By J. Christopher Walsh, Principal at Arlington Associates, Inc.
Past. After witnessing the dramatic growth of group health medical provider networks and the resulting managed care savings in the 1980’s, workers’ compensation payors began adding PPNs to their mix of bill and utilization review the following decade. Today these networks are an integral part of virtually every workers’ compensation TPA/carrier cost containment and quality assurance strategy.
Initially focused on hospitals and primary care physicians, workers’ compensation (comp) PPNs have grown to include chiropractors, physical therapists, occupational specialists, ancillary services such as durable medical equipment and transportation, translation, diagnostic and surveillance services.
PPN providers and services has expanded to the point many comp payors have turned to specialty networks to help control their physical medicine, pharmacy, and diagnostic imaging claims. As one might guess, the cost in these provider areas has exploded in recent years and can exceed a third of total medical expenses.
And while many group health networks offer comp PPNs, the correlation between comp PPN success and knowledge and experience in the workers’ compensation is high. Simply retrofitting a group health network rarely leads to quality results and savings.
Present. With average medical losses growing from 40 to 60% of total comp losses in the last decade, the need for a comprehensive, proactive, and effective PPN strategy has never been greater.
Workers’ compensation is a state mandated benefit in contrast to contract based group health coverage. As such, comp is particularly vulnerable to medical cost shifting as providers are forced to charge higher fees to compensate for lower private and government reimbursement.
Proposed Medicare and Medicaid reimbursement reductions of 30% have left many providers uncertain of their financial ability to service these populations. The remaining providers will have no choice but to shift cost. Workers’ compensation will be their first target.
Future. Despite pundit recommendations to end fee-for-service discount PPNs, negotiated discounts remain vital in workers, compensation to avoid cost shifting and excessive medical loss. In short, those without contracted rates will pay the freight for those who do.
That said, most payors realize there are other vital aspects to their PPN success, including their ability to enhance the claimant experience, streamline the adjuster – provider dialogue, and even enhance provider benefits. While discounts are vital, they are not the only component to comp PPN effectiveness.
To be effective, payors need broad based geographic and provider specialty coverage. Often times that means using multiple networks. With multiple networks, the directories and on-line information needs to be clear, seamless, and meaningful for injured workers looking for network providers. Provider specialty, practice hours, location, language proficiency are some of the key data that allow claimants to make informed choices. Internally, payors should make this information available to not only adjusters, but case mangers and bill review specialists who are also working the claim.
Payors also need to understand their PPN contracts and the commitments they create. For example, the legal issue with silent PPNs comes solely from channeling language in PPN contracts. If PPN contracts require claimant channeling, then it’s vital that’s happening in a consistent and uniform way. Secondary or wrap network contracts often don’t have channeling requirements, which is why they can offer additional savings without creating a legal issue. Likewise, it’s essential the processing order for payors using multiple PPNs remain constant and discounts not be reviewed prior to adjudication to find the largest discount. As with failing to meet channeling requirements, “cherry picking” discounts is another favorite for class action attorneys.
For payors using multiple PPNs, especially those with complex discounts in different jurisdictions with different processing and payment requirements, it’s absolutely essential their network contracts be processed on a bill review platform that has the power and flexibility to handle their contract requirements. For instance, an inpatient surgical rate may include follow up office visits as part of the surgical fee. If your bill review software can’t track this and similar utilization review functions, significant savings will be lost and billing confusion will rise.
New referral and payment technology enhances claimant and provider PPN experiences. Referral software allows claimants and even adjusters to select providers and have that provider notified electronically. Key information about the claim and what’s expected from the provider is securely and instantly transmitted to the provider prior to the claimant’s arrival. The provider knows who referred the claimant, what adjuster is working the claim, and who to contract if there’s an issue.
Provider payment is typically slow, complicated, and expensive for all parties involved. By replacing paper checks with debit card merchant terminal payment, payors can reduce their payment cost significantly while simultaneously raising provider satisfaction. Both parties win as significant overhead and billing confusion is eliminated.
Building a better PPN is not unlike improving any other workers’ compensation claim process. Look for networks familiar with comp, committed to quality, data, and electronic data exchange. Understand the nature of the commitments created by PPN contracts and be prepared to fully support them.
Lastly, build a PPN strategy that benefits all parties… claimants, providers, adjusters, and case managers.
About Chris Walsh
Chris Walsh has over 20 years experience successfully designing, selling, and implementing managed health care programs.
Prior to re-joining Arlington Associates, Inc. in April 2009, he spent 15 years as a Sales VP at Coventry Workers’ Comp Services and CorVel Corporation. His clients included three of the country’s top five largest casualty insurance carriers, large self insured employers, state funds, state, county, and city governments, software vendors, and a number of national managed care companies.
In the early 1990’s Walsh founded AAI, during which time AAI clients included HMOs, PPOs, health care software vendors, and managed care service providers. Prior to AAI, he held sales and client management positions with HCX, Inc., American International Healthcare, Inc./JBI, and General Health, Inc. Walsh has a Health Management MS from American University and a BA from Georgetown University.
About Arlington Associates, Inc.
Arlington Associates, Inc. (AAI) is a brokerage and consulting company specializing in premium managed health care software and services. AAI clients receive dynamic strategic and sales support across a broad array of group health, workers’ compensation, and auto insurance areas. For more information, please visit: www.arlingtonassoc.com