C C V V I CLRS – September 2004 Copyright 2004, CWCI All rights reserved California Workers’ Compensation Institute California Workers’ Compensation

Copyright 2004, CWCI All rights reserved

CCVV ICLRS – September 2004

California Workers’ Compensation Institute

www.cwci.org

California Workers’ Compensation ReformPublic Policy Research Implications

CLRSSeptember 14, 2004



CWCI’s research:• Focuses on the real costs in the system• Helps establish consensus about problems • Assists in establishing an agenda for improving the system

Specific areas of research:• System-wide cost drivers• Medical utilization• Claims adjudication• Fraud & abuse • Litigation• VR• PD• Reform Activities



California Workers’ Compensation Reform

“Self-Executing” Changes--AB 749 (2003) SB 227/228/899 (2004) --

• Removal of PTP Presumption of Correctness• OMFS & Medicare & 5% Reduction• Outpatient Surgery Facility Fee Schedule• ACOEM • 2nd Opinion for Back Surgeries• Utilization Review• 1st Medical Pay• Apportionment • Expansion of ADR• 2-yr Cap on TD




Agenda

Part 1: Medical Utilization

Part 2: Benefit Delivery



ACOEM & The California Workers’ Compensation System

Areas of Research – Part 1: Medical Utilization

1. Actual – to – ACOEM utilization comparisons

2. Incremental effects of medical services beyond ACOEM recommended levels



Estimated Ultimate Medical Per Indemnity ClaimEstimated Ultimate Medical Per Indemnity Claim(Reflecting the Impact of AB 227 & SB 228)(Reflecting the Impact of AB 227 & SB 228)

Source: WCIRB

$0

$10,000

$20,000

$30,000

$40,000

Before 9,885 10,619 11,746 13,137 15,230 18,385 21,588 24,519 28,673 35,201

After 9,316 9,381 10,978 12,706 14,105 17,015 19,871 21,533 25,532 28,736 30,804

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Results as of 12/02 & 12/03

18%Reduction



California Labor Code, Section 4600 Provide all treatment “reasonably necessary to cure and relieve from the

effects of injury,”

Presumption of Correctness (1994)Confers a presumption of correctness to the injured worker’s primary treating

physician; intended to neutralize the multiple and conflicting medical-legal evaluation reports

Minniear Decision (1996)The injured worker’s primary treating physician’s presumption expands

beyond medical-legal evaluation to encompass “all issues” including clinical treatment.

Workers’ Comp Public Policy—Legislative History



Medical TreatmentAverage Monthly Paid (All Professional Fees)

$75

$100

$125

$150

$175

$200

The Effect of 1993 – 1996 Legislative Reform Activity

CCVV I

76% Increase

Source: CWCI 2003



Residual Effect0.5% Indemnity

0.5%

Case-mix1.1%

Increased Litigation

16.1%

More Open Claims32.8%

Longer Claim

Duration49.0%

The Effect of 1993 – 1996 Legislative Reform Activity

Source: CWCI 2003

Medical Utilization



How Safe Is Health Care?(Leape 2002)

HealthCare

Mountain Climbing

Bungee Jumping

Driving

Chemical Manufacturing

Chartered Flights

Scheduled Airlines

European Railroads

Nuclear Power

Number of encounters for each fatality

1

10

100

1,000

10,000

100,000

1 10 100 1,000 10,000 100,000 1,000,000 10,000,000

To

tal l

ives

lost

per

yea

r

DANGEROUS

(>1/1000)

ULTRA-SAFE

(<1/100K)



Utilization Review as Part of System Reform:--AB 749 (2003) SB 227/228/899 (2004) --

• New emphasis on evidence-based medicine

• New definition of “reasonable care” to cure & relieve

• American College of Occupational & Environmental Medicine (ACOEM )

• Presumption of Correctness

• DWC to review guidelines



ACOEM Guidelines

• Provide medical providers:

