errors. Resubmitting a bill prior to receiving insurer determination increases administrative costs to both parties and causes a duplicate claim denial.
Claims without insurer coverage also have residence in the top reasons bills are rejected (Bucket #2). Although some are the result of generic denial codes or denial of non-covered services that warrant follow-up, most are errors that lead to telephone calls to insurance carriers. A surprising number of these calls are to carriers that don't insure the patient.
Our data show more than 20 percent of all medical bills we process are intially rejected for Bucket #1 and #2 reasons - they are errors.
Entire industries have emerged (e.g., legal, appeals consultants, data analytics) to deal with adverse cases that are either costly or thought to be candidates for appeal. We should start with billing automation. Amazingly, while more than 85 percent of health bills are processed electronically, most workers' compensation bills are not. Paper rules.
It need not be this way. More states have or are adopting electronic billing mandates for workers' compensation and auto personal injury lines. But compliance lags or exceptions rule.
Technology enables all personal injury bills to be processed electronically with medical reports and documentation included. Carriers using electronic billing for workers' compensation report up to 50 percent reductions in telephone calls relating to denied bills by providers. For insurers considering investing in data analytics to manage costly cases, electronic billing is low-hanging fruit.
Contact us for information about e-Billing at: firstname.lastname@example.org or 888-488-2246.
How might insurers evaluate the business value of having one fully electronic billing process for workers' compensation and auto personal injury claims?
Increasing investment in claims systems and data analytics by insurance carriers is the subject of lead stories in most insurance trade journals. Business analytics holds great promise for injury prevention, back to work programs and fraud prevention. But at a time when most workers' compensation and auto personal injury bills are transacted in whole or in part using manual (paper) processes, would electronic medical billing provide higher return on investment and better outcomes for claimants?
Douglas Hubbard, a published expert in business decision support, defines the value of information as "the cost of being wrong times the chance of being wrong." Consider two valid IT investment choices to improve results in workers' compensation: Project A, investing in predictive analytics (projecting what will happen), or Project B, establishing a paperless end-to-end electronic billing process?
For each strategy, estimate the chance of success, the business impact if the project is approved and either succeeds or fails, and the business impact of rejecting the project (the status quo with zero investment cost).
Applying Mr. Hubbard's measurement methodology to workers' compensation medical claims, consider four widely accepted conditions for good workers' compensation outcomes.
1. Electronic billing by insurers and medical practices reduces operating costs by 40 percent or more when replacing manual, paper processing.
2. Claims costs are higher if bill processing, treatment or payment are delayed.
3. Medical treatment costs constitute the majority of workers' compensation program costs and are rising faster, even in the presence of utilization and case management programs.
4. Failure to acknowledge, pay or deny claims is the top reason for insurer compliance complaints (two other claims-related issues fall in the top 10).
Test Mr. Hubbard's methodology using a simple table. List in column A three variables - chance of success, impact if the Project is approved, and impact if the Project is rejected. Make columns B and C variables for Project success and Project failure. Enter your estimates for these six values. (For examples, contact us: email@example.com)
Predictive analytics Project A success would likely impact medical expenses by eliminating some percentage of fraud cases and reducing some percentage of medical expenses for a smaller percentage of overall cases. You would estimate cases averted and costs avoided for a subset of total cases. In contrast, e-Billing Project B success would have a small impact on per-case costs but would impact 100% of total cases (administrative savings on every bill processed); and Project B should have some positive impact on direct program costs as well.
We believe this measurement approach will be eye-opening. At the very least the analysis requires us to be specific about defining the costs of retaining manual bill processing and the opportunity costs of competing information technology projects.
The usual culprits for not pursuing e-Billing Project B are software functionality (inability to attach medical reports) and insurer legacy enterprise software integration challenges. But technology advances by medical billing software and claims clearinghouses provide more integration options than existed a couple of years ago.
Assess the value of end-to-end electronic medical billing for your company. We have, and the business case for prioritizing project investments in electronic billing for workers' compensation and auto personal injury claims transactions is compelling.
Subsequent issues of iHCFA e-Billing news will highlight ways insurers and providers have solved implementation challenges with e-Billing cost effectively.