The use of predictive analytics is the latest trend employed by workers’ compensation claim management teams to reduce costs. By using this tool effectively, teams have seen a reduction in the costs of claims and percentage of claims with high complexity.
What is Predictive Analytics?
Predictive analytics is a tool or process that has evolved over the years through the refinement of workers’ compensation claims management techniques. This includes the use of a number of different data sources that include reports, billing queries, statistical models and forecasting based on data complied over a period of time. The use of this analytical process has also improved with the increases in computing powers that enable insurance carriers to review data and alert claim handlers of negative trends.
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Factors Used in Claims Analysis
When analyzing any claim, experienced claim handlers understand the importance basic factors play. These include the following:
- Age (and generational ;
- Sex;
- Educational and vocational background;
- Economics factors;
- Date of injury position;
- Nature and extent of injury;
- Diagnosis and prognosis;
- Co-morbid condition(s);
- Work history and other loss indicators; and
- Prior experience in the workers’ compensation system.
Moving beyond these factors, advanced claim management programs are able to harness the power of information the claim they are working on, and use information obtained from countless others to predict better:
- The length of wage loss in a claim;
- The extent and value of future medical claim exposures;
- Settlement value of a claim; and
- The likelihood of settlement.
Understanding the Use of Advanced Predictive Analytics
In understanding the true “cost” of a workers’ compensation claim, advanced predictive analytic models peel back the layers and allow the claim management team to understand a case and see the likely result. This includes synthesizing data involving a number of complex issues and require the ability to retain large amounts of data. This is often a barrier for companies seeking to employ successfully predictive analytics.
An example of using predictive analytics is the use and abuse of opioid prescription medications. By using a vast trove of data and computing technology, warning signs become more recognizable, and allow claim management teams to identify red flags in their cases. Once these thresholds are met, members of the claim management team can direct cases to drug utilization efforts, which can in turn prevent addiction or use of street drugs.
Predictive analytics are also helpful in the areas of fraud, waste and abuse. By using vast resources of claim history knowledge, various modeling can be employed to identify and uncover trends such as doctor shopping, improper billing practices and malingering claimants within the workers’ compensation system. These same tools are being used with success within the health insurance industry, but have not been correctly employed within workers’ compensation.
Conclusions
Predictive analytics is a tool every workers’ compensation claim management team should use to reduce costs within their system. These same tools have already been proven to provide a valuable return in other areas. When correctly employed, they can pay immediate dividends for your claim management team.
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 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 monthly basis 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: [email protected].
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