There are specialty managed care offerings for PT, imaging, pharmacy, home health, DME, facilities; even dental. Till now, the only type of medical spend that didn’t have a custom answer had bern diagnostic lab.
That gap has now been filled.
Work comp managed care firm DiaTri (www.diatri.net) has signed a deal that provides their clients with access at deep discounts to the 5000 Quest lab facilities. The access enables payers to benefit from rates that look to be substantially under most generalist networks, and far less than fee schedule rates.
The deal requires payers to work diligently (my words not their’s) to encourage claimants to use the participating labs; payers will have to do more than just take discounts. However, the discounted rates will be applied to retro as well as prospective referrals.
DiaTri has an exclusive deal here; thus is a savvy business move for the company which has been operating in other work comp and group health niche markets.
Note: neither myself nor HSA have any professional or business relationship with DiaTri or Quest.

‘Managing the Impossible’, an analysis of catastrophic case management firm Paradigm’s results and comparison of those results to those achieved by work comp insurers, has been sitting on the upper right corner of my desk for a couple of months now.
I’ve read it, re-read it, discussed it with Paradigm staffers and a couple of their clients, and started to post on this at least twice. Each time other hotter issues popped up, and this got pushed back into the corner of the desk.
This may be similar to how Paradigm has been dealt with by many in the payer community. Sure, those cat cases are important, and yes, we really need to do something about it, but hey, I have a really important meeting on the latest PeopleSoft upgrade to go to, and I really need to review the latest case closure report, and…
So the urgent takes precedence over the important. And make no mistake, catastrophic cases are very important indeed in work comp. According to an analysis by NCCI, half of all medical expenses are for 6.2% of claims.
Six percent of medical dollars are spent on 0.3% of claims. By my calculation, that’s $1.8 billion annually on a very few claims. The real dollars are much larger, as cat claims account for a very large chunk of the industry’s reserves.
Many payers have set up dedicated teams to handle cat claims. Staffed by senior claims reps supported by legal and medical experts, these are variously known as ‘high exposure’, ‘large loss’, or ‘complex claim’ units. While there’s undoubtedly a lot of experience embedded in many of these units, it is simply impossible for a single payer to have the depth if expertise in specific types of cat claims that is resident in Paradigm. No insurer has seen as many TBIs, burns or spinal cord injuries; if they had they’d be long out of business.
Yet despite the demonstrated expertise and documented results of Paradigm, many claims execs refuse to objectively consider referring cat claims to Paradigm (or a similar entity).
Why?
Experience tells me some are threatened by the potential that an outside firm could actually handle a claim better than their own people. Others blindly believe (with inadequate justification) that no one outside their company could possibly do a better job.
Paradigm isn’t blameless. The company has stumbled in their efforts to build a succesful sales and marketing program. At times they have been insensitive to the threat they pose to clients’ entrenched processes and personnel. That said, there’s no question they have far more expertise in cat claims than any single payer, and their financial model is usually compelling.
Note: Paradigm is not a consulting client and has no business relationship with HSA or myself.

