Pennywise and Pound Foolish.
Why do most employers and TPAs focus on discounts they can obtain from their medical providers?
Because it’s an easy number to show in a monthly “cost-savings” report. “Wow, look at how much money we saved.” In states with fee schedules, you may see 2%, 5%, 10% or more in “medical cost-savings.”
But is this the amount that you have really “saved”? A closer look might surprise you.
First of all, you probably get charged for those “discounts,” often paying a 20-25% fee for your “savings.”
Second, your “cost-savings” amount is proportional to your utilization of services. The more services performed, the higher your savings ; so larger “cost-savings” due to higher utilization means higher total medical costs and delayed return-to-work.
Third, and most important, you aren’t shown the impact those savings programs might have on your indemnity costs. Focusing on directing care to “discount” providers often results in subpar care, delays in scheduling, wrong diagnoses, repeat exams, and over-utilization of physical therapy.
Is a $35 medical discount on a $350 MRI exam worth it if it results in slower return-to-work? Is a $15 discount on a Physical Therapy visit worth it if it leads to delayed scheduling or more PT visits? For an employee with a $40K salary, it costs you over $100 in TD for every extra day of delay. And for most government workers, TD costs can be 50% higher. You do the math.
Maybe these recent numbers will help frame the issue of what’s more important?
Average losses for accident year 2015, 2016 and 2017 claims showed increases in average paid losses within the first two years of injury, driven primarily by rising indemnity payments. Average medical costs at six months, one year and two years post-injury showed only modest increases in paid medical costs, or none at all.
Since accident year 2014, average indemnity paid on lost-time claims rose 12.9% at six months after injury, 10.5% at one year and 6.8% at two years. In contrast, average paid medical losses on those claims increased at 3.9% at six months, 0.6% at one year and showed no change at two years.
What can you do?
1. Stop obsessing on “discounts” without understanding their consequences and effect on your indemnity and total claims spend.
2. Use quality, experienced providers that deliver prompt, efficient care. Know which providers are best at which medical problems, and direct injured employees to them.
3. Insist on real-time communication between all stakeholders to further speed up claims closure and return-to-work.
“Why is my work comp medical care so bad?”
We hear this complaint all the time from employers and employees. Delays in scheduling, wrong diagnoses, repeat exams, never-ending physical therapy and of course, prolonged return-to-work.
Well, here’s one good reason that might help explain the situation… Much of what you pay in medical fees doesn't reach the local medical providers who care for your injured employees.
If you, or your TPA, are using third party scheduling networks to schedule your Radiology and Physical Therapy exams in states like California, as little as 40% of what you pay for medical services might actually get to your medical providers. The rest - up to 60% of what you pay – is kept by some of these networks. When this happens, those provider networks make more money just scheduling your referrals than the providers receive who deliver the medical care to your employees.
Why does it matter?
Because when medical providers are paid such low rates by some networks – often below their own medical practice costs – they need to cut corners when caring for your injured employees in order to stay in business. This could result in subpar diagnostic quality, delayed medical services, less one-on-one physical therapy care and slower recovery.
And when traditional scheduling networks offer providers very low reimbursement rates, many top quality providers opt out or are not selected by those networks. This limits your access to many of the high quality local physicians and therapists you would want to care for your employees.
What can you do?
Find out if this affects you. Demand full transparency. Ask your network vendor partners to show you exactly how much of each of your medical payments goes to the provider and how much the network keeps. Then, you can decide if that’s the best way to care for your injured employees.
Insist that your providers receive a larger portion of what you pay for medical services. A good number should be 80% to 100%. Anything below that level might affect care and raise your total claims costs. Pay your local providers fairly, demand better care and return your employees to work more rapidly. Isn’t that the goal of work comp?