– Information on “best practices”; i.e., what is known to work

– Reflect the state of the science

– Need to assess applicability to workers’ compensation



ACOEM: Impact on Workers’ Comp System

Claim Type Claims Total Paid Medical PaidIndemnity

Paid

Indemnity 361,242 $8.132B $3.619B $4.514B

Med-Only 665,354 $.434B $.434B

Total 1,026,596 $8.567B $4.053B $4.514B

Claim Sample: • Data compiled from ICIS database• DOI Jan 1997 – Dec 2000; benefits valued at June 2002• ACOEM treatment category assigned• Actual utilization levels compared to ACOEM recommendations



Six Medical Service Categories 1. X-Rays2. CT/MRI3. Physical medicine visits4. Chiropractic visits5. Back surgeries (Fusions & Laminectomies)6. TD days

Actual-to-ACOEM-Recommended Utilization Comparison:

ACOEM Injury Categories • Low Back – Soft Tissue Complaints (N=168,885 claims)• Low Back – Nerve Involvement (N=10,416 claims)

Utilization Comparison • Actual: Derived from ICIS claim and MBR data• ACOEM: Recommended utilization, from ACOEM Guidelines, 2nd Edition



0%

25%

50%

75%

100%

Non-ACOEM ACOEM

ACOEM 48.3% 54.6% 60.4%

Non-ACOEM 51.8% 45.4% 39.7%

Claims Medical Indemnity

Percentage of Claims Covered by ACOEM Guidelines

Source: CWCI 2004

Actual – to – ACOEM utilization comparisons



Non-ACOEM CategoriesPcnt

Claims

Trauma Diagnoses 21.6%

Non-Specific Diagnoses 30.2%

Injury Categories Not Included in ACOEM Guidelines



ClaimsTotal Paid

TotalMedical

TotalIndemnity

1 95990 – Injury –Site NOS 15.2% 14.8% 14.1% 15.60%

295980 – Injury Multiple Site/Site

NEC 12.0% 18.1% 17.2% 19.0%

3 7998 - Ill-Defined Condition NEC 4.9% 6.9% 5.9% 7.9%

4 71946 – Joint Pain-Lower Leg 1.7% 2.9% 2.7% 3.1%

5 959 - Injury NEC/NOS* 1.6% 2.4% 2.4% 2.4%

6 95910 – Trunk Injury NOS 1.6% 3.8% 3.8% 3.8%

7 95970 – Lower Leg Injury NOS 1.2% 2.7% 2.5% 2.8%

8 7295 - Pain In Limb 1.0% 1.1% 1.0% 1.1%

9 8488 – Sprain NEC 1.0% 0.3% 0.3% 0.3%

107262 - Shoulder Region

Dislocation NEC 0.8% 3.2% 3.1% 3.3%

Top 10 Sub-total: 41.0% 56.2% 53.0% 59.3%

Top 10 Non-Specific Diagnosis Codes



X-Rays

• Not recommended by ACOEM

• Strains and other causes of non-specific pain cannot be visualized on plain x-ray films with enough detail to be clinically useful

• Actual utilization: Pcnt of ICIS claims with x-rays - Low back / soft tissue claims: 56.2% - Low back / nerve involvement claims: 74.8%

Actual-to-ACOEM-Recommended Utilization Comparison: Medical Service Categories



199,391

22,581

0

50,000

100,000

150,000

200,000

Low Back - Soft Tissue Low Back - Nerve Involvement

Film

s

Actual ACOEM (est.)

N/A

N/A: Test or service not recommended by ACOEM Guidelines

X-RaysComparison of Actual to ACOEM-Recommended Utilization

Source: CWCI

N/A



Computer Axial Tomography (CT) Scans & Magnetic Resonance Imaging (MRI)

• Recommended only to confirm clinical findings and clarify the anatomy prior to surgery1

• If surgery is not contemplated, imaging will not affect the course of treatment or recovery

• Actual utilization: Pcnt of claims with CTs/MRIs - Low Back / Soft Tissue: 15.9% - Low Back / Nerve Involvement: 45.7%

1 ACOEM Occupational Medicine Practice Guidelines, ed.2, p. 303




42,862

11,424

2,3990

20,000

40,000

60,000


Scan

s

Actual ACOEM (est.)

