Workers' Comp

Managing Specialty Health Care Spending

Experts discuss ways to monitor and manage specialty health care spending.
By: | October 1, 2013 • 9 min read

Now is the time for workers’ compensation claims executives to be taking a hard look at how they can monitor and manage specialty health care spending.

While pharmacy garners a lot of attention due to its rising share of the workers’ compensation medical cost dollar, the host of services classified as specialty health care services are a relatively under-managed area that can yield substantial cost savings if properly addressed, according to experts.

Comprising durable medical equipment (DME) and supplies, orthotics, prosthetics, home health visits, diagnostic imaging, physical medicine, and a number of other ancillary services, specialty health care services as a category is much more fragmented than pharmacy benefit management, which has been studied and managed more extensively in recent years.

Seeking to learn more about this area of practice, Risk & Insurance® partnered with Atlanta-based Healthcare Solutions to convene an executive roundtable in Philadelphia on July 25. The focus of the breakfast meeting was to take a deeper dive into the cost drivers in specialty health care services and to discuss the solutions that will create meaningful impacts for payers and self-insureds.


“Within the specialty health care category of spending, unit costs are fairly small but I equate this area to a death by a thousand cuts,” said Joe Boures, president and chief operating officer of Healthcare Solutions, and an attendee at the breakfast roundtable.

Analysis of the elements of specialty health care spend is challenging due to the sheer number of service units involved. But Boures said that savings are available and achieving them is not as challenging as some may think.

“There are a lot of savings that can be realized if you implement processes to manage it in the most appropriate way and choose the correct partners.”
— Joe Boures, president and chief operating officer, Healthcare Solutions

“There are a lot of savings that can be realized if you implement processes to manage it in the most appropriate way and choose the correct partners,” Boures said.

Now is the right time to take a look at DME, according to other members of the roundtable. Better analytics are being developed, and some other areas of medical spending management, such as pharmacy, are in a more mature phase and not demanding as much concentration from some payers.

“I think the industry focused first on areas of spend where we could have the biggest impact, and now we’re working our way down from there,” said Laura Pierman, a roundtable participant who is assistant vice president, claims operational and system management at Amerisure, the Farmington Hills, Mich.-based insurer with a commercial lines focus in health care, manufacturing and construction.

Analytics were created in pharmacy. Now they’re being created in DME.

“For a long time, there really wasn’t true visibility into specialty spending due to the fragmented delivery system,” said Ron Skrocki, vice president of product management development at GENEX, who also attended the roundtable, in explaining why specialty spend management is now coming to the fore.

Besides developing the analytics, gaining visibility is going to mean assigning greater responsibility for it to claims adjusters and giving them the tools to properly do the job, other panel members said.

“Historically, there hasn’t been someone in the payer organization that was held accountable for this entire spend category. Today, all that’s changing. It’s finally found its rightful place and stride and the analytics for people to say, ‘Hey, we’ve got something here. Let’s try to harvest savings out of the spend,” Skrocki said.

The timing is right, but addressing this area is probably going to take a specialized approach, according to Ron McGee, senior vice president of the property and casualty division for Insperity and a roundtable participant. McGee said his company uses a phalanx of service providers and gives them different responsibilities and goals.

“For a long time, there really wasn’t true visibility into specialty spending due to the fragmented delivery system.”
— Ron Skrocki, vice president of product management development, GENEX

“The success, at least in our program, is that although we have a TPA that is adjudicating claims, we have demanded and set up companies — such as Healthcare Solutions and GENEX — to do what they’re good at doing,” he said.

“One TPA or one adjuster might not be good at doing everything. So we have really diversified our program, and that’s really strengthened it,” McGee said.

“So you play to the players out in the field that have the expertise, and work with the adjuster to make that happen,” he said.

In addition, according to McGee, claims managers are going to need not only technical support, but a different mind-set, to make progress in this area.

“Claims managers tend to focus on cost drivers with higher unit costs, which is a good place to start. But I think more attention needs to be paid to getting other areas of spending under management control as well, such as DME,” McGee said.


This approach can also be looked at regionally, according to Pierman.

“In some cases there are some very good local programs that can be put into place that may work better for one office or one geographical region than another,” she said.

Creating the Engine

Boures said his company has developed technology and processes to better manage this area of spend. When referrals are received, a catalog-based system is used to identify the appropriate lowest-cost, yet clinically appropriate product. When appropriate, and based on client business rules, the product is automatically sent to utilization review prior to being fulfilled.

Another critical component of the program is a retrospective processing engine that increases program savings by retrospectively applying discounts to bills that would historically be paid at either fee schedule or usual and customary rates.

