One of the biggest challenges in workers' compensation is getting the necessary data in the first place. There are a lot of moving parts, a lot of factors that don't get appreciated until one is looking for something, and a lot of hay covering up needles.
A challenge for system administrators is always the control of medical costs. This is done in large part with medical fee schedules which prescribe procedure based reimbursement rates. Because of all the moving parts, a portion of the challenge is related to just tracking the data - what effects occur when certain changes are made.
An example of data driven decision making is going on right now with new research to come out of the National Council on Compensation Insurance (NCCI) on whether doctors perform more medical procedures when states reduce workers' compensation system fees for their services.
The assumption has always been "yes", but that assumption has been based on old research: a 1998 Centers for Medicare and Medicaid Services (CMS) study, not directly applicable to workers' compensation systems.
Karen Ayres, an NCCI actuary who recently presented a loss-cost rate reduction proposal in Tennessee that included a 40% offset for expected increased service volumes, said the study is complete and undergoing internal peer reviews. External peer reviews and publication of the results will likely conclude by the end of 2012, according to Ayres.
One of the reasons NCCI is making the study is because of criticism that loss costs would be different if the data concerning service volume were different. The critics have said that the old study is no longer relevant, and even when it was near-in-time relevant it still was not workers' compensation specific which experiences different motivations and other factors that impact service volume.
The CMS study found a range of 30% to 50% of savings in physician payments from fee schedule changes are not realized due to medical service volume increases. The study indicated the higher range of variance occurred when new fee schedules were created or changes were made in young regulatory systems. The variance was closer to 30% where the regulations were more mature, Natasha Moore, an actuary and fellow for NCCI, told WorkCompCentral.
Preliminarily, according to Moore, it is appearing that the offset overall is more like 50% in the work comp world.
In other words, when a medical fee schedule change occurs 50% of projected savings in physician payments from fee schedule changes are not realized due to medical service volume increases.
I'm sure this is not a surprising conclusion to most. What I think would be more important to policy makers is how those shifts occur.
In other words, can there be some general conclusions made that can forecast what type of procedures are likely to replace or be utilized where there is a fee adjustment? For example, does reduction in fees for a physical medicine procedure correspond with an increase in surgical referrals (and surgical costs)?
If the NCCI study can be expanded to include that kind of forecasting then the work comp world will have some very powerful information at its hands and be able to make more intelligent decisions on a global basis reducing the "whack-a-mole" phenomenon.
If not, perhaps this can be the next step in this research. I think system administrators would find such information extremely helpful in the policy making process.