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Creeping Catastrophic Claims – How to Spot Them and Stop Them

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One of the biggest cost drivers in workers compensation is seemingly “average” claims that take a turn for the worst and result in several years of medical treatment and disability. Mark Walls, vp of claims for Safety National Casualty Corp. discusses the common threads of “creeping catastrophic” claims.

When people think of the types of claims that are reportable to an excess workers compensation carrier, they usually think of very serious injuries such as severe burns, brain injuries and spinal cord injuries resulting in paralysis, or even death claims.

However, the vast majority of the cases that breach the average retention are what we refer to as “creeping catastrophic” claims or “developmental” claims.

These claims start out like any other case, usually with a back, knee or shoulder injury. However, because of a series of events, they end up costing the employer hundreds of thousands of dollars. These developmental claims share many common characteristics that, if identified and addressed in a timely manner, can prevent significant adverse development of the claims.

Unnecessary disability

I cannot emphasize enough the important role that a return-to-work program plays in controlling claims costs. It's a relatively simple way to prevent average claims from becoming developmental claims.

There is a strong correlation between duration of disability and the chances of ever returning to work. According to studies done by the Workers Compensation Research Institute and others, employees who are disabled for longer than six months have less than a 50% chance of ever returning to their job. If they are off work longer than a year, the chances for a successful return to work are less than 10%.

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In addition to the direct cost of extended disability in terms of both indemnity and medical benefits, there are also significant indirect costs. While you are paying the injured employee's disability, you're also paying another person to perform their job.

In spite of these statistics, an increasing number of employers are not providing modified duty for injured workers. The most common reasons I hear for this are the economy and the unions. Employers argue that, because of the economy, they are running lean operations and cannot afford to have a worker who is not productive. In addition, many unions have a “whole person or no person” rule, which does not allow for accommodating any restrictions.

By returning injured employees to the workforce as soon as possible, the employer can significantly reduce the chances of adverse development on an average claim.

Inappropriate medical treatment

When comparing cases with the same diagnosis, the rates for surgeries, physical therapy and diagnostic testing are significantly higher in workers compensation than in group health, and the outcomes are much worse. Why is this? For starters, there are significant financial incentives for many of the stakeholders to over-treat. Medical providers look to workers compensation to make up for the lower reimbursement rates that Medicare and group health provide. The lack of deductibles makes the injured worker more likely to pursue the lengthy treatment that the doctor recommends. And finally, the quest for a large settlement can lead attorneys to refer their clients to medical providers who produce poor outcomes.

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The common thread flowing through these different motivating factors is that the medical care being rendered is inappropriate based on the diagnosis and objective findings. At Safety National, we utilize Best Doctors Inc., a medical peer review organization, to assist in the management of our complex and catastrophic claims. According to the findings of Best Doctors, 29% of the cases that they review have been misdiagnosed. Even when the diagnosis is correct, a change in the treatment plan is recommended in 60% of cases.

When injured workers receive an incorrect diagnosis and inappropriate care, the costs on the claim skyrocket. That's why it is so important to focus on getting the injured worker the appropriate care from medical providers who produce superior outcomes. TPAs, carriers, and employers must be diligent in monitoring the medical treatment using case management, utilization review and independent medical exams to verify that the treatment is appropriate.

Psycho-social issues

I have seen both ends of the spectrum: injured employees who are paraplegics successfully return to the workforce, and people with back strains who never work again.

The one element of developmental claims that cannot be controlled is the motivation of the injured worker. The mind is a powerful healing tool. If a person accepts being disabled and truly believes they cannot improve, then they will indeed be disabled, and no amount of medical treatment will improve their condition.

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While you cannot control motivation, an area that is getting increased focus is screening claims for certain psycho-social elements that can impact motivation. Most screening models focus on whether certain factors are present for the employee:

  • Young children at home

  • A disabled spouse

  • A history of drug or alcohol abuse

  • A high school education or less

  • A low wage-earning capacity

  • A history of discipline problems at the employer

  • A history of psychological treatment, including for depression

If any of these red flags are present, special attention needs to be given to the claim to minimize the potential impact. Enhanced communication with the injured worker can make a significant impact, because fear of the unknown can drive mistrust and increased litigation rates. Although there is hesitancy in the industry to accept psychiatric conditions on the claim, a little bit of counseling early in the process may head off significant issues later on. If you ignore these psycho-social issues, they are certain to complicate the claim. It is imperative that you identify and address them as soon as possible.

Co-morbidities

Given that a significant percentage of the population is overweight, it is no surprise that obesity and its associated complications are significant contributors to workers compensation costs. Obesity, hypertension and diabetes are the most common co-morbidities seen on workers compensation claims. According to research presented in the report “Comorbidities in Workers Compensation” that was presented at the 2012 NCCI Annual Issues Symposium in Orlando, Fla., “Claims with co-morbidity treatments have about twice the medical costs of otherwise comparable claims.”

While claims handlers cannot prevent the co-morbidities, it is important that they identify them early on so that their potential impact can be minimized.

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Opioids

The over-prescribing and abuse of opioid medications is not just a workers compensation problem—it is a public health crisis that is costing our health care system billions of dollars every year.

Opioids commonly seen on workers compensation claims include oxycodone and fentanyl. Another study presented at the 2012 NCCI Annual Issues Symposium was titled “Workers' Compensation Temporary Total Indemnity Benefit Duration.” This study found that the disability duration on claims receiving opioids was 50% greater than comparable claims.

A similar study by the California Workers' Compensation Institute found that higher levels of opioid use led to increased disability and medical costs, and poor outcomes for injured workers.

Opioids are designed for short-term use during the acute phase of an injury. On almost every developmental claim I have seen, the injured worker was taking a significant dosage of opioid medication for long-term pain management. Such long-term use of this medication not only renders the employee unable to work, it also can lead to other health complications.

If you have ever had an injured worker who was on Actiq lollipops for a period of time, inevitably they ended up with significant tooth decay. That's because these drugs were designed for people dying from cancer, not to treat pain associated with a back injury. But tooth decay is probably the least serious complication. More people die in the United States from prescription drug overdoses than from car accidents.

It's very important for claims handlers to take immediate action when they see opioids prescribed. They should partner with a pharmacy benefit manager who will monitor the frequency and duration of the dosage to ensure they are proper. They also should insist on a monitoring program to ensure the drugs are being taken properly. Finally, they should work with the treating physician to identify pain management solutions that do not involve long-term opioid use.

The money spent on a comprehensive pain management program today can easily save you hundreds of thousands of dollars later in prescription drug costs. And the key to preventing an average claim from becoming a developmental claim is to diligently monitor for the first sign of potential problems. If red flags are identified, the claims handler must be proactive in addressing these issues before they spiral out of control.

It is important to use all tools available to assist in managing the claims early on, before things blow up. If we can spot the indicators that drive claims costs today, we can stop adverse development in the future.

Mark Walls is vp of claims for Safety National Casualty Corp. and founder of the 15,000 member Work Comp Analysis Group on LinkedIn. He can be reached at mark.walls@safetynational.com.