How to Calculate Cost Per FTE Metric to Show Workers’ Comp As Profit Center

How to Calculate Cost Per FTE Metric to Show Workers' Comp As Profit CenterData can be overwhelming. If you have more than 50 workers’ compensation claims per year, you likely have lots of numbers. Industry leaders frequently talk about using data for various metrics. That sounds great, but what should you measure? How should you measure? And, most importantly, how do you use these metrics for real value?

 

What’s important is to understand how to use the metrics to tell a story — to see the trends in your program, determine the financial impact and target areas that need improvement. Ideally, you can show upper management that your efforts and the resources expended to improve the workers’ compensation program are worthwhile. Using a fairly simple formula mixed with a little finesse can help you interpret the meaning behind the data you are collecting.

 

There are many metrics you can use to improve and show the value of your workers’ compensation program. But that doesn’t mean you need to use all of them. What is important is to select one that helps you tell your story.

 

 

Cost per FTE

 

A metric called Cost per Full-time Employee (FTE) is one of the more powerful and popular among many organizations to see the value in their workers’ compensation programs. It is not appropriate for every company, however. Businesses with fewer than 50 claims per year and/or those with guaranteed cost programs may find other metrics are more suitable.

 

Determining the Cost per FTE can provide tremendous insight into your program. From it, you can show:

 

  • Average cost per injured worker
  • Aggregate costs for injured workers
  • Trends in the costs over several time periods
  • Which company divisions are spending more or less on injured workers
  • Savings to date from the program
  • Projected savings to the FTE goal

 

The formula to determine the Cost per FTE is fairly simple.

 

(Incurred losses x 2000)/productive man hours =  Cost per FTE

 

  • Incurred losses = the amount paid per claim + amount reserved for medical and wages + any expenses.
  • The number ‘2000’ equates to the number of hours a Full Time Equivalent employee works per year (40 hours per week x 50 weeks).
  • Figures for productive man hours should be available through HR or the payroll personnel.

 

All figures should be for the same time period; such as January – December of a particular year.

 

As an example, let’s say a company with 2,500 employees has incurred losses of $1 million. To determine the top portion of the equation:

 

$1 million (incurred losses) x 2000 = $2 billion.

 

To figure the number of man hours, take the number of FTE employees multiplied by 2000 hours:

 

2,500 x 2000 = 5 million.

 

The Cost per FTE for this time period would be $400. ($2 billion/5 million = $400).

 

To get the most out of the metric, do the same exercise for at least three specific time periods for the organization as a whole, and for separate divisions within the company. Laying out the numbers on an excel spreadsheet helps you tell a story that becomes extremely meaningful.

 

 

Tell a Story

 

There are several ways that the Cost per FTE can be of value to your organization.

 

  1. Compare to national benchmarks. The Risk Insurance Management Society (RIMS), for example, publishes an annual survey by industry. Comparing the Cost per FTE of your industry with that of your organization gives you an idea of how you are doing compared to the national average.

 

  1. Compare divisions within your own company. Looking at the Cost per FTE for each division of your organization will tell you which are doing a better job with their workers’ compensation programs. Where one division’s Cost per FTE may be $400, another may be $500, and another could be $325. Using the information enables you to create a ‘worst to best’ list, which you publish for the entire organization. Not only will senior management be able to see which divisions are doing better (or worse), but the division leaders will too. That can be a tremendous motivating factor for those divisions at the ‘worst’ section of the list.

 

  1. Demonstrate savings to date. This is especially effective if you have been ramping up your workers’ compensation program — focusing on return-to-work efforts, improving safety, working closely with adjusters, for example. The numbers for the different time periods show a trend.

 

To do this, multiply the Cost per FTE for each time period by the number of employees. For example:

 

The Cost per FTE in the first time period was $400. That, times 2,500 employees = $1 million.

 

If you had the same 2,500 employees for the next time period, but the Cost per FTE was lower — say $350 — the overall number will be reduced. 2,500 x $350 = $875,000.

 

Savings to Date: $1 million – $875,00 = $125,000

 

If the Cost per FTE for the most recent time period was lower still, the number would be decreased further. That adds up to major savings to a company’s bottom line.

 

This metric resonates most with senior management when it is presented as simply as possible — on a single page, in an easy-to-read excel sheet, with the overall savings highlighted at the bottom. Ultimately, it shows that the workers’ compensation program is not a drain on the bottom line, but an actual profit center.

 

 

Summary

 

Organizations can see significant savings on their workers’ compensation programs when efforts are made to improve the overall functioning. But senior management needs to understand the return-on-investment. Showing how much the company has saved through the efforts demonstrates the true value of an efficient, well run workers’ compensation program.

