The managed care spotlight in risk management circles in the United States has been on outcomes for the last two years. Risk managers are asking their vendors about the results of certain activities and what impact they have on cost. Several major studies completed over the last year not only corroborate what workers' compensation managed care vendors have known for many years but refute some long held insurance industry contentions. Acknowledgement of new results and further indepth study are essential to make sure that perceptions are real and the metrics being studied are correct. Finally, the need for practical analysis in terms of the behavior that results is essential. As Max Taylor, the chairman of Lloyd's, commented in Best's Review: “The market has got to the point where, in simplistic terms, the premium that they are taking is insufficient to pay the claim.” When cost rather than result becomes the driver, the impact on the result may be quite different from what was anticipated.

The purpose of this article is to review what type of focus will achieve the best results. If the driver is the cost of the service, the resulting behavior may be quite different than if the driver is the outcome achieved. The question is then whether a focus on outcomes can change workers' compensation managed care service delivery and achieve better results.

One such example of how a major outcome study can have a significant impact on behavior is the recent CompScope TM study performed by the Workers' Compensation Research Institute (WCRI). The study, which created a comprehensive methodology to study medical and indemnity payments and results on a detailed level, found that using network providers is less expensive than individuals visiting their own physicians.

More importantly, however, the study was able to identify that not only was the treatment less expensive (a huge area of interest for the risk manager) but, contrary to popular opinion, does not increase the utilization of services. Insurance industry leaders have long feared that the direction to a network provider, while less expensive on a unit basis, over the long term is actually more expensive because the number of units of service tends to expand.

The WCRI study found, in fact, that the overall savings from directing an injured individual into a workers' compensation network of providers were due to price of service (34%) and lowering the number of services (66%). This, in turn, shortened the duration of the claim and facilitated a quicker return to work. In this situation, the decreased cost was a result of better performance behavior.

A similar study at Boston based, Concentra Managed Care, Inc. indicates that the duration of managed care has been steadily decreasing over the last three years. In a review of more than 150,000 field case management cases, analysts found, comparing the 1999 performance to 1997's, that significant improvement of the key indicators had occurred. The primary benchmarks studied were: length of time to referral, average case costs and duration of case activity. The results deserve a more indepth look to determine the true meaning of this finding.

Length of time to referral

It has long been assumed that the earlier one intervenes on a problem case, the shorter the case duration and subsequently the lower case cost. In the study, (see graphs), the reduction in this time factor improved by 23%. This appears to be one of the best indicators of how well a program is complying with early intervention processes. However, the actual results of the study identified extraordinarily high lag times. Lag time is defined as the time between an injury and the first case management intervention. In order to evaluate the impact of this, a further drill down into the detail is required to determine why the length is so great. The answer lies in a change in how services are utilized.

The data studied did not differentiate the reason for referral at the time of assignment. The assumption is made that cases are referred for one of two reasons: one, early in the case in order to coordinate medical care and return to the original employer or two, later in the course of the case when a return to work is not imminent and vocational activity to generate a job with a new employer is required. By the time this has occurred, the case is often open a year or longer. Finally, data on expert vocational activity that would occur on a case from a forensic perspective was also included in this data set. Pure surveys of labor markets for vocational evaluation also fit into this category. Vocational activity occurred in 28% of the cases and therefore could contribute significantly to the extended time to referral.

The other issue which is likely to have had a significant impact on the lag time is the trend towards outsourcing. An in house case management program within an insurance carrier can be impacting the data. When a case is referred for case management, there is no indicator that exists to determine whether any intervention has taken place prior to referral. If this metric existed, it would help to determine an actual measurement. However, in the absence of a more specific metric, the relative change is a meaningful one.

Average case costs

Average case costs decreased significantly. This translates directly to customer savings. In comparing the 1997 and 1999 performance, the decrease was a 13% overall decrease in total case cost. By total case cost, we mean the dollars expended on field case management activity. This is largely reflective of a change in behavior on how quickly cases are referred. Although there is a margin of error due to the summary nature of the data studied, it was determined that for cases six months old, for each month the case could be referred earlier, the duration would decrease by a month. Looking ahead to further impact on case cost, continuing to push cases to early identification and resolution will result in shortened duration and translate to lower dollars spent per case.

The trend for the future utilization of financial resources will be on utilizing service on the right cases. Current efforts are being focused on the predictability of cases most likely to benefit from case management. Using dollars appropriately and maximizing the benefit of specific activity will likely result in further case savings. However, as task related cases continue to proliferate, the ability to categorize case savings may become more difficult to quantify.

Duration of case activity

The most significant issue of all was the decrease in duration of case activity. While the decrease of a case duration from 6.5 months in 1997 to 4.1 months in 1999 does not seem enormous, it represents a 37% improvement and it reflects a direct correlation to the decrease in case costs. Although the case cost decrease was a smaller percentage than the duration, this appears to demonstrate that there is an increase in intensity of the service provided. There are several potential reasons for this. Factors which predispose a case for successful resolution are the clarity of the assignment, the customer's expectations, the predictability of the activity needed to resolve a case (perhaps a proxy for experience) and the time intensity spent on resolution activity. As the trend for making task referrals increases, so too does the trend for case duration to decrease. As in the other indicator areas, analysis at a detailed level is required to understand the real performance issues.

Single task activities tend to have the shortest duration of all - a large percentage being in the range of 30-45 days. This statistic will tend to shorten the duration numbers even further. However, when compared to a long term vocational placement case, the duration of activity is increased. Low unemployment, the drive for automation, and the paucity of skills in lower level workers make likely a continued demand for vocational service and a subsequent duration rise over the next few years. By contrast, predictability and data analysis are likely to make the early intervention and cost management activity even more effective.

Tracking task based cases creates their own outcome analysis challenges because total case time activity is added together to reflect multiple tasks. A task referral may have the shortest duration and the majority of the activity takes place in short term goal directed spurts. As program changes, further cost awareness initiatives and segmenting of the case management work processes continue to grow, identifying patterns and trends will expand to be more difficult. The task at hand and whether the results were achieved will begin to be the issue to be tracked rather than case duration. Because the bulk of the cost that threatens loss ratios is at the insurance level, the greater interest will always focus on duration and cost.

Impact on the future

The trends in managed care, because of industry demand and economic challenge, are driving toward the management of cost, yet forces which will result in behavior change should be driven by results. The challenge of having greater ability to analyze performance on a detailed level, using predictable data sets, will create unique matches in the future. One look at the health maintenance organisation (HMO) industry demonstrates that driving hard on cost doesn't necessarily promote better utilization. Taking a page from the analysis done by the WCRI will benefit insurers, third party administrators and case management companies alike. Looking at the fine detail and translating meaningful data to create change in performance is scientific but the implementation of that change is also an art. Risk managers must spend their dollars on getting the right results and making sure that the data means what it appears to be saying. The issue of identifying the correct behaviors is essential prior to establishing outcome analysis benchmarks. The disconnection between the managed care vendor data and the claims data must be fixed. The breakdowns in work process need to be identified and corrected. It is the focus on critical success factors and its subsequent reporting that will ensure the right results. It is this marriage of costs and results that ultimately will provide the best outcomes.

  • Anne E. Kirby is vice president of product development of Concentra Managed Care, Inc. located in Boston, MA. She is a recognized expert in the areas of managed care program design and has implemented numerous programs integrating healthcare and workers.

    The graphical information appears courtesy of Richard Wilmot at Concentra.