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Value-based payment – will it work in workers’ comp?

The IAIABC meeting in Portland Maine (a singularly GREAT location for conferences) includes some really deep dives into very hot topics – this morning’s discussion of value-based payment was certainly both.

Big takeawayCMS is going BIG into alternative payments tied to quality; estimates are 72 million people will be covered by ACOs by 2020.

David Deitz MD led off with a summary of what’s happening with Accountable Care Organizations (ACOs). Note this is NOT specific to work comp, but does have significant implications therefore. A few key takeaways:

  • Doc led ACOs performed better than hospital led-ACOs
  • ACO savings generally improved as ACOs got more experience, with half of the ACOs four years into the program earning performance bonuses.
  • some indication that quality has improved – BCBS MA, Marshfield Clinic are two that have delivered results.
  • several key process measures of quality show good improvement – hospital readmissions being one example.

What happens to losers in the quality race? Providers in NJ who didn’t meet quality standards sued and employed various other methods to try to address Horizon BC BS’ refusal to admit them to their Tier One network. Expect this “denial of fairness” argument to show up in other states where providers are booted out of narrow networks.

Kathryn Mueller, MD, Medical Director of Colorado’s Workers’ Comp and Dan Hunt, DO, Medical Director of Accident Fund, gave the regulator’s and payer’s perspectives.  As two of the more thoughtful medical leaders in workers’ comp, Drs Mueller and Hunt dug into the reality of work comp and value based payment.

Dr Mueller noted that bundled payments for surgery won’t necessarily help reduce the number of unnecessary surgeries, a point the audience heartily endorsed.

Dr Hunt has experience with bundled payments from his work as a surgeon; he noted that a lot of analysis and preparation went into developing a single bundled payment for one diagnosis in one location.  He also reported CMS is looking at a zero-based bonus system, where there may well be more losers than gainers (this is consistent with CMS’ expectations).  And, with work comp’s focus on functionality makes for a “better” outcome metric than those used in other payment systems.

So what does this mean for work comp?

  • FFS leads to more care – inevitably
  • FS may constrain costs but, FFS pays bad docs and good docs the same amount
  • So yes, value-based payment makes a ton of sense for workers’ comp, but…
  • Effective payment design must link value and outcomes – and NOT pay for harmful or valueless care.

What might work in WC?  Not medical homes, likely not shared savings or capitation. Possibly bundled payments, and pay for performance only with different metrics.

Emphasis on different metrics – because we in workers’ comp care about stuff other payers don’t, namely functional improvement and indemnity payments chiefly among them.

Data from a variety of providers indicates bundled payments have reduced length of stay, delivered lower costs and higher patient satisfaction.

And due to indemnity payments, work comp has even more incentive to pay for bundled care based on functional outcomes.  As a lot of high cost care in comp is orthopedic, which lends itself well to bundled payments, comp is well positioned to use bundled payments.

However…there are lots of barriers, regulatory, financial motivations of bill review and network vendors, TPAs, insurance companies, and no standard outcomes measures across work comp.

Dr Deitz opined that incentives to cost-shift may drive docs to categorize injuries as occupational in high FS states such as Connecticut and Illinois.

What does this mean for you?

Lots of frictional, regulatory, and entrenched interest resistance will make it hard for bundled payments – in fact most types of value-based payment – to see significant adoption in workers comp.


Note – I captured this as accurately as possible, however I may have unintentionally misquoted the speakers.  Corrections welcomed.

4 thoughts on “Value-based payment – will it work in workers’ comp?”

  1. Joe, this is a very interesting topic. While not exactly on target, but still related, is the issue of physicians declining to see certain patients due to penalties associated with potential poor outcomes. Below is a excerpt from a very experienced physician.

    “It came to my mind again after going to meeting this Saturday at Piedmont Hospital where bureaucrats from Washington told us how we are to practice medicine this year and how they are going to determine what our pay and practice modes will be. It was very scary. Payment will be for outcomes. So a thoracic surgeon got up and said how he was caring for a man with lung cancer who would not stop smoking so this man had many many visits to the doctor and many episodes of pneumonia. The doctor across the street not caring for this man has a better profile because this man seeking many visits to a doctor ruins his profile. The patient that weighs 400 pounds and will not lose weight has many more complications that the lean patient and the doctors who care for obese patients have a worse profile and will be paid less. This has come to fruition already as last week I saw a healthy 20 year old referred to me for the first time. She has had 5 eye muscle surgeries in the past and now has seen 5 ophthalmologists none of whom will operate on her. She is healthy, no smoking, no cancer and has good insurance-private. So her father asked me why none the 5 doctors would operate on his daughter. I explained to him that his daughter will take at least 2 surgeries to get straight eyes and maybe more and that this will ruin the profile of the ophthalmologist who cares for her.”

    This is where outcomes bases payments has some flaws. While the above excerpt is not comp related, you could see the same challenge if physicians stop seeing obese truck drivers who have multiple comorbidities and blew out a knee jumping out of the truck cab. I welcome your thoughts.

    1. Very good points; but at the ethereal heights where these decisions are made there is a vast disconnect with the reality in the clinic. We are treating people and this is not automobile production line. But you can deploy all sorts of programs and regulations and manipulate how a physician practices and make the bottom line look great despite reality. At some point as a health provider you just keep on treating patients the best you can within the system, leave for boutique medicine, or find something else to do.

  2. Value based purchasing should be implemented into all aspects of healthcare as it is a way for providers to validate their expertise for providing care that meets the needs of their patients.
    Today, we have the data to document interventions and also to demonstrate the outcomes for the work being done.

  3. As long as there is a reimbursement system in place in WC where that physician can do a TKR on that truck driver knowing it will only last a fraction of the time due to the patient’s morbid obesity and still get paid full boat for it, nothing will change. Before we look for the perfect reimbursement process, healthcare providers need to step up to the table with greater transparency in the proposed care they give and what they think the benefit will be to the patient. I still deal with many, many IW’s who remain crippled in pain, no improved function, still on opioids months and years later, yet the doc says his/her 3 level spinal fusion fused perfectly and is a “total success”!

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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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