Physical therapy is one of the least understood components of work comp medical expense. This lack of understanding begins with a wide range of ‘definitions’ of what counts as PT – from services performed by physical therapists, to all the 97xxx procedure codes, to services billed by a PT clinic tax identification number (TIN).
Confusion continues when the widely varying state regulations are brought into focus, with states like Florida and California setting a hard-and-fast maximum number of visits (‘the 24-visit rule’), while others ignore PT altogether in their medical management regs, and still other jurisdictions require payers to review and authorize PT.
Physical therapy is not a price-per-service issue, but rather a number-of-services issue. Several years ago I did an analysis for a very large self insured employer that identified several claims with more than five hundred PT visits over periods of no more than three years.
That’s not a typo nor hyperbole.
Another analysis, this one for a large insurer, found over a dozen claims with more than a hundred visits over the course of a year. In both cases, there was no apparent medical necessity for the excessive visits, they were not authorized in settlement agreements, and most of the treatment records reflected massage and whirlpool treatments, repeated day after day after day.
Overutilization not only drives up medical costs, but also keeps the claimant out of work.
A recent article in the IAIABC Journal (sub req) authored by Janet Jamieson, PhD, President of the Physical Medicine Research Institute, an organization funded by PT management firm Universal SmartComp, evaluated one strategy for controlling PT visits – peer review.
Janet’s been studying the work comp world for years, so I was excited to learn of her study. Janet was kind enough to clarify several questions I had after reading the article, as I couldn’t determine if peer review had an impact on controlling utilization, and if so, if that impact was quantified.
It seems that peer review may have had an impact – possibly by reducing the number of claims with more than 24 visits (this wasn’t apparent from the article). Complicating the analysis was the underlying data; it wasn’t possible to determine objectively if there were jurisdictional differences or claim severity differences (e.g. there is a very wide range of ‘severity’ associated with lumbago). The article noted that more severe claims were probably more likely to have peer review, but that was based on the assumption (a reasonable one in my view) that lost time claims were more likely to have requests for peer review than medical only claims.
That begs the question – was the ‘right’ number of visits 24? And if the peer review program did result in fewer cases with more than 24 visits, how many of those were still excessive (the average number of visits for PT in comp is much lower than 24). And what was done during those visits, were the claimants ‘shaked and baked’ or was there actual work hardening and therapy designed to increase the patient’s functionality?
One finding of note was that active involvement of the payer appeared to reduce the number of visits more than the possible impact of peer review itself. That is not surprising; employers with strong risk management, injury prevention, and claims management programs always get better results than those who rely on utilization review alone.
As with almost any study, more questions were raised than answered.

Those of us with plenty of gray (or silver) hair have not been surprised by the significant increase in medical expense in California since the implementation of reform several years ago. What has been surprising is that it has taken this long for medical inflation to ‘present’.
Medical costs are the primary reason premiums are headed back up, but before we get too excited, let’s remember that work comp premiums plummeted over the last few years, dropping to almost-unprecedented levels. Carriers rushed into the state, new insurers started up, and existing carriers sought to write even more business. The result was a very competitive market, and a dramatic drop in employers’ workers comp costs.
The market has turned; the insurance rating board is looking for a rate increase of almost 24%, driven in large part by the increase in medical expense.
In a recent hearing before the state’s insurance commissioner, two problems became apparent – one obvious and the other much less so.
The obvious problem is the rapid rise in medical expense in California. According to a recent release by CWCI, their analysis shows “significant increases in California workers’ comp medical payments since AY 2005, with amounts paid for treatment, pharmaceuticals and durable medical equipment…all on the rise.”
The less obvious problem is the lack of understanding on the part of most insurers, TPAs, and other payers about the factors driving up medical expense. This ignorance is demonstrated by their continued reliance on medical management techniques and tools that are not only ineffective but I would argue are likely contributing to the increase in costs.
As reported in WorkCompCentral (subscription required);
“Despite the fact that self-insured employers such as Safeway and the University of California reported much smaller medical cost increases than commercial insurers, they pointed out that their medical networks have helped reduce much of their exposure to cost drivers because of the quality of their physicians [emphasis added], and their ability to encourage claimants to seek treatment within their medical networks and avoid litigation.”
Big generalist networks do not reduce comp medical expense because the incentives are all wrong and they contain too many docs who can’t spell workers comp.
What does this mean for you?
Until and unless payers figure this out and stop talking about doing something and actually start doing that ‘something’ medical costs are going to continue to rocket up, and so will employers’ premiums.

Magellan Health is buying a small chunk of Coventry – the unit that provides prescription drug programs and other services for Medicaid members. Although the unit was identified as ‘First Health’, it is NOT Coventry’s workers comp managed care business.
The business currently generates about $55 million in annual revenue.
Coventry will take a loss on the sale (evidently the business was carried on the healthplan company’s books at a value considerably higher than the sale price) of fifty-five to sixty cents a share.
The move ties into a larger relationship between the two firms, as Magellan will also be managing Coventry’s radiology and oncology claims for the next three years. The radiology contract is on at at-risk basis, meaning Magellan will guarantee to hold costs to a specific range or dollar figure.
The sale continues CEO Allen Wise’s strategy of divesting under-performing and non-core businesses; expect more news like this over the next year.

