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17 Workers Compensation Cost Control Initiatives Defined

The ISU Pro-Active Program For Containing Workers' Compensation Costs

1) Safety Programs

This initiative implements regularly scheduled safety training which produces workers conditioned to sound safety practices; setting up safety committees; encouraging strong commitment from management to develop a corporate philosophy of safety and loss control; identifying and correcting unsafe working conditions; and instituting inspections of both equipment and the safety program on an on-going basis.

2) Pre-employment Screening

This approach includes written and/or physical examinations to help ensure that an employee is well suited to the requirements of the job; obtaining previous work experience information; and obtaining the frequency and nature of any compensation claims from past employment. Other benefits would include reducing the prospect of future injury or illness related to performance of duties; preventing the spread of communicable disease and screening for addictions to drugs or alcohol. A targeted pre-employment health evaluation may cost more per applicant but ultimately will reduce rates and costs of serious industrial disabilities.

3) Light Duty Programs

This initiative emphasizes getting employees back to work as quickly and safely as possible. Light duty programs are for those recovering from injuries working for the same employer in a different job - a job compatible with the employee's disability. A modified work program is considerably less expensive in that other programs (such as physical therapy outside the job place) have higher claims costs. Moreover, if an employee completes one year of employment in a modified job, a refund of a portion of the workers' compensation premium may be possible.

4) Vocational Rehabilitation

Qualified injured workers, unable physically to return to their pre-injury jobs, must, as mandated by the workers' compensation law, be offered vocational rehabilitation. Three sources of costs are involved:

1. Maintenance allowance to help replace lost wages while the worker receives rehabilitation services, (this accounts for the largest portion of the vocational rehabilitation dollar, typically half the total cost);
2. The cost of evaluation, testing, development and implementation of a specific return to work plan, job replacement assistance and other rehabilitation counseling;
3. Out-of-pocket expenses related to the vocational rehabilitation plan, e.g., tuition, books, transportation, tools, uniforms, food and lodging while the worker is away from home, even child care in some instances.

5) Medical Bill Audits

This initiative includes the review of physician practice patterns; applying fee scheduling to the "double-standard" type medical bill (for example, when an employee breaks an arm during non-working hours, it can be a $100 bill, but the on-the-job bill can be $300); identifying and reducing billings that are above acceptable workers' compensation rates, or contract rates if a bill is from a PPO member; and working with insurers and employers to identify employees who can receive the same care at a less costly facility.

6) Claims Administration Audit

Benefits paid to employees, under workers' compensation, are statutorily derived but subjectively influenced by the method and extent of investigating the claim; expertise in reserving losses; human error in posting and recording information about the losses. Solving these problems can be accomplished by:

1. loss analysis,
2. experience modification review prior to submitting losses to the rating bureaus
3. participating - policies review so that losses are reviewed prior to calculation of the client's dividends,
4. pre-certification of hospital admissions and length of stay,
5. concurrent hospital stay review and discharge planning,
6. rate negotiations of physician fees, hospital daily rates and capitation rates, and
7. elimination of payment for treatment of conditions unrelated to work injuries.

7) Job/Task Analysis

Matching the employee with the job is a preventative measure designed to decrease the possibility of injury before it happens and to help an injured worker return to work quickly in a realistic manner. Job/task analysis can be viewed from the following perspectives: matching the equipment to the employee; modifying the workstation; analyzing the job itself (perhaps breaking it up among several employees); providing a modified schedule--flextime or altered rest periods; relocating the place of the job to make it more efficient or convenient to the employee

8) Litigation Management

Excess and spurious litigation generates staggering costs - it is necessary to return to the basics of a no-fault system. In the meanwhile, the focus of litigation management will be on the reduction of existing litigation costs, cast management, examining litigation status, billing reviews, selection of counsel and Alternative Dispute Resolution (ADR), i.e., mediation and/or arbitration. To avoid litigation there are several principles to follow: prompt and objective exploration of the accident; procedures that show concern and equity so as to prevent hostility and suspicion; selection of competent providers to prevent poor treatment; assuring that all aspects of a claim are confronted so as to avoid dispute and protracted expenses.

9) Fee Schedule Compliance

Physicians tend to bill amounts higher than is allowed by the "Official Medical Fee Schedule” under the workers' compensation law. These fee schedules conform to the usual customary and reasonable fees in the community based on a relative value scale. Costs are substantially higher in fee-for-service and employee group health indemnity plans than in pre-paid plans, such as PPO’s, where they are based on negotiated provider discounts. Studies show that the lack of compliance with established fee schedules is prevalent in everyaspect of medical care (i.e., diagnostic testing, office visits, surgical procedures, all aspects of hospital stay, etc.) and that employers would save considerable costs by taking control of this area of their workers' compensation.