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2018 Amaxx LLC. All rights reserved under International Copyright Law.

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

Improve Workers’ Comp Lag Time With This Single Principle

Hey, there! Michael Stack, here, CEO of Amaxx.

 

One of the most mystical powers is the ability to predict the future; which, of course, none of us can do. All we can do is put ourselves in a position to have the highest likelihood of success, to stack the deck in our favor, to stack the odds in our favor.

 

I want to talk with you today about a critical metric of your lag time reporting, what that means, and how to improve it.

 

 

Lag Time Defined

 

First, let’s talk about what lag time is. Now, this is the difference between when the time of the injury occurring, and the time it’s reported to your carrier, or TPA; so, when the time an injury happens, to the time it’s reported, to your carrier, or TPA. If the employee reports it to the supervisor, and the supervisor delays, and doesn’t report it to the carrier, or TPA, for another week or two, that’s lag time as well.

 

 

Impact of Lag Time on Litigation Rates

 

Let’s talk about what this now means, as far as predicting your claim outcome, of what actually happens on that claim. Now, much has been said about this, as far as lag time, and the impact it has on cost. But what I want to talk about today is the impact on litigation rates, as well, because when a claim gets litigated, all sorts of bad things have the higher potential of happening, as far as delayed claims, increased costs, et cetera.

 

I have these numbers up here: 23% increase, 87% increase, and 39% increase. This is a 23% increase in litigation rates. If there’s one week of delay of lag time, 23% increase after one week, 39% increase in litigation rates after two weeks, and 87% increase in litigation rates on claims after four weeks. (source: NCCI Research Brief, January 2015)

 

While we can’t predict the future, we can put ourselves in the best possible position to be successful to get those claims reported early.

 

That’s great. You may understand the philosophy. You may agree with that philosophy. But now, how do you do it?

 

 

Improve Workers’ Comp Lag Time With This Single Principle

 

Here’s the foundational principle that I want to resonate with you: it needs to be in the employee’s best interest to immediately report their claim. I’ll say that again. It needs to be in the employee’s best interest to immediately report their claim.

 

Now, a number of factors go into that: culture, and communication, and the way that you set things up. But if it’s not in the employee’s best interest to immediately report their claim, they’re not going to do it, or they’re not going to do it as often as they otherwise would.

 

Once you understand that foundational principle, the culture, or the impact it has on your employees, now you can implement tactics like injury triage. You can improve your communication. You can use an employee brochure. You can use different injury response tactics to now make sure that that, in the employee’s best interest, actually comes to fruition; and if it does, then the outcome of your claims, and the future of your claims, will be significantly improved.

 

Again, I’m Michael Stack, CEO of Amaxx; and remember your work today in Workers’ Compensation can have a dramatic impact on your company’s bottom line. But it will have a dramatic impact on someone’s life, so be great!

 

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2018 Amaxx LLC. All rights reserved under International Copyright Law.

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

Be Prepared to Deliver Your Workers’ Comp State of the Union Address

 

This week marks President Trump’s first State of the Union address to our nation. And if I had to guess it’ll be one of the highest rating State of the Union addresses in our recent history. We just have that kind of president, whether you view that as a good thing, or as a bad thing.

 

 

Are You Spending More Effort Following Trump Than Your Own Work Comp Program?

 

Hello, my name is Michael Stack. I’m the CEO of Amaxx. And today I want to talk about the state of the union of the administration of your worker’s compensation program. And I want to ask you a question, and I want you to analyze your strategy and philosophy, and answer this question honestly. Are you spending more time, more energy, putting more effort into following the Trump administration than you are to the administration of your own program? Are you putting more time, more effort, putting more of your attention, gathering more of your emotional willpower into the Trump administration than you are in your own work comp management program, the thing that matters most to your career? The thing that you’re working on, on a day-to-day basis.

 

The reason that we’re going to have … this will be one of the highest rated State of the Union’s is because Trump is a polarizing president. You’re either going to be watching that State of the Union, rah-rah-ing and cheering everything that he’s saying, or throwing tomatoes at the TV because you have such a disdain for that individual, but you’ll be tuning in.

 

But you have no idea what’s happening in your program. You have no idea where your program is trending. It’s just sort of a cost of doing business, and you’re going along hoping for the best. So what I want to do today is I want to go over a very specific metric that you can track, that you can trend, that you can tell the story of the financial impact of your organization for exactly what is happening in your work comp program. So if you had to give a state of the union address about where things stand in your program, and you only had one metric to use, this will be the one I would recommend using. And this is the cost per FTE, the cost per full-time equivalent employee.

