Wisconsin's Unique Opportunity to Get It Right

Wisconsin stakeholders are talking about instituting medical networks into their state workers' compensation system.

They have the benefit of learning from the trend setting states about what to do and what not to do with medical networks.

In theory, a workers' compensation medical network should provide efficiencies, and therefore savings.

The mistake that medical networks make in the context of work comp though is that their model of savings is based on the cost of individual procedures. Doctors feel cheated because what they know they need to do can not bring income through the door, and thus cost shifting to procedures with a higher reimbursement rate occurs.

The perverse effect of course is that savings aren't realized and medical networks just become another bureaucratic hassle with increased paper work and decreased function.

The first step to designing medical networks in a work comp setting should be to understand and measure a) all of the cost components of providing treatment and b) understanding and measuring health outcomes (note I said "health" outcomes, because while the physician may be able to release a patient for return to work there are way too many factors outside the doctor's control that impact actual return to work).

I briefly went over this process in my post about TDABC.

Karen Wolfe, President and CEO of MedMetrics, coincidentally argues essentially the same point in her blog posted.

She notes: "the strategy of discount networks is to contract with as many providers as possible, then measure success based on network utilization, penetration, and total discounts. More network utilization produces more discounts and reported 'savings'. Moreover, the discount network strategy relies on the presumption of medical excellence and perfect moral integrity among providers, along with knowledge of the unique characteristics of Workers’ Comp."

The discount strategy model of most networks that Wolfe notes are based on elements that don't coincide in the real world.

Wisconsin has a very unique opportunity, if stakeholders are truly interested in a performance based medical reward system, to design laws that encourage networks and physician practices to a) understand what the TOTAL cost of treatment is for any given diagnosis, b) pay for treatment on the totality of services, NOT on a discounted per procedure basis, and c) agree on what the expected health outcome should be with rewards for hitting that goal.

I urge anyone that is involved in the medical care component of workers' compensation, in particular those on the negotiating table right now in Wisconsin, to become familiar with the works of Kaplan and Porter at Harvard Business School (one example here). Smart people have figured out how to measure both costs and outcomes. We can use these lessons in the design of work comp networks.