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Mar
22

The cost:benefit of catastrophic case management

A well-designed, thorough, and much-needed study of the impact of nurse case management on catastrophic claims was completed late last year by the University of Washington.

The UW study examined 216 cat cases insured by L&I, the state workers’ compensation fund, and evaluated workers satisfaction and self-reported outcomes, duration of time loss and total medical costs.

Among the conclusions were these:

there is a high level of worker satisfaction with nurse case management services, and

there were no changes in the average duration of time loss or average medical costs after implementation of the nurse case management pilot for catastrophic injuries.

One particularly striking conclusion was the Economic Analysis. The Analysis “examined the predicted and actual medical and NCM costs for one outcome based firm with the most referrals (Paradigm).” Of the 216 cases, there were a total of 25 referrals to Paradigm, of which 15 were accepted by L&I and managed by Paradigm. [A detailed description of the analysis of the Paradigm cases begins on page 104)

The report noted the small number of Paradigm cases precluded a formal “statistical assessment or economic evaluation, e.g., return on investment (ROI) analysis.” Instead, the UW researchers provided a “descriptive analysis involving comparisons of different cost measures in order to assess the economic value of NCM services provided by Paradigm.”

Regarding the Paradigm cases, the study concluded:

the cost for nurse case management alone was 1.8 times the total medical costs paid by L&I.  In addition, the medical costs estimated by the outcome-based firm were substantially higher than the actual medical costs paid by L&I, on average. For all other firms, the costs of nurse case management were substantially lower than the average medical costs for the injured workers. [emphasis added]

I reached out to Paradigm to get their take; this is their response:

Paradigm is aware of the UW research paper and has reviewed its findings. It is not possible to reach any of the conclusions made about the “economic value” of our services based on the limited scope and methodology of the report. The report fails to capture the most meaningful measure of success, which is the ability to achieve maximum functional outcomes at a lower total cost of care. This is the model that Paradigm, and our clients, uphold. As you know, Paradigm’s Catastrophic Outcome Plan product, which is the service that UW referenced in the paper, is not a traditional case management solution.

We confidently stand by our results and our 30-year record of delivering life-changing outcomes to catastrophically injured workers and their families, and value to our clients. We encourage you to read the October 2020 study conducted by independent actuarial firm Milliman which confirms Paradigm’s results.

I followed up with this request:

MCM – I’d appreciate a bit more explanation about what specifically about the limited scope and methodology prevents one from reaching any of the conclusions cited by the study’s authors?

Is there any comment re what could have accounted for the high costs of case management compared to medical costs for many of the patients?

Paradigm responded:

Our commitment to Washington L&I was to deliver our risk bearing outcome plan model that provides a total lower lifetime cost and a guaranteed outcome—verified by Milliman as recently as October 2020, and based on 30 years of clinical data. With this product, Paradigm provides an integrated system of clinical capabilities, data, and experts to deliver lower lifetime costs. Comparing case manager expenses to Paradigm’s outcome plan model is not valid. Further, the study focused on a short timeframe (less than 24 months) and could not have captured the outcome and total cost benefits that Paradigm delivers.

Three observations. 

First, the 24 month time period may well have been too short to capture the full impact of Paradigm’s program.

Second, the cost of case management services strikes me as “valid” indeed, if one is concerned about the total cost of a cat case. I cannot imagine a scenario where a VP of claims or Medical Director wouldn’t have some rather pointed questions about a cat case where case management costs were almost double medical expenses.

Third, Paradigm predicted medical costs that were much higher than what L&I actually paid.

Disclosures

Carisk is an HSA consulting client; it has a division that competes with Paradigm Outcomes.

I’m working with two of the researchers on a PCORI-funded analysis of the impact of different regulatory approaches on opioid prescribing in workers’ compensation.

Note – For more of my coverage of Paradigm, click on links for posts complimenting the company on its strategy and suggesting more payers should utilize their services.

 


Joe Paduda is the principal of Health Strategy Associates

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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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