 

 

Cost Per Full Time Equivalent Employee

 

What this does is it allows you to benchmark against national standards. It allows you to create an apples to apples trending in your program regardless of hiring, regardless of seasonal employees, regardless of the number of workers in your program has gone dramatically up, or gone dramatically down in a year over year period, so that you can understand where it is that you’re going, either up or going down or staying the same.

 

So let’s talk about how this is calculated. You take your incurred losses times the number 2,000 over your man-hours, so your incurred losses times the number 2,000, and the number 2,000 it’s 40 hours a week times 50 weeks a year. That’s how you get 2,000 for the number of man-hours worked for an equivalent for a full-time employee. So if you have a bunch of seasonal workers, you have a bunch of part-time workers, your hiring has gone up and down as I mentioned, this smooths out this equation and you take it over your actual man-hours worked for that specific period.

 

So I like to track this by quarter. You could also track it by semi-annually, and then, of course, you’re going to look at this annually in a year over year basis, but the first time you do this, I would start with annually and look through your four years back, so that you could see where it is that your program is going.

 

 

Three Uses for Cost Per FTE

 

And as I mentioned, three things for you to do with this: benchmark against national standards; two, you can trend against where your company is going in a year over year period; and then three, and most importantly, is calculating the actual impact, the financial impact, that your improvements have made, or the decline in your program has actually made on your organization.

 

Again, I’m Michael Stack, CEO of Amaxx, and remember your work today in worker’s compensation can have a dramatic impact on your company’s bottom line, but it will have a dramatic impact on someone’s life. So be great.

 

 

 

Michael Stack - AmaxxAuthor Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center .

 

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

 

©2018 Amaxx LLC. All rights reserved under International Copyright Law.

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

3 Metrics To Combat Silent Killer Of Workers Comp Costs


Have you ever walked into the bathroom, stepped on the scale, said, “Whoa. How did that happen?” Or maybe got your credit card statement in the mail, took a look at it and said, “That’s not good,” or maybe looked at what you were paying in workers compensation premiums and said, “How did things get so bad?” I’m Michael Stack with Amaxx and today I’m going to be talking about a very important concept to understand called Drift. I’m going to tell you a little bit of a story.

 

 

Drift Happens When You Are Not Paying Attention

 

My companies been around for over 25 years, and we’ve worked with hundreds or organizations implementing a system of workers compensation management. Now there’s companies we worked with many years ago, we helped them to implement their systems and they achieved a minimum of 20% and often times greater than 50% reduction in workers compensation cost. Then that project will end, and time will start to go by. Five years go by, ten years go by, maybe some personnel changes happen at the organization, maybe the culture starts to shift at the organization, maybe they’re not doing the training and implementing some of the systems and training their employees as they’re supposed to be internally.

 

Now 15 or 17 years go by and we get a call from that same organization that says our Workers Comp program is a disaster, can you help us? How does that happen? How do we get those surprises on the scale? How do we get those surprises in our credit cards statements? Let’s take a look here, where your boat is close to the dock, everything is going well, systems are running just as they’re suppose to. Then time starts to go by, and little by little, little by little, little by little, little by little, little by little, little by little, little by little your boat ends up all the way over here in what happens to be some very rough water.

 

Now when our personal lives it’s about finding a system of management that works for you. In Workers Compensation management, it’s about paying attention to very specific metrics to understand where you are in your process and in your program.

 

 

Three Workers’ Compensation Metrics

 

I want to give you three very important metrics to understand and track.

  • The first one is your lag time. How quickly are your employees reporting their injuries?
  • Second one, your return to work ratio. Again, how quickly are your injured workers getting back to work?
  • The last one is the cost per FTE or the cost per full-time equivalent employee. A great way to track the period over period of even division to division to compare apples to apples in how you’re doing.

 

Now, if you don’t know how to track these metrics, leave a comment or send me a message, I’ll be happy to provide some additional information to where find this information and track-in your organization. If you’re watching this video somewhere other than reduceyourworkerscomp.com, go ahead and go to that website, sign up to receive a lot more free information on how to control your workers comp costs. If you want to take it one step further, I invite you to join me as a guest on my next live-stream training. Go to workerscompclub.com/livestreamtraining. Again, I’m Michael Stack with Amaxx and remember your success in Workers Compensation is defined by your integrity, so be great.

 

 

For additional information on workers’ compensation cost containment best practices, register as a guest for our next live stream training.