The two overarching issues in work comp bill review are state reporting and the non-connect between utilization review/medical management and bill review.

Bill Review
Workers comp payers spend hundreds of millions of dollars each year on medical management – pre-cert, utilization review, peer review, case management, clinical guidelines, and the variations and permutations thereof. Dozens of companies from mom-and-pops to regional players to industry giants like Coventry and Genex employ highly trained professional medical personnel to watch over the care delivered to injured workers, carefully reviewing and approving or not approving thousands of medical procedures.
Then, the medical bills come in to the payer. The frightening/amazing/unconscionable truth is that many non-approved medical treatments actually are performed, and billed for, and likely paid – because those determinations are not automatically fed into the bill review system’s database, and/or the bill review system can’t link the determination to the bill/provider/claimant.
How much of this actually occurs on a national basis is impossible to say, and there’s no doubt some payers have the links in place to ensure most if not all medical management determinations are linked to the right claimant/provider/event.
But many payers do not have this link in place and/or it doesn’t work very well and/or it requires a human to make the link, dramatically increasing the opportunity for error.
I’ve seen anecdotal evidence of this non-connect in audits performed for payer clients, but this is the first evidence I’ve seen of an industry-wide issue.
Implications
There are a number of potential implications, starting with the obvious – how much are payers spending on treatments that have not been authorized or were actually non-authorized? How much are payers spending on medical management programs/services that are not delivering results due to the bill review linkage issue? Which systems/vendors have these links in place, and how well are they working?
State reporting
State reporting is another issue; friend and colleague Peter Rousmaniere has long proved his ability to cut right to the heart of the issue and he did it again in an email to me this morning wherein he asked the question that is likely on many bill review/IT managers’ minds – what exactly are states doing with all the data they are forcing payers to send to them? Are they doing anything? If so, what, and how will that benefit the industry, employers, society? When?
These are both vitally important issues, albeit for different reasons. But at their core, the question we should be asking about both is the same; what are we getting for our expenditure of time, effort, intellectual capital, and money?

Note – The public version of the First Annual Survey of Workers Compensation Bill Review will be released Friday. If you would like a copy, do NOT comment here, but send an email to infoATHealthStrategyAssocDOTcom.
I’m finishing up the survey report, need a break from analysis and writing – and some of the results are just too interesting to keep to myself till Friday. (I know, I need to get a life)
One of the less-obvious but more-interesting findings is the way the market’s perceptions about bill review firms have shifted of late. The industry has seen a lot of change at a rapid pace, with Mitchell’s acquisition of SmartAdviser, Coventry’s acquisition and ownership of the code for their bill review system, new management at Medata, CS Stars’ announced departure from the business, the purchase of Stratacare, and Ingenix’ troubles with UCR.
All of these events/transactions have influenced respondents’ views of the industry, and certainly of individual vendors within the industry. Some have risen in stature, while others have declined, and the changes aren’t necessarily what one would think.
One of the last questions in the survey asks respondents to rate each firm on a scale of 1-5, with 5 being best/highest. While respondents’ views of the various BR firms tend to lump them in a fairly narrow band, their statements paint a more complex and more nuanced view.
Couple the individual BR firm ratings with the responses to another question “is the bill review industry meeting payers’ needs?” and the picture that emerges is of an industry that is viewed in general as mediocre, focused more on processing speed and throughput than effective medical management (yes, bill review does have a lot to do with med management), and more reactive than innovative.
Among the vendors reviewed there are a couple notable exceptions, and it is important to note these views are general: depending on the payer’s market, technical abilities, business model, and strategic orientation, one or more vendors may be a great fit. The ‘fit determination’ process is key to successful vendor selection, and according to several respondents that had recently gone through the RFP process, requires much more interaction, discussion, and sharing of information on the part of the payer than they had anticipated. Instead of the typical RFI-RFP-finalists selection-onsite presentations-reference checking/offsite visits-battle over pricing and terms-contracting process, to a person these respondents talked about the need to engage much more deeply with potential bill review vendors than they had anticipated. In some cases this was acceptable to management, but in others a more rigid process prevailed, resulting in (in a couple cases) a less than optimal outcome.