TPA physician advises drilling through medical bill review process

Medical costs are not created equally. Understanding your unique medical expenditures can help you identify solutions to bring those costs down, according to the medical director of one of the nation's largest third-party administrators.

"It's a peeling of the onion," said Dr. Jacob Lazarovic, chief medical officer for Broadspire, a Crawford Co. "What we're doing is trending medical costs over time, typically a three-year period, and looking at it both from a high level and down to a very granular level."

Medical costs per lost-time claims rose 6 percent in 2008 and have increased 305 percent since 1991, according to recent data from NCCI. Medical costs account for 58 percent of the share of total claim costs and could reach 70 percent in another 10 years.

But controlling those costs means different things to different companies. Every company is distinctive in terms of the types of injuries, how fees are handled in one state versus another, and jurisdictional differences.

Medical cost data available through the medical bill review process can provide information about utilization, unit pricing and savings, Lazarovic explained. For example, say a company has a medical cost trend of 8 percent.

"With that information alone it doesn't really productively tell you what you might be able to do to improve that trend," Lazarovic said. You need to dissect the numbers further.

Comparing the 8 percent trend with the industry, NCCI numbers, or those of similar companies in other states gives you more insight. Breaking it down further can help you determine specifically where you're spending money and whether the issue is one of unit price or utilization.

"Then you peel one more layer," Lazarovic said. "You have the aggregate trend. But what are all the components doing? So you peel to the high costs and not so high -- hospitals, both inpatient and outpatient, physicians, pharmacy, chiropractic, and diagnostic imaging centers.

"You can look at each component and see what is the trend of each," he explained. "So, if hospital inpatient is very high and you've broken it down to unit price, versus utilization, at that point you have some practical alternatives to solving the problems."

Unit price vs. utilization. Addressing high unit price costs takes a completely different strategy than tackling high utilization. "If high hospital costs are due to high unit costs, you'd look at network penetration. Are patients being directed to network facilities? Is it adequate? What changes should you make in your network to get more people going into your network facilities," Lazarovic said. "Also, look at the actual pricing arrangements with the hospitals in your network."

On the other hand, if utilization is very high, you'd focus on an entirely different set of elements. "You want to intensify all medical management efforts using the best available guidelines," he said. "You collaborate on the best ways to address that -- adopting guidelines, making sure the right guidelines are being used in making decisions. Also making sure your utilization and peer review processes are comprehensive."

Understanding medical expenditures related to workers' comp claims is crucial for every company trying to cut costs, Lazarovic said. "You can identify the main contributors to overall medical costs and choose strategies to help mitigate those costs while ensuring that injured and ill employees are receiving the medical care they need."

Read more at the WorkersComp Forum homepage.

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