 

Author Michael Stack, Principal, COMPClub, Amaxx LLC. He is an expert in workers compensation cost containment systems and helps employers reduce their work comp costs by 20% to 50%.  He works as a consultant to large and mid-market clients, is co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder of COMPClub, an exclusive member training program on workers compensation cost containment best practices. Through these platforms he is in the trenches on a working together with clients to implement and define best practices, which allows him to continuously be at the forefront of innovation and thought leadership in workers’ compensation cost containment. Contact: mstack@reduceyourworkerscomp.com.

 

 

©2016 Amaxx LLC. All rights reserved under International Copyright Law.

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.

 

Incentivizing The Right Work Comp Outcomes

Hello, Michael Stack here, Principal of Amaxx, founder of COMPClub and co-author of Your Ultimate Guide to Mastering Workers’ Comp Costs. I recently put together a series on the National Workers’ Compensation Conversation. There was a meeting that was held in Dallas on May 10th and 11th of 2016 where 39 stakeholders came together. That series details all the information and discussion that was had at that meeting. It also reviews the political history and, the imperative issues that were identified throughout the course of the National Conversation. As a follow-up to that series, I put together a town hall webinar, where I asked for the input and perspective from those within the workers’ compensation industry. Everyone was invited to participate that wanted to. What I want to do today is go over the main theme that was discussed in the town hall webinar, as well as how that can impact both the national conversation and your organization.

 

 

Incentivizing The Right Work Comp Outcomes

 

The main theme that was discussed from the multiple participants and the multiple people that added on that town hall webinar was this idea of incentives, and incentivizing the right work comp outcomes, and how right now, as we’re set up, that’s not the way the system currently works, so I want to just detail this out and just very quickly, if you want to know all the details of the imperative issues, and go through that in detail, I highly recommend checking out that Workers’ Comp National Conversation series that I put together. You’ll find it extremely informative.

 

 

The Longer A Claim Goes On, The More Revenue Is Generated

 

For this purpose, today, we’re just going to look at something very simple. Let’s look at the costs of a claim over time, and really how this works. The longer a claim goes on, and obviously this isn’t to scale, but the longer a claim goes on, the more expensive that claim becomes, and here was the idea that was talked about, really, on that town hall webinar from the various perspectives.

 

This is the profit line of all the different stakeholders in the industry. That includes claims management, that includes vendors, that includes medical providers, that includes various vendors that are servicing that claim. The profit and the revenue from those various providers increases the longer a claim goes on, and the more expensive that claim becomes, so that was one issue that was discussed throughout the course of that webinar.

 

 

Collateral Source Benefits

 

Second issue, then, is from the employee side, and let’s take a look at this, and we deem this, we call this collateral source benefits, and let’s say, from an employee standpoint, this is what that employee brings in net, of one example I’m just going to use childcare as an example of a collateral source benefits. Net of childcare expenses, this is what that employee brings in on a weekly or monthly basis.

 

Now let’s take a look at that individual on workers’ comp insurance. They’re getting 66 and 2/3 percent of their income, and they have no childcare expense. Now they might be bringing in this much money monthly.

 

They might actually be making more money out of work than they are actually working, and one of the parents now gets to stay home with the child or children. Collateral source benefits can incentivize the wrong thing. The way that our industry is currently set up can incentivize a wrong outcome. I’m not going to have an answer for what this looks like on a national conversation level today, but what I do what to do is start to present and float the idea as something that needs to be a part of this conversation moving forward, needs your perspective and your input for how we can now start to solve this issue of incentivizing the wrong outcomes the way that the current system operates.

 

 

Accountable Care Organizations

 

What I want to do now is start to look at how this can impact your organization and some other examples of things that have been done to now start to try to incentivize these right outcomes, and the first thing that I want to give an example of is these ACOs, or accountable care organizations.

 

These were designed to now incentivize the right outcome, because providers, medical providers, are compensated for the quality of their care and the outcome with the patient, rather than the amount of treatments that they give, so the provider is compensated for the quality of their care, as well as the outcome of the patient, rather than the amount of treatments, or amount of surgeries, that they are now performing. That starts to now really fall under this umbrella of incentivizing the right outcomes. One example for us to start to think about and look to in our industry, obviously easier said than done.

 

 

Cost Allocation / Charge Back System

 

What is a reasonable thing to expect is now to bring this idea to your organization? Bring this idea of incentivizing the right outcomes to your organization, so here’s what I want to give an example of, of how to do this. Call the cost allocation or our chargeback system, and I want to give a very quick example of this. Let’s say you have 3 divisions in your company. Each of them has $100,000 in losses.

