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Employers can save 10% to 70% on workers compensation lost-wages expenses by contracting with health maintenance organizations, a new study says.

The average saving is 25.7%, the study says.

Companies also report workers comp medical savings of 10% to 40% when using an HMO as contrasted with fee-for-service providers, the report says, with an average medical saving of 24.6%.

The report, by Seattle-based consultant Milliman & Robertson Inc., said HMOs-especially the largest ones-continue to cast eager eyes on the workers comp market. Despite some employers' reservations, the trend is good news for buyers, according to the report.

Seven in 10 HMOs responding to a survey last year said they were active or planning to be active in workers comp products and services. That figure is slightly down from 1995, when 74% of HMOs reported to be poised for entry into workers comp. However, the industry still has penetrated this arena much more deeply than in 1994, when only half of HMOs reported they were interested in or had workers comp contracts.

A strong presence of managed care organizations in workers comp will not only save employers money but also will introduce more professionalism and efficiency into workers comp practices, said William L. Granahan, senior consultant in Milliman & Robertson's Boston office and co-author of the study. Doctors working under traditional fee-for-service reimbursement and indemnity health plans have had no incentive to return workers to the job, he said.

"The insurance company would (routinely) treat it as a monthly expense," he said. "We're getting a physician and a case manager involved within the first 24 hours. That's the ideal, anyway."

HMOs involved in workers comp on the whole are dedicated to "true injury treatment" and working much more closely with the patient than was the case under fee-for-service, Mr. Granahan said. In past years, and sometimes today where managed care is absent, doctors haven't asked patients if their injuries or illnesses were job-related, he said. "You have to understand the worker and what the employee does for a living, whether they mop floors or lift boxes or run a machine," he said.

Today's doctors also must understand if transitional work or light-duty programs are available at the patient's worksite and not assume that absence from the job is automatically necessary, he said.

The authors acknowledge the fears of some employers that managed care might give physicians an incentive to spend little on tests or treatment of workers comp patients, but to send them home for long recuperation periods anyway. There is no evidence this has been the case for managed care cases, the study says.

Despite the significant numbers of HMOs moving into workers comp, the report expressed surprise that more aren't doing so, especially medium-size companies. Mr. Granahan characterized HMOs in general as "novices" when it comes to knowing how to make money in the workers comp arena. The exceptions are the largest HMOs that have targeted large, self-insured employers as potential clients. Last year, a quarter of HMOs active in workers comp had 250,000 or more members, in contrast to 10% two years ago, the report said.

The study speculates that other opportunities in managed care, such as Medicare risk, may be drawing the attention of some plans away from workers comp.

Single copies of the study, "Report on Third Annual Milliman & Robertson Survey: HMO Managed Workers' Compensation Strategies and Products," are available by contacting Mr. Granahan, 617-245-4847.