Errors in payments, usually referred to as “leakage,” are a major issue for any insurance company involved in workers compensation claims. Generally “leakage” is classified into two types: hard and soft.
Hard leakage refers to erroneous payments made on claims without coverage, e.g., a claim is paid when no policy coverage or compensability exists.
Soft Leakage refers to overpayments to claimants in wage compensation, errors in medical payments, and errors in payments to medical providers after a claim is denied or disputed.
There is an area not often mentioned, however: vendor leakage.
Vendor leakage involves payments to various outside vendors used in investigation and claims handling such as nurse case management, surveillance, independent medical evaluation (IME) companies, and vocational assessments.
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Nurse Case Management Leakage
Many companies use outside vendors for nurse case management (NCM). Adjusters use these nurses to assist in gathering medical records, to talk over medical issues with physicians either onsite or telephonically, and to meet with claimants to get another view of the ongoing medical complaints a claimant may have.
Leakage can occur when NCM is used on claims where it is not necessary. Too often adjusters have a high claim volume and, to save time, they assign an outside NCM to assist on uncomplicated medical claims. This is not only expensive, but also not needed.
For example, if a claimant has a typical back strain with no internal structural damage and no pending surgery, there is no need to involve a NCM. But in order to keep an eye on the claimant’s medical treatment, an adjuster assigns a NCM to oversee the medical portion of the file.
Adjusters are known to assign NCM from time to time solely to gather medical records so they do not have to call the provider and request records. This is both a waste of claim expense and a sign of a lazy adjuster.
NCM should only be used when there is a complicated surgical case, when congenital medical issues could complicate healing after injury (e.g., a case with a claimant with severe diabetes or morbid obesity), or in scenarios when the same claimant has a number of similar complaints/injuries throughout years in the workforce, indicating the presence of a repetitive injury that could lead to a severe injury if the work duties are not corrected. Any other use of outside NCM is a waste of claims dollars and a waste of the nurse’s time and effort.
First of all, surveillance does have its place in certain claims and secondly, not all surveillance is a waste of time. However, in most cases surveillance does not greatly impact the outcome of the claim. Depending on the jurisdiction, videotape of a claimant walking around outside or running various mundane simple errands will not impact the compensability of the claim. A workers compensation claim does not disable someone from performing most general activities of daily living.
Keep in mind though that even though it does not influence the outcome of the claim, it may be very useful to build internal management commitment for your program or be a deterrent to fraud when others in the facility become aware that extent of injuries is verified via surveillance. In fact, we at Workers Comp Resource Center are huge proponents of using surveillance to verify the extent of any injury before a settlement is offered. When one member of our staff was a litigation manager, he wanted to see with his own eyes that a claimant was really disabled before authorizing payment of a settlement. LowerWC.com is a stickler for detail.
Surveillance is typically costly, and unless an employers has an inside tip that the claimant has other employment, or is routinely breaking medical restrictions, it may not be useful. Surveillance without a purpose is considered leakage.
Independent medical examinations (IME) are probably the most commonly used tool for adjusters. IMEs are used to make a medical correlation between the objective injuries a claimant may have, and how they relate back to the workplace injury. Inexperienced adjusters will send a claimant for an IME too soon, or too often. The results will shoot their defense of the claim in the foot because, depending on the scenario, the IME physician does not have a reason to terminate ongoing medical benefits. A typical strain can last up to eight weeks, and if the company does an IME at three weeks, the claimant is still in the healing stages and the company will either have to wait for the treating doctor to release the patient from care or perform another IME later and incur extra expenses. So, untimely IMEs are leakage. Using an M.D. to review timing of an IME can eliminate this type of leakage.
Depending on the jurisdiction, an IME may cost anywhere from $575 and $3,000, which often does not include medical record review, adding hundreds of dollars to the total bill. Plus, costs can vary on the specialty of the physician and the location of the IME. In our experience, which includes many claim audits by an M.D., about one-third of IMEs are unnecessary.
Often the treating physician can address any concerns an adjuster has regarding injury causation, and correlation of symptoms to the injury. This is usually free, and it only takes the time of the adjuster to draft a good letter to the treating doctor outlining the concerns. If the treating doctor will not respond, or it appears a claimant is over-treating for the injury, then an IME is warranted.
IME physician reputations are sometimes a greater factor than their actual report. There is a physician in Wisconsin who writes a good IME report, but when judges see his name, they disregard his opinions. Plaintiff attorneys and administrative law judges often see the same IME physicians again and again, and if these physicians have given poor depositions in the past or write overly-aggressive reports failing to support objective medical diagnoses, the IME report is not worth the paper it is printed on.
An IME is a fantastic tool when used properly, with the appropriate physician, with a cover letter written by an M.D. requesting specific medical information, at the correct time it is needed. Any overuse or improper use just leads to more expense sunk into the claim for no strategic benefit.
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Vocational Assessment Leakage
When a claimant can no longer perform their pre-injury job, adjusters sometimes bring in a vocational expert to comb the job market for potential work based on the claimant’s experience and medical restrictions.
Similar to IME reports, the reputation of the vocational counselor is very important. In most litigated cases, a voc expert is used to show the injury and subsequent permanent medical restrictions the worker has doesn’t deter him or her from any future employment. But, this argument must be made correctly. Plenty of outside factors are taken into account, including geographical location, the current job market, the claimant’s transferable skills, and the overall chance that the injured worker will have gainful, long-term, satisfying employment within these restrictions. You usually can’t take a man who was a welder his whole life and turn him into a greeter at a grocery store, and expect a judge to be satisfied with that. This can be avoided by selecting a vendor that searches for jobs in the open market, sets up interviews, and follows up after the interview to make sure the employee attended the interview appropriately dressed, for example — making a real effort to get hired.
Adjusters know when a claimant sustains an injury resulting in the injured worker having permanent medical restrictions, the claim can go down several routes. First, the adjuster should go to the employer where the claimant was injured to try to either create a job within the restrictions and pay range, or to attempt to modify the worker’s position to accommodate medical restrictions. If this can be achieved a voc expert is not needed. Otherwise, vendor’s fees are spent on countless hours looking for jobs outside of the employer’s facility.
In summary, leakage affects all insurance companies, third-party administrators (TPAs), self-insured employers, etc. Unnecessary outside vendor usage contributes to excessive claim costs and is known to be used more often than needed in day-to-day claims’ practices.
Consider on a larger scale the costs going into a basic, lost time claim. It is a good bet some of these costs can be eliminated with a more proactive adjuster who is open to getting the injured worker back to the employer by strengthening the adjuster/employer/worker relationship. Knowing your vendors, selecting your own vendors or becoming VERY WELL acquainted with TPA vendors, and specifying the triggers for use in your account instructions, can go a long way toward making your program more efficient.
Author Rebecca Shafer, JD, President of Amaxx Risks Solutions, Inc. is a national expert in the field of workers compensation. She is a writer, speaker, and website 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. See www.LowerWC.com for more information. Contact: RShafer@ReduceYourWorkersComp.com.
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