 

We know that the activities that produce the best outcomes are getting a claim reported immediately, and getting that employee back to work. It creates lower workers’ compensation cost, and it creates a better outcome for the employee, for the injured worker, so you design a cost allocation, you design a chargeback system, based on those 2 metrics, and here’s what this looks like. In this first edition, they’re not doing a great job of getting their claims reported timely. They’re not hitting the metrics that you’ve designed, so they’re charged that full $100,000 in work comp losses. Division number 2, they’re doing a little bit better in their injury reporting, but they’re not doing a great job in getting their employees back to work, so they’re charged $80,000, so they get that savings of $100,000, and that division leader, the person that’s in charge of this particular division, now seeds $20,000 more on that organization’s bottom line for that particular period. This final division, then, they’re doing a great job with getting claims reported timely.

 

They’re getting a great job getting their employees back to work, they have a transitional duty job bank, they’re working with their medical providers, they’re working with the system as you’ve created it and laid it out in your organization. Now they get an additional $40,000 in profit on that division leader’s bottom line.

 

Starting to now incentivize the right outcomes of two simple things:

 

  • Getting the claims reported timely
  • Getting their employees back to work.

 

Starting to incentivize the right work comp outcomes. It’s an idea that needs to be a part of the national conversation.

 

Easier said than done, but starting to work towards this idea of incentivizing the right workers’ comp outcomes from a regulatory or systems standpoint, and then taking that same idea and implementing it in your organization in the form of a cost allocation or a chargeback system over multiple divisions, and if you don’t have multiple divisions, starting to put this in play with individual supervisors’ bonuses, individual, different pieces of a same company, to now incentivize the right outcomes to have them do the right activities that create the lowest cost for your organization and best outcomes for the injured workers.

 

Because remember, your success in workers’ compensation is defined by your integrity. So be great!

 

Improve Workers Compensation Success Through Benchmarking

Benchmarking is often described as the process to measure company success in meeting a goal to improve the quality of a policy, product, strategy or program. Basically, benchmarking measures improvement numerically; numbers are used whether it is by dollar amounts, percentage amount or in whole numbers. Benchmarking is often done on a monthly basis to compare the results of the month just completed with the results from the prior month, prior quarter or prior year.

 

 

Benchmarking Can Measure Performance & Quality of Claims Handling

 

In workers’ compensation, many facets of the claims handling process can be benchmarked. Benchmarking can be applied to measure the performance and quality of claim handling of individual adjusters, the adjusters under one supervisor, the staff of one claims office, or the entire claims organization. To obtain the best results from benchmarking, we recommend the benchmarking be applied at the individual adjuster level. Benchmarking for any group being should be comprised of the results of all adjusters within the group.

 

Benchmarking by adjuster is important because it will quickly tell you which adjusters are striving to provide a high quality claims product, which adjusters are controlling the cost of your workers’ compensation claims, and where improvements are needed.

 

 

Individual Claim Benchmarks Related To Claim Cost

 

There are numerous criteria that can be benchmarked on an individual basis. The most frequently used benchmarks relate to claim cost and are often measured as a percentage change in cost, but can also be measured by a dollar change in cost. This includes:

 

• Indemnity benefits cost per claim, which can be broken down into:

 Temporary total disability claims with no permanent impairment

 Temporary partial disability claims, with no permanent impairment

 Temporary total disability claims, with a permanent partial impairment rating

 Temporary partial disability claims, with a permanent partial impairment rating

 Permanent total disability claims

 Death benefit claims

• Medical benefits cost per claim, which can be broken down into:

 Doctor cost per claim

 Hospital cost per claim

 Diagnostic testing cost per claim

 Drug cost per claim

 All Other medical expense cost per claim

• Legal expense cost per claim

• Vocational rehabilitation cost per claim

• All other expense cost per claim

• Average cost of lump sum settlements

 

 

Benchmarks to Measure Best Practice Compliance

 

The second most common type of claim benchmarks is those used to measure compliance with Best Practices. The easiest way to measure these benchmarks is the use of the number of days taken to accomplish a particular task. Common time related benchmarks include:

 

• The number of days from the time a claim is reported to the claims office to the first contact with the injured employee

• The number of days from the time a claim is reported to the claims office to the first contact with the employer

• The number of days from the time a claim is reported to the claims office to the first contact with the medical provider

• The number of days from the time a claim is reported to the claims office to the first indemnity payment is made to the injured employee

• The number of days from the time a claim is reported to the claims office to the adjuster has filed the Insurance Services Office report

• The number of days between on-going contacts with the injured employee

• The number of days from the time the claims are reported to the claims office until the claims are closed

• The average number of days between when medical bills are received and when the medical bills are paid

 

 

Many Options to Benchmark Claims Handling Process

 

Many other areas of the claims handling process can be measured with benchmarks. This would include benchmarks for:

 

• The average number of days medical only claims are open

• The average number of days indemnity claims are open

• The total number of medical bills per file

• The ratio of medical only claims to indemnity claims

• The average number of days before an injured employee returns to work

 

When benchmarking is properly used, a company can identify the areas where improvements are occurring and the areas where improvements are needed. By benchmarking the claims handling, the insurer, self-insurer or third party administrator is able to improve both the quality of the claims handling and lower the overall cost of workers’ compensation claims.

