Medical cost inflation solved
Published in Risk & Insurance Magazine June 2011 in slightly modified form.

I have seen the future, and it works: a future in which we lick the demon of excessive medical cost inflation. Four essential strategies, visible in at least one state and among a handful of claims payers, cry out for adoption by many.

Pain treatment costs drive claims costs today. Poor treatment also drives up indemnity costs. Every major claims payer, every team engaged in claims analysis, every lobbying arm of the business and insurance community needs to focus on executing these four strategies.

First, use state regulation and claims payer collaboration to solve the public health crisis of over-use of opioid (narcotic) pain medication. State regulation covering all over-prescribing in workers comp and healthcare is needed.

A leading architect of this strategy, Gary Franklin MD, is medical director of Labor and Industries, Washington’s state fund. His state has orchestrated a policy of education and control over over-prescribing. Part of the strategy is to mandate physician oversight where prescriptions exceed a threshold.

Other states are in effect trying to replicate this policy, but Franklin is uniquely informed about how it plays out in the workers comp community.

Workers comp payers with large market shares in states need to use their moral authority at the CEO level and their claims resources to move regulation ahead and execute the policy on a claim by claim basis.

Second, claims payers can to a lot more to document and make public the deleterious effects of a very small share of physicians in aggressive use of opioids and controversial treatment.

Alex Swedlow and his team at the California Workers Compensation Institute recently released a study with nuclear force about opioid prescribing in his state. Edward Bernacki MD of Johns Hopkins led with Larry Yuspeh of the Louisiana Workers Compensation Corporation a similar study of extreme outliers in medical treatment.

This kind of analysis, while resource-intensive, should be done. We need to document how much a very small number of outliers drive a huge share of medical cost severity, by throwing drugs, injections and surgeries onto hapless workers with no documented benefit on outcomes. Claims departments not aware of this skewing.

Third, claims payers need finally to invest in medical intelligence to develop a "supply chain" of preferred clinicians to address chronic pain issues, along the spectrum of cases ranging from early intervention to old open claims. I estimate that very roughly there today is about one truly trustworthy provider of chronic pain services to workers per million of state population – 300 in the country. Broad scale discount networks are clueless about who these people are. They also are incapable of tripling that number to where it needs to be.

Superior treaters of workers with chronic pain vary in their treatment models. While some standardization is desirable, it is not necessary. A claims payer should use physician/nurse teams to compensate for gaps in service and to link providers.

It is a rare insurer that knows these providers, systematically monitors them, and follows a proper approach for referral and compensation (this is an area of care very amenable to global fees).

Fourth, claims payers have to buy in to very close monitoring, intervention and referral. Predictive modeling is valuable in forging within the claims payer a habit of timely intervention and referral. This is a vital step to severely cuting down on unnecessary surgeries -- half of them can be eliminated -- and injection-happy doctoring.

Safeway, the grocery chain, the Kaiser’s occupational medicine program is ready to share its early intervention predictive modeling protocol, which has proven very successful. In fact, predictive models should be open source, public domain tools.

Claims payers that adopt these four strategies in their states will solve the problem of excessive medical severity.

This is a call to action.