N/A


CTs & MRIsComparison of Actual to ACOEM-Recommended Utilization

Source: CWCI



ACOEM Occupational Medicine Practice Guidelines, ed.2, p. 299.

Physical Medicine

• Comprises one-third of all outpatient medical costs

• ACOEM-recommended number of visits is two or fewer, for teaching a home exercise program

• There is insufficient evidence of effectiveness for traction, ultrasound, massage, diathermy, biofeedback, TENS, magnet therapy, acupuncture, neuroreflexotherapy or lumbar supports

• Actual utilization: Pcnt of claims with Physical Medicine visits: - Low Back / Soft Tissue: 60.2% - Low Back / Nerve Involvement: 78.3%




1,486,830

250,052117,536

12,8760

500,000

1,000,000

1,500,000

2,000,000

Low Back - Soft Tissue Low Back - NerveInvolvement

Vis

its

Actual ACOEM (est.)

Physical MedicineComparison of Actual to ACOEM-Recommended Utilization

Source: CWCI



ACOEM Occupational Medicine Practice Guidelines, ed.2, p. 299.

Chiropractic Manipulation

• ACOEM-recommended number of visits equals a maximum of 12 visits in first 30 days for Low Back / Soft Tissue claims

• Not recommended for Low Back / Nerve Involvement claims

• Actual utilization: Pcnt of claims with chiropractic visits: - Low Back / Soft Tissue: 10.7% - Low Back / Nerve Involvement: 32.5%




448,235

121,255

23,772

0

100,000

200,000

300,000

400,000

500,000


Vis

its

Actual ACOEM (est.)

Chiropractic ManipulationComparison of Actual to ACOEM-Recommended Utilization

Source: CWCI

N/A




Back Surgery (Spinal Fusions & Laminectomies) • ACOEM recommends only patients with severe disc disease, spinal stenosis or thoracic/lumbar disc displacement

• Fusions have a very low success rate in the absence of serious conditions

• Surprisingly high surgical rate for backache NOS (5.2%) and sprain of sacrum (4.0%)

• Actual utilization: Pcnt of claims with specified surgery:• - Low Back / Soft Tissue: 1.4% (n=2,374)• - Low Back / Nerve Involvement: 9.3% (n=968)




Back Surgeries (Fusions & Laminectomies)Comparison of Actual to ACOEM-Recommended Utilization

Source: CWCI

2,374

989

403

0

1,000

2,000

3,000


Actual ACOEM (est.)

N/A




Paid Temporary Disability Days

• Average Length of Paid TD :Low Back / Soft Tissue: 63.9 daysLow Back / Nerve Involvement: 113.0 days

• NHIS study showed averages of 6 to 10 days for comparable injuries




0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

Pai

d T

D D

ays

Actual 4,750,518 858,913

ACOEM (Low est.) 446,058 45,606

ACOEM (High est.) 743,430 76,010

Low Back - Soft TissueLow Back - Nerve

Involvement

Paid Temporary Disability DaysComparison of Actual to ACOEM-Recommended Utilization

Source: CWCI



9.6%

4.1%

15.6%

7.9%5.2%

8.8%12.0%

0%

20%

40%

60%

X-Rays CT/MRI Phys Med Chiro Surgury TD (Days)


N/A N/AN/A N/AN/A


Summary of ACOEM-Recommended Utilization:

Percentage of Tests & Services Recommended by ACOEM, Based on the Evidence, for Two Low Back Conditions

Source: CWCI



Actual-to-ACOEM-Recommended Utilization Comparisons

A common response to conservative nature of ACOEM:

“The absence of high-grade evidence is not conclusive proof of lack of value to the injured worker.”

So, what and where is the value to the injured worker?