 

 

Author Michael B. Stack, CPA, Principal, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: mstack@reduceyourworkerscomp.com.

 

©2013 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.


Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional about workers comp issues.

The Best Tidbits Of News From The Workers Comp Community

 

 
The United States House of Representatives today passed the Saving Medicare and Repaying Taxpayers (SMART) Act as part of a broader legislative effort. The SMART Bill was attached to House Bill 1845 Medicare IVIG Access Bill which provides for…Read More
 
 
 
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Broadspire, a Crawford Company (NYSE: CRDA; CRDB) and leading third-party administrator of workers compensation claims, liability claims and medical management services, announced today that it has been awarded continued accreditation for Case Management, Workers' Compensation Utilization Management, Health Utilization Management, and Independent Review Organization: Internal Review from URAC, a Washington, DC-based health care accrediting organization that establishes quality standards for the health care industry. Read more…
 
 
 
From now thru Dec 2012, if you buy either the 2012 RIMS Benchmark Survey Book or the 2012 Workers Compensation Management Program Book, we’ll send you a second copy at no charge.
The RIMS Benchmark Survey Book and our Workers Comp Cost Reduction Book are the most popular books that we offer, and we're trying to set a sales record in December.
Now thru December 31, 2012 order one copy of either of two books below and receive a second copy of that book for FREE.  Read more…
 
 
 
Tallahassee, FL (WorkersCompensation.com) – The Florida Legislature passed and Governor Rick Scott has signed into law CS/HB 941, which amends sections 440.02(9) and 440.05, Florida Statutes. Effective July 1, 2013, the law changes to include Limited Liability Company (LLC) members as employees.  Read more…
 
 
Author Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher.  www.reduceyourworkerscomp.com
 
 
©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law.

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional about workers comp issues.

Workers Comp News in Review April 1, 2012

 
LexisNexis Work Comp Community This Week In Review
 
The Workers Compensation Law Community Powered by Larsons on LexisNexis offers several great pieces this week:
 
 
First is this article by Roger Levy titled, “U.S. Supreme Court Issues Much Anticipated Decision in Roberts v. Sea-Land Services, Inc.” Levy explains the March U.S. Supreme Court decision answering the question of the meaning of LHWCA Sec. 6(c)'s "newly awarded compensation" clause in its decision in Roberts vs. Sea-Land Services, Inc. “Faced with two choices as to the meaning of the clause, the Court chose the one most favorable to employer/carriers and supported by the Director, Office of Workers Compensation Programs,” Levy writes.[WCx]
 
 
In “Work Loss Data Institute Warns of Fox Guarding the Hen House in State Treatment Guidelines,” by John Stahl, found here, Stahl explains that Phil LeFevre, a senior account executive at the Work Loss Data Institute, recently compared official disability guidelines (ODG) with other workers’ compensation treatment guidelines. “The overall theme was that the ODG provides more objective guidance than individual state systems that often reflect the self-interests of medical providers in that jurisdiction,” he writes.
 
 
Larson’s Spotlight this week narrows in on a recent case in which an injured worker is entitled to additional TTD benefits despite derogatory conduct. The Supreme Court of Arkansas decided in a case where a worker sustained a work-related injury, was placed on light duty for a period of time, and then fired for calling his supervisor an "insulting, derogatory, and vulgar name." Read more about this case and others in the spotlight here.
 
 
WCRI to Host Webinar April 10
The Workers Compensation Research Institute (WCRI) is hosting “Hospital outpatient Costs and the Impact of Fee Schedules” for those looking to control medical care costs for injured workers. The webinar will examine the WCRI study to help attendees make comparisons between “hospital outpatient costs across states, identify key cost drivers, and measure the impact of reforms over time.” The webinar will be from 1 to 2 p.m. EDT, Tuesday, April 10, 2012.
 
 
To learn more about the webinar or to register, go here.
 
