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WCRI – will value based care come to workers’ comp?

Value-based care is growing rapidly in the real world outside workers’ comp.  An excellent session asked if VBC will come to work comp.

Work comp care management today is really fee and utilization management using discounted networks and external vendors.

VBC involves bundled payments and is focused on the patient’s experience and results. Simply put, Value = Quality divided by Cost. That requires evidence based medicine, clinical practice guidelines, measuring outcomes, and monitoring and ensuring use of all these tools.

While VBC is complicated to implement in the real world outside work comp, the additional complexities inherent in work comp make it even more complex.  Dr Page noted there are few active VBC initiatives in workers’ comp.  While several states appear to support pilots, they are few, far between, and there doesn’t seem to be any results available just yet.

Dr Page sees objective measurement of outcomes – from the patient’s perspective – as key to the adoption of VBC in work comp.  She identified a sustained return to work as the desired end point.  While that’s true, as we learned yesterday – and undoubtedly you were well aware of this – there are any number of factors driving RTW that have nothing to do with medical care.  Employee-employer relations, psycho-social issues, the availability of employment are just three.  That being the case, I’m a little skeptical about the utility of RTW as the outcome point.

Other barriers to implementing VBC are

  • the need for accurate, consistent, and comprehensive data;
  • comfort and trust between the parties (alert!),
  • and the inherent complexity of designing payment formulae that consider outliers, risk adjustment, comorbidities, and specific state laws favoring or limiting opportunities to direct patients to use and stay with specific providers.

So, while VBC has a lot of promise, my sense is we aren’t going to see any widespread use for a very long time.

Dr David Deitz noted that one challenge is the lack of ability for or interest among orthopedic surgeons in sharing risk around RTW may be a significant obstacle to surgical bundles.

What does this mean for you?

VBC is an idea whose time has come in the real world, and likely won’t ever come in workers’ comp.

10 thoughts on “WCRI – will value based care come to workers’ comp?”

  1. VBC will be likely be a very tough climb as long as discount networks have a perverse incentive to steer patients to the cheapest contracted clinic. That does not nuture quality…it leads to middlemen lining their pockets with $$$$$$$ which were intended for patient care.

  2. This is a very unusual post, in that it seems to surrender in the face of trying to do something in WC that benefits all parties. Why can\’t the paradigm change? Why wouldn\’t a provider take the option of a bundled payment (and much more volume) when he/she knows his/her cost is much lower than average (i.e., the likely bundle price)? Why wouldn\’t that incent other providers to review their cost structures and improve? Why can\’t we start locally and get some traction in breaking down these 3 barriers noted? Middlemen will take notice. As an actuary, I also know it\’s not because we can\’t analyze data or make risk adjustments (though we would have to share more data). Regulators will listen and propose change if it makes economic sense. And we won\’t build trust if we don\’t all try. To me, while some challenges exist (of course), this is a great opportunity for our industry – change and disruption is needed!

    1. Hi Steve – thanks for the note.

      I’d suggest it isn’t surrender but rather the recognition that it just isn’t doable due to a variety of reasons, chief among them a very low frequency rate (few rotator cuff tears in any MSA), likely highly variable severity (“the law of small numbers), inconsistent health insurance coverage of work comp patients thus widely varying underlying health status and the potential for work comp to have to pay to treat those non-occupational conditions, and the inability of medical providers to “own” RTW.

  3. Hi Joe,

    Do you think LifeTEAM might be considered a version of value based care even if niche? Curious about your perspective. We deliver only evidence-based biopsychosocial interventions, essentially we have bundled rates, we use standardized outcomes measures and oversee the outcome of the case including RTW. Providers have to adhere to our EBM protocols/programs published in the peer reviewed literature. Thoughts?

    Hope the conference is going well!

    Best regards,

    Darrell Bruga

  4. Thanks for your reply, Joe. We can get a very reasonable level of insight into severity variation on the WC claims that do occur, for certain more frequent injury (or diagnosis) types, for most WC insurers, and even for larger corporate clients. RTW would not have to be a/the key metric. Comorbidities exist in healthcare as well, but that does not stop a focus on specific procedures to bundle. And for corporates, we would not have the issue of varying health coverage. It seems doable, no?

    1. Steve – there just aren’t enough claims with specific diagnoses to make this viable in the vast majority of service areas. VBC requires enough claims to ensure certainty for providers and payers. The fewer the claims, the more variation among the claims, the more variation among the claimants and the more risk for the provider.

      There may be enough soft tissue back claims in a service area. Then the challenge becomes:
      – does any one payer or grop of payers have enough claims
      – is it an employer direction state, and if so, what flavor of direction; complete control, control for X days, direction to a single provider or panel or network, employee opt out ability

      I don’t see how RTW cannot be the key metric – that’s what WC is about. If it isnt, there’s too much latitude for argument about what is MMI, return to functionality, who’s responsible for that, etc.

