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The MedMetrics blog provides comments and insights regarding the world of Workers’ Compensation, principally, issues that are medically-related. The blog offers viewpoints regarding issues affecting the industry written by persons who have long experience in the industry. Our intent is to offer additional fabric, perspective, and hopefully, inspiration to our readers.

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Wednesday, June 15, 2011

Provider Networks: Failure, Folly, and Overhaul

A critical topic in Workers’ Comp managed care is the state of medical provider networks. People are awakening to the fact that provider networks, continuing to operate as designed in the eighties, are not working. Actually, they are working, but not for the purpose of controlling costs. Quite the opposite is true, in fact. Medical costs are spiraling while claim outcomes are mostly unknown, a fact that seems to go unnoticed.

Traditional networks
Traditional medical provider networks in Workers’ Comp were designed to emulate group health insurance networks. In group health the benefit plan strictly controls access and fees. In group health, providers not in the network and medical services not within the authorized range are simply not reimbursed. Moreover, while discounts in the group health arena may be tied to the contractual relationship with providers, they are not used to gain competitive advantage for providers as they are in Workers’ Comp.

In Workers’ Comp, traditional networks contract with providers who, in exchange for business directed to them, offer discounts on units of medical services. Every unit of service is discounted and reported to network subscribers as units of savings. While the savings reports appear to be a positive result, they are actually a major problem that most people realize, but few acknowledge openly.

Opportunity for provider manipulation
Medical providers understood from the beginning they could simply increase frequency and duration of medical services to offset the discounts and bolster profit margins. Under the system of reporting discounts as savings, increases in frequency and duration are reported as even more savings!

Medical providers come in many flavors. Most are excellent treating providers seeking the best outcome for their patient, the claimant. They are also willing to work with employers to control Workers’ Comp costs by supporting modified work programs, for example. Yet, a number of treating providers are unaware, inept and some are downright fraudulent. Unfortunately, the latter group, while small in number, is costing the Workers Comp industry millions of dollars annually and little is being done to change the system.

Until networks are restructured so that incentives reward different behavior, they will continue to do business as usual. Doing nothing is profitable and there is little motivation or provocation to change.

Network overhaul
Nevertheless, the groundswell from employers and other purchasers of networks is building and some forward-thinking provider network organizations are leading the way. A few networks are being overhauled by changing incentives and focusing on claim outcomes. Creating outcome-based networks requires selecting providers that have proven records as evidenced in the data.

Best practice providers are identified in the Workers’ Comp world by their patients’ early return to work and return to full duty. Indemnity costs are limited. Frequency and duration of medical treatment are reasonable and direct medical costs are comparable to other treating providers treating the same injuries. Several additional factors come into play in evaluating provider performance, such as whether there is legal involvement in the claim and duration of the claim from date of injury to closure.

Injury severity adjustment
Beyond these and other measures of performance, injury severity must be computed and applied to provider performance analytics to level the playing field among providers. The performance of those who treat more complex cases should be compared with others treating similar cases. Adjustments for fairness in evaluating providers is important to the credibility and reception of the process.

Our broader opinions on this topic have been written and posted in the following articles. A four part series on this topic is available below and you are invited to review these and other articles posted under Blogs

Part I
Rating Medical Providers

Part II
How to Rate Medical Providers in Workers' Compensation

Part III
Transforming Provider Networks into Quality Networks

Part IV
Monitoring Provider Performance for Predictive Profiling