 
Managed Care Advisors Asks if FECA Regulations Will Change
In the recent issue of The Advisor, MCA notes that two proposed pieces of legislation would alter the Federal Employees Compensation Act (FECA). “The less controversial of the two, the Federal Workers Compensation Modernization and Improvement Act (HR. 2465), was introduced in the House of Representatives in July of 2011 and is currently pending in the Senate Homeland Security and Governmental Affairs Committee. It includes measures to allow the Department of Labor to cross-match claimants' reported income to Social Security data. It also includes provisions to authorize physician assistants and nurse practitioners to certify traumatic injury and related disability,” the article says.
 
 
Read more here.
 
Study Shows Workers’ Compensation Medical Prices Were Higher without Fee Schedules
A Workers Compensation Research Institute (WCRI) study shows that WC med prices were higher and grew more rapidly in states without medical fee schedules.
 
 
The study, found here, shows prices paid for medical professional services for injured workers were higher and rising faster in states without fee schedules compared with states that have them in place. The information was “designed to help public policymakers and system stakeholders understand how prices paid for medical professional services for injured workers in their states compare with other states and know if prices in their state are rising rapidly or relatively slowly,” according to WCRI.[WCx]
 
 
Dr. Richard Victor, WCRI executive director, said, “In documenting the growing prices paid for the medical care received by injured workers, this unique study also shows the effectiveness of medical fee schedules in controlling those costs.”
 
 

Note: If your company has any developments you'd like to share, please send them to us at: RShafer@ReduceYourWorkersComp.com

 

 

Author Rebecca Shafer, JD, President of Amaxx Risk Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and publisher. Her expertise is working with employers to reduce workers compensation costs, and her clients include airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality, and manufacturing. She is the author of the #1 selling book on cost containment, Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: RShafer@ReduceYourWorkersComp.com.

 


WORKERS COMP MANAGEMENT MANUAL:  www.WCManual.com

VIEW SAMPLES PAGES

MODIFIED DUTY CALCULATOR:  www.LowerWC.com/transitional-duty-cost-calculator.php

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.

 

©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact us at: Info@ReduceYourWorkersComp.com.

Medical Provider Performance Indicators for Workers Compensation

By Karen Wolfe, BSN. MA, MBA
President, CEO
MedMetrics, LLC


 
Workers' Comp is Different
While rating providers in group health is a long-practiced endeavor, its elements and parameters have not significantly migrated to workers compensation. Efforts to translate group health provider quality measures to workers’ compensation have fallen short of the mark because they omit several factors crucial to workers’ comp. Quality medical performance indicators in workers’ comp encompass medical treatment, outcome, and cost factors similar to those in general health, but they also include non-medical functions. In workers comp, those non-medical elements can be primary drivers of cost, quality, and outcome.


Return to Work: An Indicator of Performance
A major quality goal in workers' comp is return to full work. Responsibility for achieving that goal rests with the treating physician. Another major quality goal in workers’ comp is return to maximum or full work capacity at the least cost. This article explores the many non-medical functions of treatment that spell quality in workers’ compensation, factors that must be considered in rating doctors’ performance.[WCx]


For instance, multiple and repeated studies have shown that early return to work is a major indicator of better outcomes in workers comp. (Google search:  “Return to Work studies in workers’ compensation.”) The overwhelming take-away from these studies is that the sooner employees return to work after a work-related injury, the sooner they are re-acclimated to the job and the lower the overall cost of the claim. Alternatively, the longer the employee is kept off work, the higher the cost of the claim, with reduced chance of successfully returning to work. Studies show a 1:1 correlation between length of time off work and returning to work — ever. Treating providers are the major driver in returning claimants to work. Therefore, early return to work and reduced overall work loss are key indicators for evaluating medical provider performance.
 

Cost Measures of Performance
Also important to rating provider performance in workers’ compensation is the issue of cost. Two quantifiable generators of unnecessary costs are frequency and duration of medical treatment. Because PPO, MCO, and MPN networks discount each unit of service delivered, the tendency of some providers is to exploit both frequency and duration of treatment to overcome their discounted fees. Individual provider’s frequency and duration of medical treatment for specific injury types should be measured and compared with the performance of their peers treating similar injuries.


Another comparative quality indicator is direct medical costs. Billed costs are not a true performance indicator by themselves. However, assessing billed costs with paid amounts or percentage reduction of charges recommended by bill review is a more accurate measure.

 
Prescriptive Practices
Recent research indicates a problem of opioid misuse or abuse in workers comp. Evaluate prescribing practices of individual physicians by monitoring current data, thereby creating an opportunity to intervene. Prescribing practices are a valid indicator in measuring performance.
 

Outcome
Of critical importance is evaluating providers in terms of outcome like how did things turn out in the claims where they were involved? Is the employee back at work, permanently disabled or somewhere in between? What is the provider’s record? If a provider is associated with a high rate of litigated claims, that should also be considered in the descriptive mix.
 

