By Mark Walls, Workers’ Compensation Market Research Leader, Marsh
Utilization and medical bill review are essential elements of any comprehensive workers’ compensation program. However, these processes also can be a significant source of waste if not properly monitored.
Many claims handling organizations (employers, carriers, and third party administrators) contract with utilization review (UR) vendors to review medical treatment requests to ensure they are following the appropriate treatment guidelines and meet standards for medical necessity. Problems arise, however, when UR protocols are automatic and do not allow for the inclusion of common sense.
For example, I’ve seen claim files where the adjuster paid $500 or more for utilization review on medical treatment that costs a fraction of that amount because they had automatic protocols in place sending everything through UR. In my opinion, it makes no sense to spend $500 in an attempt to avoid paying for a $50 heating pad.
At the same time, why spend the money on UR when it is clear to the claims examiner that the treatment being required is appropriate? I have seen claims where the claim notes indicate their agreement with the treatment recommendation, yet the adjuster still waits on utilization review before authorizing the treatment. While there are some states with mandatory UR for certain procedures, I don’t believe you can get into trouble for saying “yes” and authorizing the treatment quicker.
Another potential waste of UR is paying for a review when the injured worker is being treated by a physician on the employer’s approved panel. If you don’t trust the physician’s treatment recommendations, why would they be on your panel? I’ve seen claims handling organizations litigate UR denials of treatment provided by the employer-selected physician. These cases are usually unsuccessful and only serve to undermine the credibility of the claims handling organization in front of a judge.
A final problem area in UR is a lack of coordination with bill review. This can occur when the utilization review provider denies a treatment, but the physician performs it anyway and sends a bill. If the bill review provider pays for the treatment, you have just undermined your utilization review process. This is something that happens all too often.
Similar waste is also occurring with medical bill reviews. For example, I still occasionally find employers paying the bill review vendor a percentage of savings to reduce medical bills to the legally required fee schedule. Doing so is like paying a fee on reducing the average weekly wage to the appropriate temporary total disability rate. There is no savings. The fees for reducing bills to fee schedule should be an administrative charge on a per-line or per-bill basis.
Another common bill review money waster is on resubmissions. This occurs when a medical bill review vendor reduces a bill and collects a fee based on a percentage of savings and then collects an additional percentage of savings fee after the medical provider resubmits the bill seeking additional payment. There should never be a second fee collected on a bill. On the contrary, the bill review vendor should be refunding part of the prior percentage of savings fee if the medical provider is paid additional money on resubmission. Such additional fees can add up to a huge amount of money very quickly.
On that note, employers are advised to establish a maximum fee amount that their bill review provider can collect on a single bill since you cannot control what medical providers will bill for a specific treatment. I have seen hospitals and outpatient surgical centers bill several times the usual and customary fees for certain procedures. In these cases, you can end up paying more in percentage of savings fees to the bill review provider than you do pay to the medical provider who actually rendered the treatment.
If you take a common sense approach to utilization and medical bill reviews, they can be an important cost savings tool for your workers’ compensation program. However, they cannot be a completely automated processes. You need the human element to weave in common sense and make exceptions to protocols when it makes practical sense to do so.
About Mark Walls
Mark Walls is the workers’ compensation market research leader for Marsh. As part of the firm’s Workers’ Compensation Center of Excellence, he assists Marsh clients nationwide on a variety of workers’ compensation issues. Mark is also the founder of the Work Comp Analysis Group on LinkedIn, which is the largest discussion community dedicated to workers’ compensation issues.
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).