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SAN FRANCISCO -- An alliance between California's State Compensation Insurance Fund and Kaiser Permanente is bringing down workers compensation medical costs for those participating.

A recently released study by Ernst & Young L.L.P. shows that for the first 14 months of treatment, the average medical costs per worker for lost-time injuries amounted to $2,852 under the alliance, compared with the $4,636 average cost for treatment of lost-time injuries outside the alliance.

Claims that did not involve temporary disability cost an average of $319 when treated under the Kaiser alliance and $543 if treated outside it.

The report tracks claims related to worker injuries suffered from Jan. 1, 1996, to Dec. 31, 1996. Data on those injury claims continued to be gathered through Sept. 30, 1997.

California employers that meet certain requirements -- such as having return-to-work programs in place -- can choose to participate in the alliance. By doing so, they agree to send injured workers to Kaiser's occupational health facilities unless the worker pre-designates a personal physician to treat an injury, in which case the injury is not counted as part of the Kaiser-SCIF alliance.

An employer that buys coverage from the State Fund and joins the alliance will get an immediate 10% discount off its workers comp premium. Other savings may come later.

Claims costs are factored into experience modifiers that determine workers comp premiums, explained Linda Hoban, manager of health alliances for the State Fund. "So lower costs do translate into savings."

Costs for all types of claims -- including medical, total and permanent disability, vocational rehabilitation and death benefits -- averaged $2,599 under the Kaiser-SCIF alliance. The average was $3,299 for claims handled by non-alliance providers.

Lower costs under the Kaiser alliance are the result of "a more focused treatment of industrial injuries," said Arnis Tubelis, vp of the State Fund. "Kaiser's occupational medical centers deal exclusively with on-the-job injuries, and their emphasis is on return-to-work."

The study shows that workers with temporary disabilities who are treated by Kaiser providers are back at work sooner than those treated elsewhere. Kaiser-treated workers are off the job an average of 62.8 days, compared with an average 75.9 days of lost time for workers treated by other providers.

Dr. Doug Benner, clinical coordinator of occupational medicine for the Permanente Medical Group, said Kaiser "emphasizes taking care of the patient's educational needs" to make sure he or she returns to work sooner and avoids reinjury.

Injured workers are shown how exercise, for example, can keep injuries from happening again or to reduce the effects of injuries whose symptoms linger, Dr. Benner explained.

He said Kaiser's philosophy is to "get patients into our occupational health centers early and provide prompt care."

That philosophy has an added benefit, Dr. Benner pointed out: "Taking care of the patient quickly and satisfactorily lowers the litigation rate."

"Litigation definitely drives up costs," he said, and the study shows that the Kaiser-State Fund alliance has reduced litigation.

Of the claims studied, 6.6% under the alliance were litigated, compared with 10.6% of the claims handled outside the Kaiser alliance. When only temporary disability claims are considered, 16.7% of those handled under the alliance were litigated, while 24% of those claims handled outside the alliance reached litigation.

Average medical costs on temporary disability claims that went to litigation amounted to $8,355 under the Kaiser-state fund alliance. Those costs were $10,476 for litigated claims treated outside the alliance.

Average medical costs for injury claims that were litigated and did not involve temporary disability were slightly higher under the alliance, reaching $2,419. When treatment was provided elsewhere, those costs averaged $2,059.

Free copies of the study are available from Linda Hoban, manager of health alliances at the State Fund, 213-266-5132; e-mail: