The Future of Value-Based Care in Workers’ Compensation – Part 1

By Michael Choo, MD MBA FACEP FAAEM, Chief Medical Officer, Paradigm Outcomes

Dr Michael Choo

The future of the Patient Protection and Affordable Care Act of 2010 is presently uncertain, but our healthcare industry’s steadfast exploration of value-based care models to achieve better outcomes is encouraging.

Although the workers’ compensation industry has always operated independently from mainstream healthcare, issues afflicting the private and government healthcare sectors profoundly impact workers’ compensation.

Similar to Medicare, the workers’ compensation industry’s responsibility for lifetime care creates incentives to facilitate injured workers attaining the best clinical and functional outcomes from any injury, and especially subsequent to catastrophic and/or complex injuries. Taking a longer-term holistic-care approach to recovery care management by measuring and rewarding clinical outcomes, rather than just clinical activities, will improve quality of care and reduce the long tail of lifetime claims costs.

As the Chief Medical Officer of Paradigm Outcomes, I’ve witnessed firsthand how guaranteeing a clinical outcome at a fixed price for catastrophic and complex workers’ compensation claims aligns everyone’s goals to focus on achieving injury recovery and claim management. This value-based care approach essentially is to function as an Accountable Care Organization (ACO) that is proficient in managing our unique population of injured workers with catastrophic and complex injuries.

There are four elements that are crucial to successful value-based care:

  • First, the organization must retool its culture towards a value orientation. Everyone in the system must be injured-worker focused and make decisions based upon achieving the desired clinical outcome. It is not driven by what activity gets reimbursed but rather what helps the injured worker get closer to achieving his/her desired functional outcome.
  • Second, care decisions should be based upon evidence-based medicine with proactive care interventions to avoid medical complications and/or mitigate risk. It’s also about systematically anticipating what and when the injured worker will need specific interventions to achieve the desired clinical outcome faster.This is a much more complex and arduous process than the traditional utilization review process of simply approving or denying requested treatment authorizations.
  • Third, the clinical team of experts must adopt a comprehensive biopsychosocial approach to care and recovery by being diligent about injured workers’ relevant psychosocial behavioral elements. Care managers and providers must go beyond the bio-medical issues in order to achieve the desired clinical outcomes effectively and efficiently.
  • Finally, data analytics capabilities must be robust enough to deliver both clinical and provider performance insights to guide clinical decision making and care facilitation. In addition, a clinical data platform that enables real-time monitoring of clinical outcomes can ensure continuous quality improvement.

ACO as a Value Option
Interestingly, among the variety of value-based payment methodologies investigated, ACOs seemed to be the more popular approach in the U.S., with currently more than 923 ACOs covering approximately 32.4 million lives, according to a November 2017 report from the Health Care Transformation Task Force, Levers of Successful ACOs.

The important distinguishing attribute of ACOs is the understanding that the ACO provider or provider entity is responsible for the healthcare quality, medical costs, and overall clinical results/outcomes for a defined population at a fixed price. Simply put, the focus is on financial accountability for the desired outcomes or results; hence, the ACO takes on financial risk.

This requires a system of effective communication, collaboration, clinical expertise, and innovation that integrates evidence-based medicine, care standardization, robust data analytics, and a culture of continuous quality improvement.

While most ACOs are focused on population health management in group health, this value-based strategy can also play a role in improving and properly aligning the incentives of providers and stakeholders in the workers’ compensation system, which has been traditionally rooted in a transactional model dominated by utilization management, discounting fee schedules, and jurisdictional variations.

ACOs by the Numbers
One promising report released by Centers of Medicare and Medicaid Services (CMS) in October 2017, demonstrated ACOs to have reduced gross Medicare spending by $836 million in 2016 and returned $70.6 million in net savings to Medicare Trust Fund.

In addition, according to report by Modern HealthCare published in Nov. 3, 2017, the ACOs with more experience in delivering value-based care do better: the most veteran ACOs generated the most savings in 2016. Specifically, the 73 ACOs that have participated with CMS since 2012 (the first year of the value-based program), accounted for 36% of the 2016 savings to Medicare. This compared to 85 ACOs that started in 2015 and 100 ACOs begun in 2016, which accounted for 6% and 0.59% of the Medicare savings respectively. This clearly underscores the importance of experience in working in a value-based care-delivery system to gain savings benefit.

Workers’ Compensation Claims Costs Trending Up
National Council on Compensation Insurance (NCCI) data clearly points to medical expenses as the key driver of workers’ compensation costs associated with lost-time claims. In fact, although the frequency of claims declined over the past decade in the workers’ compensation industry, the severity of claims has been on the rise, with 6% of such catastrophic injury claims accounting for 50% of total costs associated with injury claims. Furthermore, a very small percent of catastrophic injury cases (0.3%) account for a large portion of total claims spending: 17% of total claims costs.

Paradigm Outcomes’ catastrophic injury cases further illustrate this premise. Over the past five years, we have noted a significant growth in the number of catastrophic injury claims with medical payments over $2 million, including many that are greater than $5 million, and recently a few which hit a level of $10 million.

The Employer’s Perspective 
In addition to CMS and HHS interest in value-based care and payment models, it is clear that employers also want to reward value or high-quality, lower-cost care. It is important to keep in mind that successful employers are responsible for much of the costs related to both group health and workers’ compensation insurances. These employers increasingly collaborate with providers and payers directly, driving the transformation toward value-based care.

The evolution of value-based care approaches, such as ACOs and other alternative payment models like bundled payments and shared savings methodologies, can have meaningful impact and significance in our workers’ compensation industry.

I, for one, believe that there are promising and innovative opportunities ahead. But we must be willing to let go of some past traditions in WC and embrace the best features of value-based care models that will align every stakeholder’s goals, reduce medical spending and waste, and keep our focus on improving the lives of our injured workers.

About Dr. Michael Choo
Michael Choo, Paradigm Outcomes chief medical officer and senior vice president, maintains Paradigm’s relationships with network of physicians and centers of excellence. Responsible for enhancing clinical operations, research, and development. He teaches emergency medicine, internal medicine and family practice residents at the Wright State Boonshoft School of Medicine.

About Paradigm Outcomes
Paradigm Management ServicesParadigm Outcomes is the nation’s leading provider of catastrophic and complex case management, Paradigm achieves 5x better medical outcomes and lowers total costs by 40%. Paradigm accomplishes this by bringing together nationally recognized doctors, the best providers in the country, and 25 years of clinical data to guide decisions. Paradigm is the only company designed and built specifically to address the needs of those with acquired brain injuries, spinal cord injuries, amputations, burns and chronic pain, and is the only company to stand behind their promises with medical and financial guarantees.

Read part two here.