Workers’ Compensation Claims: Conquering Their Cost and Complexities

By Rob Lewis

Challenged by rising medical costs, the threat of fraud, and claims that can quickly spiral out of control, workers’ compensation insurers are seeking betters ways to achieve profitability. Fortunately, financial gains are possible when claims organizations prioritize accessing the right data for better decision making. When delivered and applied correctly, this data can help eliminate work-arounds and manual tasks and reduce claims-processing time, effort, and errors.

Workers’ Compensation Claims: Conquering Their Cost and ComplexitiesFocusing on improvements can be vital. That’s because with claims compliance obligations, excessive claims management oversight demands, and the possibility of medical claim fraud, workers’ compensation expenses can easily accumulate. In addition, these factors can cause staff productivity to go off the rails.

The following scenario illustrates what’s at stake:

A workers’ compensation claimant sustains a lower-back-related injury. After rounds of physical therapy and modification to working conditions, his physician determines that surgery is required to repair the spine. The patient undergoes surgery but has complications due to comorbid conditions known at the time of first report of injury but not taken into consideration. Follow-up surgeries are unsuccessful, and the claimant is on multiple narcotics. Additionally, a spinal cord stimulator has been recommended. The claimant is on disability and has been receiving Medicare as a result.

This is an example of a claim that has spiraled out of control. It evolved from a benign lower-back injury to a very complicated claim with costs that are difficult to contain. Subtle but available information was present at the time of first notice of loss to trigger a triage team and send this to an experienced claim handler—yet it was missed. In this case, the claims manager didn’t put an experienced adjuster on the claim and didn’t assign the right claims resources to handle and mitigate costs. Medicare became involved and paid costs both related and unrelated to the underlying incident. There now may be federal compliance implications.

A nightmare scenario has ensued:

  • The insurer hasn’t properly reported this claim to Medicare, exposing the company to a $1,000 fine per day.
  • Medicare is seeking tens of thousands of dollars in unrelated claims—although the case handler isn’t sure how to dispute them.
  • Claims staff is trying to settle the claim and take Medicare’s interest into account but can’t figure out how to control medical costs to obtain a reasonable Medicare Set-Aside amount.

In this scenario, matters were made worse because the case handler had no idea the doctor providing the physical therapy billed for more visits than were actually provided. (With more than 80 percent of medical claims suspected to involve medical providers, this is likely to occur.)

Here’s what could have been done to ensure a far better outcome:

The severity of the claim could have been identified faster. What would this scenario have looked like if the adjuster had access to daily severity scoring to better manage outcomes? The manager might have assigned the case to the most senior adjuster, who would have taken the comorbid conditions into account. Had this been done at the outset, the patient’s initial surgery might have been successful, and in the best-case scenario, it might not have been necessary at all. This plan could have automatically saved thousands of dollars and hours of effort.

Using a solution that provides daily severity scoring, insurers have reported finding 24 percent of high-severity claims sooner—40 days earlier, on average. The longer a case is open, the more exposure and the greater the costs typically tend to be. The savings and productivity are significant when this approach is applied across all workers’ compensation claims.

Some other factors to consider:

  • With regard to the Medicare reporting of this claim, how many claims do companies submit without errors? It’s possible to achieve this with the right Section 111 solutions provider, saving $1,000 a day in fines.
  • In addition, by automatically integrating Section 111 data with the conditional payment compliance process, adjusters have reported savings of 133 hours per 1,000 claims.*
  • As far as conditional payment savings, it’s possible to successfully reduce initial amounts owed about 90 percent of the time—and 47 percent of that time, it’s possible to reduce exposure to zero.
  • To address the fraud aspect of this claim, an insurer could easily have applied a two-pronged analytics and expert analysis approach to identify the suspicious medical provider activity. This would have saved money on the claim, as well as all future claims involving this provider. Using such an approach, at least one insurer saved more than $15 million over the course of two years.*

In today’s ever-changing world, insurers need to know how to access and analyze data. But they can no longer afford to build disparate, homegrown data-driven solutions. It’s also inefficient to use ad hoc solutions from different providers that address narrow problems. To address these concerns and achieve the best results, insurers would be wise to apply holistic solutions that can efficiently address claims outcomes, compliance, and fraud.

*Results based on ISO Claims Partners 2016 data


Robert Lewis

Robert Lewis is president of ISO Claims Partners, a Verisk Analytics (Nasdaq:VRSK) business.