10) Use of Case Managers

This is a process whereby a case is overseen by a medical professional, such as an occupational health nurse or a registered nurse. He or she examines and audits all the information from the date of the accident through all treatments, from a medical standpoint rather than from a claims administration standpoint (which looks at a file from a workers' compensation view). Case Management also builds good will in that it fosters an atmosphere of concern on the part of the employer.

11) Utilization Review

The objective of a Utilization Review (LJR) program is to encourage high-quality care while containing costs by reviewing the medical necessity and appropriateness of treatments in comparison with established industry norms or laws in those states that require UR. Registered nurses in consultation with a physician panel review hospital admissions for necessity and length of stay, review outpatient practices, manage large cases, audit retrospective bills, do medical peer reviews, and integrate all company programs (such as Employee Assistance Programs or employee benefits) to eliminate drugs and alcohol from the workplace.

12) Review of Physician Practice Patterns

This type of review uncovers and remedies the following types of problems associated with care providers:

• Incompetent treatment resulting in bad outcome.
• Channeling non-work-related conditions into the workers' compensation system so that higher fees can be recovered.
• Requiring too many office visits and prolonging treatment.
• Ordering unnecessary diagnostic testing.
• Making unwarranted referrals to collaborating specialists.
• Authorizing unwarranted disability leave or permitting workers to falsify facts about the cause or extent of an injury.
• Charge excessive amounts under the general heading of "usual and customary fees."
• Recommend to workers that they obtain legal assistance when it's not really needed.

13) Use of HM0s. PPOs etc.

Medical costs are much higher in fee-for-service and employee group health indemnity plans than in pre-paid plans, such as PPOs, where fees are based on negotiated provider discounts. Higher utilization rates for all aspects of medical care exist outside of HMOs and PPOs such as diagnostic testing, office visits, surgical procedures, hospital stays length of stay, drugs, x-ray, prescriptions, etc. On the positive side, HMOs and PPOs provide the availability of care from an organized emergency system; geographic accessibility; the assurance that primary care physicians are readily available to manage the use of referral specialists; and the capacity to perform other health services for the employer, such as preplacement physicals, EAPs, health training and on-site investigation of industrial accidents or illnesses.

14) Pre-Certification

Prior to an injured employee being admitted to a hospital, the admissions procedures, length of stay, daily rates and capitation rates for medical coverage, and rate negotiations of physician, fees should be agreed upon. Concurrent hospital stay review and discharge planning can be pre-determined. The elimination of payment for treatment of medical conditions unrelated to work injuries or illness can be established before treatment begins.

15) Rate Negotiations with Health

A negotiated contract by an employer with medical providers can be a powerful instrument in controlling costs. The contract should not only regulate rates but should include: availability of care; geographic accessibility; assurance that the primary care physicians are available to manage and control the use of referral specialists; the capacity to do pre-placement examinations for the employer, Employee Assistance Programs, health training and investigations of industrial accidents and illness. With the aforementioned points, the employer can improve care and reduce costs without interfering with the legal rights of the employees.

16) Incentive Programs

This initiative utilizes behavior modification to make it socially unacceptable to file fraudulent claims or engage in unsafe behavior. People aren't motivated without a perceived benefit, whether the benefit is from preventing the negative or realizing the positive. To change the behavior of employees, there must be a benefit to do so. Incentive programs create peer pressure to change behavior. An ongoing awareness campaign, headed by management, creates an environment in which attention is paid to possible dangerous behavior. With this awareness goes a program which creates an environment in which there are negative ramifications to making false claims. Modifying behavior through the concept of team cooperation and individual awards dramatically reduces accidents and fraudulent claims.

17) Coordination With Group Health Programs

The difference between occupational and life style illness is very blurred. It is all too easy for unprincipled providers to steer patients into the workers' compensation system which is often more lucrative and it may have no restrictions on the amount and type of treatment that can be prescribed. The advantages of integrating the claims administration for both group health plans and workers' compensation plans are:

• Duplicate claims can be identified and eliminated;
• Negotiated rates, utilization controls and treatment regulation can be applied to both simultaneously;
• Claims experience can give direction to both types in prevention, injury control, health education and Employee Assistance Programs;
• Integrated claims processing can prepare for calculation of capitation rates for prepayment of both group health plans and workers' compensation plans
• Cash incentives to encourage employees to properly report non job related injuries as such, rather than burdening their workers' compensation insurance with fraudulent claims.