How do we keep score in workers' compensation? Typically insurance carriers provide "top of the line measurements" such as total number of claim dollars spent in a given year, average claims costs for medical-only claims and average claims costs for lost-time claims to employers. They may even break down some injury costs by department.
Not surprisingly, these metrics drive decisions. They become goals and measures of success. In fact, metrics on claims costs have become so predominant that companies often reward their employees based on them. If injury costs go down in a department, it's a good thing and supervisors and employees are rewarded. If they go up, it's a bad thing and corrective actions are needed.
Unfortunately, this focus on total claims cost from one year to the next is incomplete and shortsighted. It fails to recognize or measure what's driving the claims costs. If the average medical cost per claim increased, was it simply a matter of medical inflation or did it have anything to do with something the employer could control? If it went down was it luck or a result of the employer's actions?
What is needed are tangible and measurable metrics of factors driving claims costs. This focus has several advantages. First, it inherently takes a long-term view enabling employers to understand the underlying circumstances and conditions that are driving up work-related injury costs. Secondly, it isolates measures of the value of the employer's actions. This approach is much more than a difference in semantics; it not only will drive decisions in a different direction but it may also entail significant changes in an organization's management of workers' compensation.
CompScore Metrics, the four most important measurements for driving down workers' compensation costs, are:
A well-known study by The Hartford has demonstrated that "time is money" for workers' compensation claims. A week's delay in reporting an injury can increase claim cost by 10 percent; claims filed a month or more after an injury cost 48 percent more to settle than those reported in the first week.
Yet it is not only the lag time in reporting that is important to measure; along the continuum of care there are many points at which a claim can become snagged, slowed down or stopped dead in its tracks. Lag time to first doctor's visit; lag time to get report from doctor; lag time to see a specialist; and so on, all have negative effects on claims costs.
An employer can set their own baseline for improvement by examining injury records, writing down dates and identifying excessive time lag. Reducing delays in care and accelerating continuity in care and communication with the employer will drive down claims costs and improve productivity.
Excellent sources of disability duration guidelines and benchmarking data on time away from work are available. The Medical Disability Advisor, by Presley Reed, MD, helps companies more efficiently manage and measure the time employees are away from work by providing evidence-based disability duration guidelines for over 6,700 of the most common injuries and illnesses of working age people.
The gold standard for effective occupational medical practice from the American College of Occupational and Environmental Medicine (ACOEM), Occupational Medicine Practice Guidelines: Evaluation and Management of Common Health Problems and Functional Recovery in Workers, 2nd Edition, provides evidenced-based treatment guidelines for all types of injuries. These guidelines are the foundation for the state of California's Medical Treatment Utilization Schedule that requires doctors to use these treatment protocols for injured workers.
The evidenced-based guidelines offer the best standards of medical diagnosis, evaluation and medical management in the workplace. With these benchmarks employers can measure the actual versus the expected disability duration for an employee based on their injury and determine whether or not the treatment matched the treatment protocols. The approach has met with success in California and warrants consideration as a national model.
Drilling down even further, there are predictive modeling programs that can identify claims that are likely to spiral out of control. Flagging these claims and monitoring vigilantly is another way that evidenced-based guidelines can reduce costs.
A smooth, safe and expedited return-to-work is the mark of a well-run loss control program. The longer an employee stays at home, the more difficult it is to bring him or her back to the work environment. Return-to-work programs with modified work assignments are a crucial component in reducing workers' comp costs. Yet, modified duty work assignments are transitional, designed to reach the primary goal of returning workers to full duty at their original job. Injured workers should not be mired in modified duty for extended periods of time. Benchmarks are available to evaluate the employee's progress and reductions in modified duty days will improve productivity.
The best way to measure a physician is by the evidence-based treatment guidelines. Yet, not all doctors follow them. Reviewing the cases treated by the same physician can reveal disconcerting trends; i.e. every one is referred for physical therapy. While state statutes differ with respect to the extent to which employers can direct injured workers to certain medical providers, the medical management of a workers' comp claim is essential to reducing costs. Holding physicians accountable to established standards is key.
Using CompScore metrics will lead to different insights and strategic decisions than the current claims-cost approach. They act as a mirror into the current processes. If it takes on average seven to 10 days to report an injury, there is a training and communication issue. The employer can put a training initiative in place and measure the results over a three- or six-month period. If there are delays in the continuity of care, there is a problem with the physician and it must be communicated that it is unacceptable. Often times, delays can be resolved by using alternative specialists, improving communication or simply being more aggressive on the telephone.
In the same way that measuring results is key to productivity improvement, measuring the factors that affect workers' compensation costs becomes the basis by which employers can reduce these expenses and, at the same, better serve injured employees.
Since insurance companies are not providing this critical data, it falls to employers, along with their insurance agents, to take action on their own since it's their bottom line and employees that are at risk.
Editor's Note: Keith Pearsall is president of Business Insurers of the Carolinas, Chapel Hill, North Carolina, one of only 20 Level-5 member agencies of the Institute of WorkComp Professionals. Pearsall, who has 16 years' experience specializing in workers' compensation, is an Accredited Advisor in Insurance, a member of the Independent Insurance Agents of North Carolina and has been designated a Certified WorkComp Advisor by the Institute of WorkComp Professionals.