There are three primary ways to reduce workers’ compensation costs: reduce the frequency of injuries, the costs per claim and lost workdays. All other things have little impact on your premium, according to workers’ compensation specialists. Employers largely control the claim frequency and severity in their workplace with safe work practices. Medical costs per claim and lost workdays often depend on the provider.
There are others espousing another way to reduce medical costs and lost workdays. “New” or “better” provider networks giving discounts for medical services are returning. While offering to save the cost of a medical procedure, rarely does objective data validate its claim of reducing overall costs. Frequently, the networks give employers only a procedure cost, not the case cost data, i.e. direct and indirect costs.
For Example
Two providers practice medicine—one network provider (Provider A) and one non-network provider (Provider B). Two workers with identical back injuries are sent to the providers. Provider A examines the worker, orders x-rays and takes the worker off work for three days. The direct medical costs for the visit are $400. Subsequently, the worker is seen six more times at $100 per visit for a total of three lost workdays and seven modified days. The total direct medical cost for the claim is $1,000.
Provider B examines the worker, orders x-rays and prescribes modified duty restrictions. The initial visit cost is $500. Subsequently, the worker is seen three more times at a cost of $120 per visit, or $360, and is returned to full duty six days after the injury. The total direct medical costs for Provider B (the non-network provider) is $860 (14% lower than Provider A—the network provider).
The indirect costs of the claim—e.g. replacement workers, lower productivity and potential overtime costs—and the costs to your premium due to lost and modified workdays are estimated at four to 10 times greater than the direct costs. In the example above, Provider A’s indirect costs are much higher, as the employer had to replace the worker for three lost workdays. If this worker made $15/hour, Provider A is also responsible for an extra $360 to the claim. In addition, the lost workdays also increase any settlement costs, the risk of litigation and premium rates.
Rarely do networks ensure provider superiority and outcomes. Their primary goal is to have a quantity network, not necessarily a quality network.
How will you know? Ask the network representative some simple questions. Do you require a quality review process for provider outcomes and could you show me the data? Have you ever refused a provider into your network based on an outcome data review? What are your provider benchmarks and requirements for lost workdays, restricted duty, visits per injury and costs per claim? Who are your current providers in the network? Who has refused to be in your network? Do you give corresponding scheduled credits on my premium if I only use network providers?
Chances are the responses will be very telling. IBI