December 2006Volume 54 K Number 12 K www.claimsmag.com

A publication of the National Underwriter Company

E Cover Story

Time for New ShoesRe-engineering the workers’ comp case management process.page 22

K Special Report

Salvaging the bottom LineIt’s time to break tradition and innovate to reduce claim loss ratios.page 26

The Forensic AdvantageSettle your claims more accurately and effectively.page 33

K Plus best Practices page 15

Understanding cGL coverage page 18

No Pain, No Gain page 54

SALVAGe DirecTory . page 31

by Derrick AmATo . Cover Story

Time For New ShoeSTime For New ShoeSRe-Engineering the Workers’ Comp Case-Management Process

Purchasers of these services have cho-sen from two basic delivery models: task-based, in which there is a flat fee for services, and full case manage-ment, which consists predominantly of an hourly fee for services. Case

managers who serve as the clinical purveyors of these services traditionally have been rewarded through ongo-ing case activity. The quality of these services and the actual return-to-work outcomes have not been the pri-mary benchmarks of success.

Beyond being out of fashion, the “old shoes” are put-ting the industry in jeopardy of becoming a claim-mitiga-tion tool of last resort. The cost of case management is too often driven by escalating per-case fees, and outcomes are poorly measured (if at all) against any independent or reliable data to establish a return on investment. In the small arsenal of claim adjusting, case management has in some settings acquired the stigma of being costly and used only when all other efforts fail. Claim professionals see “old-world case management” often as an option of last resort — with many files being referred 16-18 months post-injury status.

Each year, companies spend millions of dollars on these return-to-work services. Many purchasers (primar-ily third-party administrators, workers’ compensation insurance carriers, and self-insured employers) buy these services in hopes of mitigating claim costs by achieving timely, cost-effective medical or disability recoveries and, in theory, earlier return-to-work outcomes. And yet “early” referrals to case management are often oxymoronic; after many months of lost time and/or complications in medical care, companies refer cases with universally high hopes of reversing negative trends and recapturing lost opportuni-

ties to manage the multifaceted issues involved with dis-ability and re-employment post injury.

Although a timely and safe return to work is the desired end result, no one really has a quick and meaning-ful answer to the question, Was the cost of services worth the return on the “outcomes” investment? And this ques-tion begs others. What are the benchmarks of a quality vendor? Are the needs of the purchasers and the providers aligned? If a predefined clinical expertise is desired, why has this professional service been treated for so long as a commodity versus a premium-value service? Beyond a depressed hourly rate, how does one national vendor rate against another when buyers examine the services provided? How does the user incorporate the guidance of case managers into an overall case strategy? What are the other tools adjusters can use to preempt high case costs? Do more commonly engaged tools such as surveil-lance and independent medical exams overshadow the need for — and importance of — strategically creating the best position for case outcomes to be win/win? In short, we need a sure way to measure both efficiency and effectiveness.

If we examine the traditional model and juxtapose this against a systematic process that deploys case-man-agement services with a more front-ended approach, the result may well be that case-management services are more successful as a first-to-strike tool. Adjusters have been trained to use surveillance and independent medical examinations, which are fast-acting “weapons” and pro-vide swift information flow. But what is the real problem-solving value of that information? How does it get used and where does it take a case in terms of the necessary next steps? When viewed with a more holistic approach, I contend that the strategy would be better driven by a

The world of workers’ compensation case management has not changed in design in more than a decade. Just as people become accustomed to a pair of old, comfortable shoes, many users and providers of case-management services are unwilling to part with familiar methods that, while comfort-able, are undeniably worn and outdated.

Cover Story

qualified nurse case manager.Holistic does not mean logic goes out the window. In fact, it

should mean identifying those cases that have a higher likelihood of developing the high-cost claims and in turn deploying the right resources with the right intensity more appropriately. Such predictive modeling has been used in the underwriting of risk for many years, and there are practical ways to use this analytical approach to skill setting and managing claims.

Re-engineering the claim-management adjusting workflow, deploying new logic techniques, and timing are all part of the solu-tion. Implications of rethinking and reworking the old model versus the new are likely to improve disability durations, re-establish case-strategy development, and solidify a means to define the return on investment of such services. Several mono-line insurance carriers, state funds, and niche predictive workers’ compensation solutions are and have been deployed. The concept is simple: Define those cases that have high probability of becoming high-cost claims and invest in the right resources to achieve the best outcomes. As is so often the case, however, the actual move to such a design is not so easy.

How do we translate buyer investment into an outcome result? Can predictive modeling bring greater insight to the early detection of high-risk claims? A path to engage these concepts is being constructed, and the benefits of re-engineering workflows and mindsets should create a means to achieve sound and more cost-efficient outcomes. It frames the need for getting rid of the old, worn-out model and getting comfortable with a new one.

Achieving case-management equilibrium is what insurance

adjusters wrestle with on a daily basis. The industry should both promote and provide back-to-basics training for claim professionals to give them a better appreciation for the barriers that hinder return to work. We should promote early identification of claims that have the most likelihood of going astray by using logic engines that bring the power of e-information to bear. Case management continues to have value, but its success in many ways rests in the hands of the industry that created it.

Now more than ever, it is time for the shift to begin. It is also the time to see who is ready to reposition the claim industry with new tools and abandon the more comfortable options. K

Derrick Amato is president of the care management division of Concentra, a national provider of health, network, and care manage-ment services for the workers’ compensation and occupational health industry. He has 30 years of experience in claim management, disability management, and return-to-work program design.

Such predictive modeling has been used in the underwriting of risk for

many years, and there are practical ways to use this analytical approach to skill

setting and managing claims.

A SpeciAl RepRint© Entire contents copyright 2006 by Claims, a publication of The National Underwriter Company. All rights reserved.