Monday, November 4, 2013

Follow the UR Dollars

The Workers' Compensation Insurance Rating Bureau's latest report, released Thursday, on SB 863 shows just how difficult it is to estimate human behavior.

While savings from the bill's lien constrictions and payments to ambulatory surgery centers are better than expected, initial projections for Independent Medical Review were way off.

The WCIRB had initially said that IMR would save $390 million a year, including $230 million in losses and $160 million in loss-adjustment expenses.

A total of 870 IMR requests were filed in the first six months of the year when the alternative process for resolving disputes about utilization-review decisions was limited to 2013 dates of injury, but 4,410 applications were filed in July, and increased to 15,731 in August and 14,990 in September.

If this trend continues the number of IMR requests will be more than three times what the WCIRB had projected in its initial cost estimates, “potentially eliminating any savings in administrative costs due to IMR and also potentially negatively impacting medical treatment costs.”

What wasn't anticipated by WCIRB actuaries was how the time limitations and lack of risk for injured workers would drive requests. Also unaccounted for were unnecessary (which perhaps are driven by some other independent profit motives) utilization reviews, as had been pointed out in the past by Christine Baker, director of the California Department of Industrial Relations.

Last month at the California Workers' Compensation Forum in San Diego Baker noted that some IMR requests are for unusually small amounts, which she attributed to overaggressive adjusters who were too quick to deny treatment.

"We had some cases of Salonpas pads rejected that were $15, go onto IMR for $500," she said. "In that sense, we really need to be careful and provide the care and request when needed."

In that example Baker isn't appreciating human behavior, and in the case of workers' compensation, the compulsory nature of the beast which some participants use to drive mandatory, thus profitable, procedures even when unwarranted.

I am reminded of when I was a young lawyer. Our firm was retained by a large self-insured non-profit entity to help them negotiate the next contract with their third party administrator.

This was at a time when bill review was starting to come into its own as a "maturing" sub-industry of work comp.

Everything on the TPA's menu of services was negotiable. We secured concessions in nearly every aspect of the claims management process except for one - bill review.

The TPA would not budge on bill review one iota. Their rules mandated that every singe provider bill go through the bill review process, and the fees for bill review were likewise non-negotiable.

It got to the point that we told them we did not want ANY bill review and that we would accept it if medical treatment bills were just paid at face value - we had calculated that we would in fact see savings if the bills were just paid on time rather than go through review, appeal, etc.

Even that was non-negotiable. This TPA had such a huge profit center built into the bill review process (as it turns out the bill review company was owned by the TPA) that any attempt to mess with that revenue system was off the table.

The TPA would have rather lost the account than negotiate its bill review policies.

So it lost that account, and likely made up for it with other, more gullible contracting entities to continue feeding the bill review food chain and whatever profit system the TPA had in place.

Utilization review now is not unlike bill review was (or perhaps still is) back then. There is nothing in the Labor Code that mandates that all treatment requests go through UR. The only mandate is that carriers and administrators have an UR process in place.

But it is a) easier to mandate that everything go through UR because that eliminates the cost of decision making at the adjuster level; b) the cost of UR isn't borne by the carrier or administrator - it gets passed on to the employer; c) there is no downside in mandating that all requests go through UR (except to the injured worker who's treatment is unnecessarily delayed and the physician who's expertise is second guessed); and d) perhaps there are new profit centers built around UR.

So peel back the onion a bit. There are many layers that contribute to the results of any particular measure of workers' compensation costs. Human behavior is complex. We can't assume that just because one hole has been plugged that others won't spring.

My suspicion is that part of what's driving IMR volume is UR over-utilization by profit-minded administrators. I don't think there would be any surprises if we followed the UR dollars.


  1. You forget that UR came into existence because trust in the adjuster to act correctly had degenerated, and they weren't trusted to do the "right"decision.

    And why did this occur? Because the Legislature gave Employers a say-so in reserving and settlements, and the employers sued the administrators when their premiums or bonds went up, mainly for bad claims handling.

    To use your example, administrators are so leery of bring sued, or loosing the account, that they're willing to take the extra time and money so they can blame someone else.

    The work climate is one of mutual mistrust, brought about by the idea that everyone is a "stakeholder".

    Whenever something is mandated, the person who pays no longer has a stake, the State has already taken his ninety, the only question is how much.

    The only stakeholder is actually the employee, because the state has taken away his right to self, determination.

    But please don't think this is an endorsement of the single payor system, I've seen what it does in England and Australia, and socialism taking people's money has never been a good economic policy, it soon degenerates into chaos.

    1. You sure hit the proverbial nail on the head with this one Elizabeth: The work climate is one of mutual mistrust, brought about by the idea that everyone is a "stakeholder".