A Conspiracy of Silence--WC Provider Networks

A particularly bizarre process has been carried out in the Workers Compensation industry for a very long time. It's something everyone knows about, but few talk about, and still fewer make any attempt to change. It is a conspiracy of silence that continues to drive up medical costs.

Managed care networks (PPO's, HCO's MPN's) contract with physicians and other medical providers to discount their services in exchange for directing injured workers to them. Some states have gotten into the act by legislatively requiring provider networks to be similarly structured. The appeal to those who subscribe to networks is that discounts are applied to individual units of medical services delivered. When the discounts are tallied they are sent to network clients in the form of clean, easily understood reports of dollar savings. The number of services charged is very simply multiplied by the contracted discount. Obviously, more units of service charged result in more discounts and more reported dollars saved. But not really.

You don't need to be too clever to figure out that more discounts reported means more medical services were delivered, but not necessarily more savings. Increasing medical services inflates the number of reported discounts, not overall savings.

Moreover, medical providers are a part of the conspiracy, being quick to realize the way to overcome the revenue hit of discounts is to deliver and charge for more services. Most providers don't think of themselves as exploiting their charges and the system. Many just know that for Workers Comp patients under the network discounting arrangement, they maximize treatment.

Payers go along with the deception because reports of discounts make people feel good. Who doesn't want to receive the good news of cost savings? They can pass along the feel-good reports to their clients and accounts. Everyone wins--except the employer who eventually has to foot the bill. Employers are aware of these shenanigans; it's hardly breaking news. But in the conspiracy of silence, no one is willing to topple the apple cart by leading the charge of change.

Nevertheless, medical network practices could be made palatable, even defensible if this archaic method of discounting were redirected to evaluating medical practice patterns and outcomes. Think quality. Under present procedures, once providers are contracted by a network, they remain on the panel indefinitely, without performance evaluations or monitoring. Quality is not measured and outcomes are not reported. We have no proof of value. We have no quality measures for the treatment practices of the individual providers in the network. Yet, this higher level of information and process management is available now.

The technology and methodology to measure and monitor treating provider performance is a process of evaluating the data to measure quality in context with desired outcomes in Workers Comp. That is different than in group health or general health where quality criteria are determined by return to health whereas in Workers Comp we are more concerned with return to work. Evaluating data is not so difficult except for the fact that in Workers' Comp, the data related to a claim are often found in different locations, even in different companies. Regardless of where the data resides, it is rarely integrated for the purposes of understanding medical treatment in context with outcome. Provider networks hold vast amounts of medical billing data, but not claim outcomes data.

Medical billing data is rich in medical treatment detail along with billed charges for services delivered. But it has to travel through bill review where the charges are evaluated and recommendations made for adjusted payments based on appropriateness and fee schedules. The bills also go the networks where the unit discounts are applied. Bill review companies and networks have truckloads of data, but still not enough data.

The essential value-add to fair provider performance evaluation is claims level data. Treatment practices of providers found in billing and/or bill review must be considered in context of the entire claim. Billing, whether discounted or not must be viewed from the broader perspective of return to work, indemnity payments and outcomes. Continuously monitoring providers and their treatment practices in this way will reveal best practice providers, inept providers, and fraudulent providers. So what's the hold-up?

The concept of contracted provider networks is not the problem. The problem is the revenue and payment structure currently used by them. Not monitoring and measuring provider performance is unacceptable. But most networks do not want to consider alternative structures, structures that do not rely on unit discounts. It would mean changing their business model where revenue and payments are derived from different logic. But networks should consider the fact that employers might prefer to pay for networks (via their payers) that evaluate providers and provider performance. Employers might choose to pay for networks with providers who have better outcomes rather than misleading discounts and reported savings. But for now, the conspiracy of silence continues.

View additional articles by Karen Wolfe under Blogs at www.medmetrics.org