By Ted Jeffries and Kim Hulsey, Missouri Employers Mutual Insurance
Remember 1985? For those of us that do, it wasn’t just the first year we survived after the dystopian society conjured up in George Orwell’s novel “1984.” In 1985, medical expenditures represented 44% of total loss costs, while indemnity made up 56%, according to NCCI data. After 1985, we began a long shift in the opposite direction. As of 2005, we found the opposite scenario – indemnity costs made up 42% of total losses, while medical had climbed to some 58%.
While part of the basis for this can be attributed to reforms and other controls on the indemnity side over the years, there has also been a major focus on medical cost controls over this same period. It is not uncommon to hear of discounting with managed care arrangements approaching and even exceeding 40% of billed charges. In many cases, these discounts are at the highest levels recorded by carriers that engage in these programs.
With medical discounts often in the area of 40 cents on the dollar, and wage inflation according to the bureau of labor statistics ranging from just 2% - 2.5% per year recently, it initially may seem counterintuitive to see such a reversal in the portion of overall loss costs attributed to medical expenditures. Over the past 11 years, medical inflation has never exceeded 5%, yet overall medical costs have risen at an average rate of nearly 9% (NCCI). To determine the root causes for this, we need to look deeper.
As you study the recent data, it becomes clear that one of the most important drivers of this phenomenon is in our utilization of services – defined as the number of services rendered, and the choices of conservative or more aggressive care. Take the preliminary NCCI data from 2005 as an example. Medical inflation was 4.2%, yet total medical severity rose by 8.5%. The 4.3% gap (or 50%!) between these figures represents an increase in service utilization.
Looking at the data from this perspective, one can quickly arrive at the conclusion that ‘standard’ managed care arrangements are no longer sufficient. The need for a comprehensive utilization management process has become very clear over the recent years.
Many examples exist that point to the need for a change in the way we evaluate medical care. New and unproven care options, a proliferation in the uses of expensive tests, such as MRIs as opposed to x-rays, and changes in treatment patterns by providers are all examples of this issue. These shifts in the way medicine is practiced today are a major cause of the increasing transfer of loss costs to the medical side, and away from indemnity, as a portion of total losses. This is most certainly not to imply that we should resist the progress of medical advancement, but that we should evaluate whether the outcome from a more expensive, repetitive, or unproven procedure will exceed that of a more traditional procedure.
How can utilization be monitored or contained? One option that should be considered is a comprehensive Utilization Review (UR) process. UR is something that has been a part of the group health world for some time, and is now becoming an option for some carriers to consider as a part of their overall medical and disability management process.
UR programs can be defined as a set of formal techniques designed to assess the delivery of medical services, to determine if the care provided is appropriate, medically necessary or medically reasonable and of high quality. It can also determine efficacy or efficiency of medical services rendered, and confirm the relatedness of a medical service to the compensable injury.
The components of UR services include the following:
- Prospective or Pre-certification UR. This type of review takes place prior to the services being rendered. It is an advance determination of the medical appropriateness/reasonableness of the medical treatment. This type of review helps to prevent costs that may not be necessary (such as treatment for services not related to the work accident) to achieve the best possible outcome.
- Concurrent UR. This review takes place as the services are being performed, for example, during the hospital stay of an injured employee. The reviewer works with the provider to determine the appropriate length of stay as well as working to reach an agreement with regard to additional treatment. Assessment can also be done for discharge needs such as durable medical equipment or home health services. Concurrent review helps to provide the best outcome by providing active oversight and immediate decisions for prompt and appropriate medical care.
- Retrospective UR. Retrospective reviews are performed on services that have already been delivered but not previously certified. The review aims to determine that the services rendered were appropriate, reasonable and medically necessary for the injury. This type of review allows for determination on whether the level of treatment was required and related to the work injury.
In order to successfully implement a UR program, it must have the backing of a medical professional(s). Having access to a medical peer review panel or a medical director is essential. The peer review panel consists of like specialty physicians that can provide opinions on the medical necessity or reasonableness of treatment based on community treatment standards. This is done by review of treatment as well as peer-to-peer contact. A medical director (a licensed physician) can assist in coordinating this process, as well.
In the consideration of a UR program, decisions must also be made as to where the program will be housed. Options include developing the capability internally, or taking advantage of one of the vendors that are already in the business of providing this service. In either case, it is important to make certain that a UR program is properly certified. The most frequently cited entity that can provide this accreditation is URAC (formerly known as the Utilization Review Accreditation Commission). URAC is an independent, non-profit organization that seeks to promote health care quality through its accreditation and certification programs.
As members of AASCIF, we approach this issue from a wide variety of legal and statutory perspectives, and it is important to study the option of a UR program within the context of your state’s statutes. In some cases, only parts of this program are feasible, due to the regulations that apply to the authorization of medical care for an injury. In other cases, such as we are seeing in California and Texas, elements of UR programs are either codified into the statutes, or finding success in the existing legal environments.
In all of this, the outcome is key. Even though the ‘savings’ shown on your managed care reports may fall, this may be because your UR program is helping to avoid procedures or visits that were not required, or were duplicative. This would then allow you to get the care that is needed more quickly, and reduce medical costs overall, while helping to return the worker to productivity even faster than before.
What would you rather see – 40 cents in savings on the dollar for medical care that may not have been appropriate, or would you rather have not incurred the expense in the first place?
If you knew that the proposed care was not going to contribute to the healing of the patient, would you permit it just because the discount was greater than that offered on the care that was actually required? Of course not.
The answer is clear- preventing medical expenditures that do not contribute to the best possible outcome for all parties is the paramount concern. Even though this may result in a reduction of the ‘discount’ percentages earned under typical managed care contracts, the overall costs will significantly improve, as you focus on getting the best, most cost-effective care for your constituents.
|