Issues:1. Actual–to–ACOEM-Recommended Utilization Comparisons

2. Incremental Effects of Medical Services Beyond ACOEM-Recommended Levels



Incremental Effects Beyond ACOEM-Recommended LevelsLow Back – Soft Tissue Complaints

5 Medical Service Categories

1. X-Ray Films2. CT/MRI3. Physical Medicine4. Chiropractic5. Back Surgeries (Fusions & Laminectomies)

Incremental Effects on Claim Development for Treatment Beyond ACOEM: Preliminary Results on:

• Total Claim Costs• Medical Costs• Overall Length of Treatment• Length of Disability (TD days)



Incremental Effects Beyond ACOEM: Preliminary Results

Low Back - Soft Tissue ComplaintsAverage Cost per Service Visit

$197$63$68

$602

$2,668

$0

$750

$1,500

$2,250

$3,000

X-RAY CT/MRI SURG PHYS MED CHIRO

Av

g C

os

t/V

isit

Note: average surgery fees are for professional component only



Incremental Effects Beyond ACOEM : Preliminary Results

Low Back - Soft Tissue Complaints Additional Payments Per Indemnity Claim Per Service

Beyond ACOEM

$2,738

$18,162

$81,422

$0

$25,000

$50,000

$75,000

$100,000

X-RAY CT/MRI SURG

Medical Indemnity




Additional Treatment & Temporary Disability Days Per Indemnity Claim Per Service Beyond ACOEM

0

200

400

600

800

Ad

dtl

Day

s/S

rvc

Addtl Tx Length 62.9 230.5 716.8

Addtl TD Days 6.1 43.9 229.1

X-RAY CT/MRI SURG




Physical Medicine & Chiropractic Manipulation:Percent of Claims Above & Below ACOEM Levels

0%

25%

50%

75%

100%

Pc

nt

of

Clm

s

Above ACOEM 87.7% 68.2%

Below ACOEM 12.3% 31.8%

PHYS MED CHIRO

>2Visits

>12VisitsIn 1st

30 days




Low Back - Soft Tissue ComplaintsIncremental Cost Per Indemnity Claim By Services Visits

Beyond ACOEM

($10,000)

$0

$10,000

$20,000

$30,000

$40,000

1 13 35 60 85

Visits

Ad

dtl

Pa

id/C

lm

Physical Medicine Chiropractic

ACOEM PhyMed

ACOEMChiro




Summary of Incremental Effects on Claim Development- Phys Med & Chiro Services -

Low Back - Soft Tissue Complaints

29.8% 119.9 155.6 8.7% 92.1 100.1TD Days

75.3% 427.4 749.3 14.3% 391.2 447.1Treatment Length

59.0% $17,849 $28,377 12.8% $17,509 $19,742 Indemnity

53.5% $13,559 $20,815 11.9% $11,482 $12,844 Medical

56.6% $31,408 $49,192 12.4% $28,991 $32,586 Total Claim Cost

Pcnt Diff

WithinACOEM

Above ACOEM

Pcnt Diff

WithinACOEM

Above ACOEM

ChiropracticPhysical Medicine




Summary:

1. Significant differences between current and ACOEM-recommended utilization patterns

2. Significant variation in treatment selection, intensity and duration

3. Excess utilization beyond ACOEM is not associated with:• Overall lower medical costs• Shorter treatment• Faster return-to-work

4. Physical medicine & chiropractic utilization at or below ACOEM is associated with positive claim outcomes



Issues in Estimating ACOEM’s Impact

• Implications for:1. Injured Worker2. Providers & MCOs3. Payors & Claims Administrators4. Labor Code, Rules & Regs & Legal Interpretation

• Difficultly in Estimating Savings1. Workers Comp is not Group Health2. Double-Counting Util Mgt. Savings

