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Networks in Texas – what are the results?

Back in September the good folks at the Texas Department of Insurance published a most interesting report (shows what a geek I am) – the 2008 Workers’ Compensation Network Report Card. Let’s start with the overall numbers.
Medical costs were about $130 lower for the Texas Star network (a Coventry product) than for the other networks (with non-network claims second least expensive, and all other networks more expensive(!)).
There’s a lot more here, but I’m going to focus on one page in particular – 15 (23 in the pdf file).
More specifically, the top half of that page. It shows (adjusted) average hospital cost per claim, six months post injury, for non-network and several networks. The Texas Star Network’s hospital costs are 5% higher than non-network costs. Corvel’s network costs are significantly higher than Texas Star, and only slightly lower than all the rest of the networks included in the analysis (except Liberty, which has the lowest costs in the study group). Digging deeper into the report, one finds that Texas Star’s higher hospital expense are due to inpatient hospital stays, which are about $3000 more than non-network costs.
By comparison, Corvel’s inpatient costs are a rather stunning twice as high as Texas Star, and over five times higher than Liberty’s HCN.
Like any report, the results generate as many questions as answers. Here are a few of the more intriguing.
Why are Texas Star’s hospital costs higher than non-network?
Texas’ comp regulations require networks include hospitals. Hospitals know this, and according to sources, most refuse to offer any discount, with many forcing networks to pay above the fee schedule. The Texas Star network is priced at around $12 per bill (not including bill review services) or $110 per claim. Thus, the additional cost of using the network is both the access fee, and the ‘premium’ paid to the hospital for the privilege of having them in the network.
Why are Corvel’s inpatient hospital costs so high?
The Corvel numbers look awful, but they have far fewer claimants treated in facilities (a third less than Texas Star, and even fewer than non-network claims). Corvel’s inpatient utilization is very low; most hospital-based care (it appears) is delivered in ambulatory surgical centers and other types of facilities (p. 32). But, the volume of outpatient facility care is off-the-charts higher than non-network claims or any other network’s results.
Which setting delivers the lowest cost per claim?
Too early to tell. Remember, these data are from six months worth of bills. All the expensive claims take years to develop, so we won’t know what the results are for some time. That said, a good chunk of hospital bills hit in the first year of a claim as the acute phase of the injury is treated. While we don’t know what the ultimate result is, it could well be that the inpatient hospital picture doesn’t change much over time.
And what does this mean for you?
Follow this closely, and watch claim development for non-network v network claims. The numbers should start to diverge in favor of networks.

One thought on “Networks in Texas – what are the results?”

  1. Joe –
    Must say that I agree with your observation that TDI’s 2008 Workers Compensation Network Report Card generates far more questions than it should. In fact, from my perspective I find the report to be totally useless as one who is responsible for paying the health care costs of injured workers. Two, by its own analysis, the statutory call for WC Health Networks is revealed for what it is: a failure when it comes to reducing out-of-pocket costs for the employer. Three, it is all too clear that NOT or using a WCHN is a far sight cheaper than joining some “network”.
    For me, the study is meaningless because it fails to look at the cost – pre and post negotiation – of the medical care by a benchmark far more telling than those chosen by the researchers, namely, by diagnosis. That measurement can then be supplemented by an analysis by job classification code and injury. From there one can factor in a comparative analysis by provider (hospital, physician, ASC, etc.)and Zip Code. None of this kind of substantive analysis is impossible if the researchers understood the workers compensation environment and the network administrators/carriers “captured” the essential data from medical bills as submitted and processed.
    I trust that your audience shares your skepticism about the report and voices a concern to policymakers, and people who influence same, if we can expect any meaningful reduction in cost.
    Ralph Galascione
    San Diego, CA

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Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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