The Challenge Remains

WCC Blog Vol 18 No 1

By: Steve Cattolica 
CWCSA

It’s not often one is given an opportunity to speak one’s mind without being interrupted. WorkCompCentral, thank you for the invitation!

I learned how to spell workers' compensation beginning in 1985 working for a medical management company.  I was the only non-adjuster among the marketing corps.  Looking back to those days, life in comp seemed much simpler - not better necessarily, just simpler.

Here we are 33 years later.  Many of the same folks who were involved at the time are still involved. Others have moved on (and up) in one fashion or another.  In total, it is my observation the “bench strength” of the industry is not what it was and certainly not what it needs to be for the future.  More about this at another time.

For all the “reforms” and “system improvements” discovered, evolved and foisted on the industry, the challenge remains to spend as little as possible yet expect an injured worker to be well taken care of and if possible, back to work in a reasonable amount of time and/or correctly compensated for any permanent loss.

Despite all efforts, this goal remains as elusive as ever.   It’s not for the want of fiddling with the system.  The current compendium of statutes and codes is many inches thicker and a few inches wider and taller than back in 1985.  People have been hard at work cajoling legislators and regulators – for what?  Improvement, of course!  Improvement in what?

Are injured workers any better off?  Is the health care they receive as effective as it should be? Are they back to work sooner and in better health?  Are industry participants more conscientious?  Do they communicate more effectively?  Do they know more about what they are doing and being given the opportunity to apply their knowledge more effectively?  Are injured workers treated better – as human beings and as injured people?  Are there fewer purveyors looking to skim off their “fair share” or put another way, is the employers’ premium dollar being spent on taking care of the injured worker effectively or is it being given to the growing legions of companies and individuals in the supply chain of health care and benefits?

The "military industrial complex" that dominates U.S. health care (of which many of us are a part) and its diversion of resources away from hands-on care is a major flaw in the current (and growing) health care delivery system.  Workers’ compensation is no exception.  Most front-line, hands-on health care providers don’t see very much of what is spent in the name of “medical costs.”  Instead, “big healthcare” and managed care middlemen skim to their hearts content under the guise of adding value.

One school of thought favors a single payer health system. However, the weight of evidence appears to support the tenet that government is not very adept at efficiency.   Thus, the diversion of resources would likely continue.  For instance, contracting with private third-party(ies) to administer and deliver benefits simply localizes the hemorrhaging.

Late last month, one pundit writing about “Medicare for all,” stated, “Millions of workers – (would be) no longer needed to handle the morass of regulations and insurer requirements.”  That’s great except those folks along with the managed care companies, brokers, consultants, as well as those in the revenue cycle management industry would likely be out of jobs.  How would our legislature face that situation?  I am confident that it would not want to be pinned down to solving this question.  America is resilient.  They’ll find work – eventually.

A retired risk management executive often points out that incentives are not in alignment to foster good conduct from participants in California’s work comp system.  Another way to put this might be there aren’t enough disincentives in the system to keep people’s business conduct in check.  

For example, the pharmaceutical company that (still) manufactures Oxycontin despite hundreds of millions of dollars in fines and fees plus some of the worst press exposure of all time.  It took several years to even start becoming the responsible corporate citizen it might have been all along.  How could so many standby for so long?

Another example is earlier this year, one managed care network company was sued in Federal court because its business model requires setting itself up in a sweetheart middleman position between the health care providers and the employer/payor.  In and of itself, that business model is not a big deal.  However, the legal settlement included acknowledgement that the company may have illegally coerced ever-lower contracted rates from its provider network artificially creating higher margins as the applicable fee schedule reimbursement also rose.  Not a bad gig if you can get (and maintain) it. 

How’s this happen?  Financial expectations.  Especially in the work comp “space,” if you will pardon the expression, it appears the “greater fool theory” is alive and well.

Wikipedia offers the following definition: 

“The greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants.[1] A price can be justified by a rational buyer under the belief that another party is willing to pay an even higher price.[2][3][4] In other words, one may pay a price that seems "foolishly" high because one may rationally have the expectation that the item can be resold to a "greater fool" later.”  (Readers can follow the footnotes and links by pressing “Ctrl” + right clicking their mouse)

To anyone who has been asked to “dress a company for sale” or been involved in the process, one of the basic steps is to quickly find more top line revenue – any way possible.  In an industry like comp, often that means one must somehow “squeeze blood from a turnip.”

The founder of a managed care company may not have near the problem “dressing” her/his company for sale as the third, fourth and subsequent owners.  When a greater fool cannot be found, those involved might choose to push the envelope inappropriately. That’s a bad incentive.

An example of a great incentive is the California legislature’s mandate found in SB 1120 (Chap 868, 2016). SB 1160 added Labor Code Section 4610 (g)(4) requiring by this past July 1, all utilization review (UR) companies be accredited by the Utilization Review Accreditation Commission (U.R.A.C.) until “The administrative director shall adopt rules to implement the selection of an independent, nonprofit organization for those accreditation purposes….”  U.R.A.C is the gold standard for accreditation of UR and other managed care services.  U.R.A.C. holds accredited Utilization Review Organizations (UROs) to high standards.  Those standards and accompanying procedures include solutions to many of the current complaints about the practice of UR in California.  When treating physicians learn how to properly use those standards, UR will improve, and costs will go down. It’s simple, if a URO loses its accreditation, it’s likely out of business in California.  What more incentive is needed?

Readers should watch closely how this requirement is implemented.  Some UROs still operating in California are not U.R.A.C. accredited as mandated by Labor Code Section 4610(g).  How will this situation be rectified?  How quickly will it be rectified?  In the meantime, to what new liabilities do unaccredited UROs expose their employer/clients?

Employers currently using unaccredited UROs could be liable for significant audit penalties.  U.R.A.C. accredited UROs should be in a great position to gain market share.  

The administrative director is positioned to create or dissolve incentives for the best behavior within one of the most contentious and costly transactions in all of California’s workers compensation system.  Unfortunately, there is also the possibility an incentive meant to bring out the best may be diluted into mediocrity or worse, insignificance.

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The California Workers' Compensation Services Association -  www.ca-wcsa.org

CWCSA provides real-time workers' compensation medical practice consultation services, medical-legal report reviewing, on-site in-service training and targeted advocacy for those who need results.