By Christopher Flatt, Workers’ Compensation Center of Excellence Leader for Marsh Inc.
Workers’ compensation insurance rates generally began to increase in 2012, and likely will continue to do so this year as insurers face an ongoing low interest rate environment, poor underwriting results, rising medical costs, and, sluggish macro-economic conditions. Containing workers’ compensation costs through a variety of traditional and innovative means will remain a priority for employers in 2013 as they deal with increasing workers’ compensation market pricing.
One option that employers should consider as part of an integrated approach to controlling workers’ compensation costs is formalized nurse case management. Taking actions to drive down medical expenses is an essential component to controlling workers’ compensation costs. Consider that in 2012 the average medical expense component of workers’ compensation claims accounted for close to 60% of total workers’ compensation claim costs, according to the National Council on Compensation Insurance.
If used properly, nurse case management can help improve the quality of care and bring about more favorable claims outcomes. Key elements of such a program include predictive analytics, customization, and differentiation.
Nurse case management is considered a “best practice” in helping to direct treatment, manage medical costs, and reduce disability durations, by providing appropriate care and returning employees to work more quickly. Shorter claim durations and returning injured employees back to work have a direct correlation in reducing workers’ compensation costs.
Nurse case management can mean a number of different things, from having nurses available for minor medical-only injuries to providing care for catastrophic injuries to customized solutions providing nursing access 24-hours a day seven days a week.
A number of decisions must be made when implementing a nurse case management strategy, including identifying the type of claims that will automatically be assigned to a nurse case manager at the time of the first report, when to refer an existing claim, and the amount of time a nurse should be involved in the claims process. Predictive analytics can help make these decisions more effectively by identifying the claim characteristics with the highest propensity to be improved through medical oversight.
Some examples of the data points that form the basis for predictive analytics to assist in the development of state-of-the-art nurse case management programs include:
- The average lag time to first contact with the injured employee
- The percentage of time a three-point contact with the injured employee was completed.
- Whether a claims supervisor reviewed the case.
- Whether medical bills were reviewed for treatment protocols and duplicate or over billing.
Establishing metrics around outcomes in these areas will help to develop a customized nurse case management program that can meet or exceed an employer’s cost savings goals and maximize their return on investment (ROI).
To project the financial value of providing nurse case management services to workers’ compensation claims, and to refine and improve the ROI, employers have used a number of methods, including:
- Performing an audit of nurse case management involvement for a sample of workers’ compensation claims to evaluate cost savings and effectiveness of case management.
- Developing and implementing a pilot to evaluate nurse case management programs for a segment of selected workers’ compensation claims over a defined period of time.
- Conducting cost benefit analysis studies.
Employing formalized nurse case management programs, and working with a broker that has the expertise to effectively advise on the topic, allows employers to consider and implement customized loss mitigation techniques to improve loss performance as well as differentiate themselves to insurers. When seeking to achieve the most favored insurance terms in the market, the importance of taking such actions cannot be overstated.
About Christopher Flatt
Christopher Flatt joined the casualty practice of Marsh Inc. in 2012 to lead its Workers’ Compensation Center of Excellence. Prior to that, he spent 11 years at Marsh’s sister company Guy Carpenter, most recently serving as the lead workers’ compensation treaty reinsurance broker for several major clients. Mr. Flatt began his career as a casualty underwriter at The Hartford Financial Services Group and spent five years as a casualty reinsurance underwriter for a GE Capital portfolio company prior to joining Guy Carpenter. He is also an attorney.
About Marsh
Marsh, a global leader in insurance broking and risk management, teams with its clients to define, design, and deliver innovative industry-specific solutions that help them protect their future and thrive. It has approximately 26,000 colleagues who collaborate to provide advice and transactional capabilities to clients in over 100 countries. Marsh is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy, and human capital. With over 53,000 employees worldwide and annual revenue exceeding $11 billion, Marsh & McLennan Companies is also the parent company of Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; Mercer, a global leader in talent, health, retirement, and investment consulting; and Oliver Wyman, a global leader in management consulting. Follow Marsh on Twitter @Marsh_Inc.