Create Algorithms to Measure
Providers can be rated specifically for workers' comp by creating a set of algorithms measuring these factors using data. An algorithm is simply a defined process, often mathematical, used to solve a problem or reach a conclusion. Algorithms should be used to compare similar types of providers who have treated like injuries in the same jurisdiction during the same time frame. Consistency is achieved because the computerized algorithms apply the same standards to all medical providers who meet a set of conditions.
 

Analyze Data from Multiple Sources
The data used to evaluate provider performance should be derived from more than one source. Raw billing data or bill review data should be integrated with claim data in order to reach a valid conclusion. Billing and treatment data must be integrated with loss time and outcome information, usually found in different systems, in order to reach legitimate conclusions regarding providers. 

Ratings for medical providers must be transparent, fair, and objective. Fairness and accuracy in developing and measuring provider performance is critical. The indicators can be found in the data. The data must be integrated and evaluated using computerized algorithms that measure and monitor provider performance based on a combination of workers’ compensation-specific values.[WCx]


Measuring Provider Performance Is a Good Thing
A post was submitted by Joe Paduda last year, “Like it or not, physician ratings are coming”. The title suggests rating doctors is a bad thing. It is actually a good thing, unless you are a poorly performing provider. Using legitimate workers comp-specific rating systems to provide objective evidence for selection and for weeding out the less effective or even fraudulent providers is positive progress. A poorly performing provider guarantees complexity and cost in the claim. Informed decisions about medical providers based on data will replace personal biases and unknown outcomes. Basing provider selection decisions on objective data is imperative.


Author Karen Wolfe, BSN, MA, MBA, is President/CEO, MedMetrics®, LLC. Karen is founder and president of MedMetrics® LLC, an Internet-based Workers’ Compensation medical analytics company. She applies her medical knowledge to gathering, understanding and applying Workers’ Compensation data to the operational process. MedMetrics imports, integrates, and analyzes its clients’ medical billing and claims level data. MedMetrics uses several tools such as Predictive Intelligence Profiling and Medical Provider Performance Assessment to gather and analyze data. Contact: Phone: 541-390-1680; Karenwolfe@medmetrics.org; www.medmetrics.org.

 



WORKERS COMP MANAGEMENT MANUAL:  
www.WCManual.com

VIEW SAMPLES PAGES

MODIFIED DUTY CALCULATOR:  www.LowerWC.com/transitional-duty-cost-calculator.php

 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.

 

©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact us at: Info@ReduceYourWorkersComp.com.

Older Employees Have Smaller than Expected Impact on Loss Costs

Even though there is an increasing number of aging U.S. workers, older employees have shown to exhibit a smaller-than-expected effect on workers compensation loss costs, according to a new report from NCCI Holdings Inc.

 
 
NCCI reported on similar average loss costs for all groups of workers ages 35 to 64. Additionally, claim frequency has fallen across the board for all age groups in the last several years as workplaces have in general become safer, according to the rating and research agency.
 
 
"These are reassuring findings, in that an aging workforce may have a less negative impact on loss costs per worker than originally thought," NCCI commented.
 
 
However, medical and indemnity claim severity for workers ages 45 to 64 was more than 50 percent greater than claim severity for the study’s youngest workers, ages 20 to 34. A large degree of that was due to additional severe injuries among older workers, including sprained rotator cuffs, torn knee cartilage and lumbar displacement.
 
 
According to NCCI, claim severity did not vary as widely among workers ages 35 and older. "There is a common belief among many that because of poorer health and longer healing times, medical severity among the oldest workers is likely much greater than among younger workers," the report goes on to say. "However, although there are some wide swings from year to year, medical severity for workers 65 and older does not seem much different from (workers over age 35)." (WCxKit)
 
 
Lastly, NCCI reported that higher wages added to higher indemnity costs among older employees in the study, who obtained 26% more in average temporary benefits per day than workers ages 20 to 34.
The study can be found at: www.ncci.com.

Author Robert Elliott, executive vice president, Amaxx Risk Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers Compensation costs, including airlines, healthcare, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. He is an editor and contributor to Workers Compensation Management Program: Reduce Costs 20% to 50%. Contact: Info@ReduceYourWorkersComp.com.
 
 
 
WORKERS COMP MANAGEMENT GUIDEBOOK:  www.WCManual.com
 
WORK COMP CALCULATOR:  www.LowerWC.com/calculator.php
 
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
 
©2012 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact us at: Info@ReduceYourWorkersComp.com.

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