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Medical Equipment in Workers' Compensation
Author: | Thursday November 30, 2006
Companies adjust to meet new challenges
Challenges to
Reduce Risk
The Dilemma of Durable
Medical Equipment (DME)
By Bryan Crawley, VP, Marketing Development & Implementation - TechHealth
In the last decade or so, the landscape of disability management and cost containment in the workers' compensation arena has experienced significant milestones.
We have seen and welcomed new regulations that allowed us to more actively and aggressively manage claims and the medical expenditures associated with those claims. In lieu of those regulatory achievements we are continually challenged to identify new and innovative approaches to further reduce the overall cost of risk.
Industry tells us that frequency continues to decrease while severity continues to increase, loss ratios are starting to improve and in many jurisdictions premiums are decreasing. This is indicative of the regulatory impact, improved claim management performance and employer safety initiates eliminating injuries.
However, payers are continuing to experience an increased number of dollars to resolve those claims. Payers evaluate their disability management and cost containment strategies regularly and are attempting to identify additional opportunities to further address unit cost of medically necessary treatment, overall claim outcome and the reduction to the overall cost of risk for their clients.
We are constantly reminded of the news from our industry sources and are faced with the reality that approximately 30% of the total medical spent in workers’ compensation is consumed by ancillary medical services and in some jurisdictions are exceeding those percentages.
Payers continue to examine the cost drivers to further determine what can be done to impact the cost of claims.
Directed and non-directed ancillary medical services networks like TechHealth have been in existence for quite some time and it is unusual for a payer not to have a relationship with one of these organizations as they have had their impact on producing unit cost savings.
While payers have typically allocated greater attention to those areas which consume the largest portion of the ancillary medical expenditure (physical medicine and pharmacy), they are now gaining a better understanding of one of the most often incorrectly coded expenditures, DME.
Since the industry aggregates many services under this large umbrella (Home medical equipment, Orthotic and Prosthetics, Electro-Therapy, Medical Supplies), it is no wonder why this is one the most incorrectly reported ancillary expenditures. Reports indicate that approximately 4.5% of the ancillary medical dollar spent is comprised of DME, however more frequently than not, payers are indicating higher percentages and annual increased expenditures.
As one of the areas flying below the radar screen that require aggressively managing cost, DME has now surfaced for payers to evaluate and re-think how a managed durable medical equipment program can be administered to produce the needed outcomes to further reduce exposure beyond just unit cost. Areas needing to be examined are:
•What are my true expenditures for DME?
•Why am I not experiencing greater reductions year over year?”
•How do I achieve better outcomes?”
•How can I be sure that I’m getting the most cost effective items dispensed while ensuring the best therapeutic outcomes?”
To answer these questions, we must be willing to think differently and incorporate innovative strategies that may not be endemic to a traditional Workers’ Compensation DME program.
We can however look to successes achieved within the ancillary medical services arena and integrate those techniques. For example, Pharmacy Benefits Programs employ specific techniques that when initially introduced significantly impacted the escalating costs associated with prescription drugs. Key components that demonstrated significant impact include:
•Formulary Management – Establishing greater control through item and pricing predictability
•Alternative Therapeutic item identification – Dispensing cost effective therapeutic alternatives
•Active Management – Incorporating tools that provide consistency and accountability to execute the desired outcomes
•Data Management - Benchmarking, evaluating and utilizing data to effectively measure program outcomes and the performance of all claim stakeholders
If we begin to think outside of the scope of traditional service delivery and incorporate successful approaches to the delivery of DME we then can be better positioned to more clearly understand (1)the true DME expenditures, (2)cost of most frequently prescribed items, (3)whether the most cost effective therapeutic items are dispensed, (4)identify and improve upon stakeholder barriers and (5)challenges to deliver better outcomes and provide long-term savings.
Ed. Note:To learn more about TechHealth and their ancillary programs, contact Bob Smith, VP of Sales & Marketing at 813-490-1900.
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