Factors influencing the costs of workers' compensation

This article has presented a number of factors believed to have shaped the costs of workers' compensation. These factors are summarized in Table 1. Of these factors, the most notable influence on claims severity is related to the way medical care is delivered to treat occupational injuries and illnesses. Whereas medical care providers may have some influence on the other factors responsible for increased claims severity, such as attorney costs and differences in state workers' compensation laws, they have a tremendous impact on the way medical care is delivered and its resultant costs. This places physicians, nurse practitioners, physical therapists, chiropractors, nurses, and physician assistants in a unique role of being able to assist US business in improving productivity through a reduction in workers' compensation costs. This has not escaped the attention of state regulators and the payer community. Many of the measures presented Table 1 in have been adopted by various states, insurance carriers, and large self-insured employers to control costs. Each of these has had variable success in affecting changes in workers' compensation expenses. Use review, treatment guidelines, and traditional case management do not seem to have had significant roles in containing medical care costs in workers' compensation [10]. The same may be true for fee schedules. Some studies indicate that states with fee schedules may experience a slower rise in medical inflation than states that do not [10]. Other studies indicate that fee schedules may stimulate increased use of medical services [4,10]. Indeed, Shuford [4] presents evidence that 60% of the increase in workers' compensation medical expenditures may be the result of increased use. Although the jury may be out on the efficacies of the cost containment devices mentioned above, there is overwhelming evidence that selected networks of medical providers have a tremendous impact on containing medical costs. Swedlow and Gardner [23] noted that physicians, whose practices provided care for large numbers of workers compensation claimants, were associated with lower indemnity medical and attorney costs. Providers that were selected by the employer also seemed to provide less costly medical care than providers selected by claimants themselves or their attorneys [10,18,24]. This author recently presented evidence that integrating a network of medical providers into a health and safety program resulted in multi-year savings in per capita medical and indemnity costs for a large self-insured employer [24]. This study also showed that medical and indemnity severity was approximately one third the expected cost of severity for a similar risk pool of US workers [25]. Thus, medical care providers can make a difference in the cost of workers' compensation with participation in networks, perhaps the most effective way to leverage up this potential. Insurance carriers, third party admistrator (TPAs), and large self-insured employers may harness this potential by constructing networks of highly skilled health care providers who are knowledgeable about the workers' compensation process and referring as many of their insured patients as possible to these networks. This seems to be an effective interim measure to contain workers' compensation costs until state legislators can craft legislation that will encourage less litigation and a more competitive health care environment.