- ER vs. EE PTP- Network Effects- PT/Chiro Visit Caps



Areas of Research – Part 2: Benefit Delivery

1. Alternative Dispute Resolution

2. 2-Year Temporary Disability Cap

3. 1st Medical Pay



Alternative Dispute Resolution

Data Sample Claims Total Benefits Medical Indemnity

ADR 2,230 $ 33,547,649 $ 12,835,963 $ 20,711,686

Statutory 9,591 $ 175,123,851 $ 67,555,187 $ 107,568,665

Total 11,821 $ 208,671,500 $ 80,391,150 $ 128,280,351

• Significant expansion to new industries• Little outcomes data



Alternative Dispute Resolution:Rate of Attorney Involvement

Rate of Attorney Involvement

9.0%

32.2%

0%

10%

20%

30%

40%

ADR Statetory



Alternative Dispute Resolution:Average Benefit Costs

Medical Indemnity Total Benefits

AttorneyInvolvement ADR Statutory ADR Statutory ADR Statutory

NO $ 5,330 $ 1,788 $ 8,191 $ 1,745 $13,520 $ 3,533

YES $14,600 $ 16,270 $36,710 $31,586 $51,309 $ 47,856

Total $ 6,161 $ 6,444 $10,928 $10,698 $17,089 $ 17,142

No Significant Difference



Alternative Dispute Resolution:Employer-level Outcome Variation

Top 3 Governing ClassesADR ER

#1ADR ER

#2ADR ER

#3Statutory System

Electrical $19,321 $20,865 $15,976 $16,283

Wallboard Application $14,967 $17,452 $20,021 $20,413

Carpentry--Private Residence $14,286 $10,518 $18,231 $17,370



2-Year Temporary Disability Cap (LC §4656)

0%

20%

40%

60%

Pmts >2Y Post DOI 12.6% 26.0%

Pmts >2Y 1st TD Date 8.5% 18.6%

Est. Paid TD Days 1.0% 5.4%

Pmts >2Y 1st TD Pymt 7.7% 16.1%

Pcnt All ClaimsPcnt All TD Payments (All TD

Claims)

Pcnt of Claims & Benefits>2Yrs of TD by Timeframe

• Injuries o/a 4/19/04• TD cap -- max. of 104 weeks



Acute & Chronic Hepatitis B & C 0.0%

Amputations 1.3%

Severe Burns 0.9%

HIV 0.0%

High-Velocity Eye Injuries 0.3%

Chemical Burns to Eyes 0.1%

Pulmonary Fibrosis 0.0%

Chronic Lung Disease 0.4%

Exempt Injuries:• 2.9% of TD Claims• 5.3% of TD Pmts• 88.7% Higher Benefits

2-Year TD Cap: Exempt Injuries



Pcnt of Claims >$10kby Timeframe

1.3% 1.5%1.9%

0%

1%

2%

3%

4%

5%

45 Days 60 Days 90 Days

Measuring First Medical Pay (LC §5402)

• Payors cover medical benefits prior to accept/reject decision• $10K Cap on Initial Medical Payments• Timeframe not defined



Estimated 1st Pay

$0

$20,000

$40,000

$60,000

All Claims $1,440 $1,576 $1,836

<= $10,000 Paid $796 $883 $1,025

> $10,000 Paid $49,682 $47,433 $42,744

45 Days 60 Days 90 Days

Measuring First Medical Pay

Initial medical payout patterns:

Future Issues:• Denial Rates• Claim Utilization• Utilization• Recovery




“Self-Executing” Changes--AB 749 (2003) SB 227/228/899 (2004) --

• Removal of PTP Presumption of Correctness• OMFS & Medicare & 5% Reduction• Outpatient Surgery Facility Fee Schedule• ACOEM • 2nd Opinion for Back Surgeries• Utilization Review• 1st Medical Pay• Apportionment • Expansion of ADR• 2-yr Cap on TD

Coming Attractions…• New PD Schedule• New UR Protocols• Medical Networks



1. Operations: Get up to speed on new rules• Medical• Indemnity• Rules & Regs

2. Data & analysis & benchmarking• Tracking internal operations & external vendors

- Networks - Fee Schedules - Utilization - Claim Operations

Strategies for Payors



California Workers’ Compensation Institute

www.cwci.org

Public Policy Research Implications & California Workers’ Compensation System

Reform

September 14, 2004

Documents

C C V V I CLRS – September 2004 Copyright 2004, CWCI All rights reserved California Workers’ Compensation Institute California Workers’ Compensation