      This could work well in monopolistic states but I don’t see bundled payments and the like getting any measurable traction elsewhere.

  5. This is a great conversation, and very timely.

    Without question one of the ‘buzz phrases’ in the healthcare industry relates to Value Based Purchasing (VBP), an initiative driven primarily by CMS along with supporting legislation that seeks to develop innovative and more meaningful ways of purchasing health care. Before we venture too far down the path of determining the viability of VBP in Worker’s Compensation, it is prudent to first define what we mean when we speak about VBP. The Centers for Medicare and Medicaid Services utilizes very specific definitions and domains for VBP, and also utilize standard measures across clinical care, outcomes, safety, and efficiency, creating a “Total Performance Score” for all participating hospitals; only a small percentage of the total score is based on outcome measures, and the outcome measures would not always align with key/important indicators for Worker’s Compensation (e.g., sustainable return to work). This methodology is more of a “one size fits all” quality program that rewards high performers in terms of inpatient care. Understand that this program is neither free nor cheap – CMS reduced all participating hospital DRG payments by 2% to fund this quality-based initiative. This program creates a broad adjustment to standard FFS type payments, and should not be construed as being a bundled payment program. Episode of care and bundled payment methodologies are quite different in design (more on that below).

    Other market payers (commercial) have developed very targeted programs for VBP; one that comes to mind targets congestive heart failure and the use of a higher-dollar pharmaceutical agent, with the goal of improving quality of life and reducing CHF exacerbation and hospital admissions. This program attempts to pay based on quality and outcomes and migrates away from the ‘penny-wise, pound foolish’ mentality as it relates to healthcare reimbursement. While the results of the program are not known at this time, both parties involved are optimistic regarding the outcome.

    As Joe points out , program design, accurate and complete data, and trust between parties are essential components of a value-based purchasing program. As the other commenter highlights above, however, there is another key player(s) in this equation – the State Regulators and the Worker’s Compensation administrations – and both play an important role in developing and supporting these programs. Integral to some of these programs, based on program design, will be an ability to manage the direction of care.

    I agree with Joe that VBP has promise; I also agree that market adoption has been slow – but despite the challenges the future direction of payment in healthcare will continue to move towards episode of care bundling and VBP, and eventually I anticipate a few attempts at payment for outcomes in lieu of payment at the claim level in the world of Worker’s Compensation. Perhaps an industry player will focus on total knee replacements, utilizing return to work parameters, specific sets of identified implants, complication rates, patient experience, or any number of goals and objectives that align with a desired outcome based on quality and total reimbursement. The options in this space are endless.

    Last comment – it is often easy to confuse value based purchasing and episode of care payment or other bundling payment methodologies. These are generally not aligned in any meaningful way. In the CMS world episode of care and the more advanced bundling payment initiatives – while they make small references to better outcomes – are in no way aligned with outcomes or value. These programs are created to simplify the payment for an episode of care for a provider (e.g., facility) or a group of providers (physician, facility, ancillary), one that saves money over current FFS expenditures for the same care package. Financial targets are created and – for models such as the CMS bundled models 1 and 2 – there is reconciliation of all FFS paid claims against the financial target. In the more complex bundling models (model 4) multiple players are involved and payment is made on a prospective basis to one player, typically the facility, who must disseminate the rest of the funding to other participants in the episode of care. Certainly no easy task.

    In the end we should remain focused on our prime objective: better outcomes, more affordable care for all. I remain hopeful that we as a nation will continue to forge ahead in this endeavor.

  6. Waaaay too pessimistic. e.g. Best was to control absence is to keep injured Ee @ work with, accommodated duty, which requires a good relationship between employer and Occ Med.
    The Occ Doc will channel referrals to the high value specialists, in the few instances when specialist care is really needed; this makes a huge value difference, and has been repeatedly documented. See work of Dr. Ed Bernacki.
    As in most of medicine, good primary care of the problem is the key to value. Need to start paying good Occ Docs what they are worth to the system. Employees recognize and appreciate good care, contrary to the suspicion generated by poor quality “company doctor”. Either the good or bad reputation will transfer to the company, so buy good medical people- they are a great source corporate competitive advantage.
    If you want really poor value, send all your injuries to the ED.

    1. Thanks for the note George. I don’t disagree with most of your points re what works and why, but that’s been known for decades. But that isn’t what we know today as VBC as practiced in the real world outside work comp

      If I’m too pessimistic, I’m curious as to where and how true VBC is working today. None of the speakers could find any instances where it does. Several states allow pilots, several vendors are claiming to offer VBC via bundled payments etc, yet there doesn’t seem to be much real activity.

      Perhaps it depends on your definition of VBC and the components thereof.

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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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