Not only does the program produce substantial savings, but the data is used to target providers that aren’t in network to get them under contract. It also enables Healthcare Solutions to provide customers visibility into which of their adjusters are not coordinating services through approved network partners.

“We’re not going to capture 100 percent of the spend. There’s just certain things that happen that are outside of anyone’s control, but we can help to close the gap,” he said.

Amerisure’s Pierman said that her adjusters are ready to engage with resources that can assist with cost containment. There comes a point where they have to utilize the expertise of others to enhance service delivery.

“We’ve noticed as we’ve put other processes and programs in place, such as pharmacy, we’ve had exceptionally high penetration.”

Pierman, who uses Healthcare Solutions’ services, said she has started in the same direction with DME as she went with pharmacy.

“As we put programs in place, we expect to see the same thing, because it helps the adjuster to have a process to utilize. Some claim needs are very difficult to manage and there are a number of reasons for that. It can be statutory, inability to direct care or simply time constraints. Many of these items or services require urgent response and an adjuster may not have the luxury of time to do the research,” she said.

“When I look at our overall medical spending in [physical therapy], it’s probably about 7.5 percent of overall medical spend, where imaging is closer to 2.5 percent, so it is substantially higher.”
— Laura Pierman, assistant vice president, claims operational and system management, Amerisure

DME is fragmented; just think of the multiplicity of different devices, from wheelchairs to electro-therapy units, C-PAP machines and glucose monitors, just to name a few, and the literally thousands of different equipment manufacturers involved.

The Issue of Coding

Managing DME is also problematic due to the lack of uniform coding for many health care products and services. Unlike pharmacy, where there is a unique code associated with every drug, a one-to-one coding system doesn’t exist for equipment and supplies.

Adding to the difficulty is that quality and speed of care must be paramount. Payers need to get the proper equipment to an injured, recovering worker as soon as possible. Many times, a payer or claims adjuster doesn’t have time to rectify a coding problem, making spend that much more difficult to track.

“This can be challenging,” Amerisure’s Pierman said.

“You don’t have the luxury of being able to do all of the analysis to say, ‘OK, is this product the same as this one? And is this the best price?’ You’ve got to get the product to the injured worker, so that is a big struggle.”

Healthcare Solutions’ Boures said his company’s program can not only map DME services and code them, but can also identify equipment that does the job but isn’t quite so expensive.

Additional Challenges

Other challenges impacting specialty health care services include an aging workforce. Add to that the expansion of technology, which is adding additional products and complexity to the health care system, and the pressure that the Affordable Care Act is expected to place on the system, with tens of millions of uninsureds coming into it.


“Work comp executives talk about navigating an increasingly complicated health care system within these specialties, with an aging population, with increasing co-morbidities, and with whatever changes we will see in the delivery system as a result of Obamacare,” GENEX’s Skrocki said. “I think the case management component — whether it is in-sourced or out-sourced — is a really important piece that can be effectively used by employers, TPAs, carriers and managed care companies.”

Payers may implement a national network, but case managers are knowledgeable about specific geographic areas, Skrocki said. They are in tune with how local providers deliver service, and more importantly, the outcomes they produce.

Another key area of focus within the category of specialty health care services is physical therapy, according to Amerisure’s Pierman.

“Physical therapy is probably the biggest concern for us,” she said.

“When I look at our overall medical spending in that area, it’s probably about 7.5 percent of overall medical spend, where imaging is closer to 2.5 percent, so it is substantially higher.”

Just think of it. Physical therapists number by the dozens in most towns and cities, and getting them all onto one code would be next to impossible. In addition, older workers require much more physical therapy to get back in working condition.

It’s also an area where utilization is hard to manage. Who is to say how much physical therapy is too much?

“I think the number of physical therapy treatments for individuals ages 45 to 64 is about 40 percent higher than for the younger age group,” said GENEX’s Skrocki.

That aging workforce trend is impacting all areas of workers’ compensation risk management, not just specialty health care services. But that doesn’t make its impact any less significant, according to Insperity’s McGee.

“The trend we’re seeing now is that claims frequency is going down, but severity is going up, and that’s concerning,” he said.

Not only is severity increasing, but specialty health care services as an overall percentage of medical spend is increasing, according to panel members.

Parting Thoughts

Prior to closing the session, all of the roundtable participants acknowledged that specialty health care services are not the most glamorous component of the managed care equation, but said that significant progress is being made to bring more attention to this area of spending.

While individually, these categories of spending are much smaller than other areas of the health care dollar, such as hospital and physician costs, specialty health care services represent the next frontier in reducing overall medical costs.

The bottom line? If you haven’t looked into developing programs to manage specialty health care services, it’s time to take a second look.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]