How Data Analytics Helps to Control Workers’ Comp Claims and Costs

Several challenges unique to workers’ compensation claims highlight the benefits of a robust data analytics system, according to a panel of experts who presented on the subject during Verisk Insurance Solutions’ Monday webinar series.

Underwriting new risks, managing medical provider fraud and navigating Medicare Secondary Payor compliance can stall workers’ comp claims handling and increase claims costs, they said.

Panelists from ISO and Verisk explained that data analytics can assist in controlling the costs and complexities of workers’ compensation claims.

According to Sanford Brown, AVP of Product Development for Verisk Insurance Solutions – Commercial Lines Underwriting, underwriters faced with rising medical costs and flat rates, are tasked with improving risk selections. Better risks are hard to come by if underwriters’ only source of information is from an agent and insured. The underwriter is then encumbered with the time-consuming process of aggregating, researching and validating the information.

Brown said complete and accurate data can increase efficiency as well as risk selection.

Metrics that can be used to judge management capability of the risk include how long a business has been around, the financial stability of the organization and credit scores. According to Brown, Verisk developed an analytic that compares credit scores among industry peers.

In addition, OSHA inspections and violations can offer insight into how often a firm has been cited for serious violations and whether there is a track record of repetition for the same violations.

“You’d be surprised to see how many times a business will get fined for something, as opposed to correcting it they’ll just go ahead and get another fine on it at the next inspection,” Brown said.

A variety of sources can be used to verify and validate business classifications.

Brown said buying behavior of an organization is another important factor in assessing a risk. If a firm claims to work in consulting but a number of purchases have been made for lumber, that might be red flag, he said.

According to Shawn Deane, AVP of Product Development for ISO Claims Partners, current issues facing workers’ comp departments is the impending loss of experienced adjusters, increasingly difficult Medicare compliance obligations, as well as complex claims that drive costs.

“Five percent of worker comp claim drive 80 percent of the costs,” said Deane.

He explained that predictive modeling can aid workers’ comp departments by assisting new adjusters with decision-making and by identifying patterns and trends. Deane said analytics can monitor innocuous claims at the outset to see if any might spiral out of control.

Flagged claims can be set with more accurate reserves or assigned to more experienced adjusters, said Deane. In addition, data analytics can be used to mitigate costs, apply appropriate resources and train new adjusters.

Medicare Secondary Payor compliance has become increasingly burdensome, Deane said. Sec.111 requires electronic notification to Medicare at the beginning of a claim with the query, during the claim with notification of ongoing responsibility for medical treatment and payments, and by communicating the total payment obligation at the end of a claim.

The key to success in complying with Sec. 111 is accuracy of information and through automation, so that reporting doesn’t hinder of the claims workflow.

Deane emphasized the importance of controlling the compliance process before it can take control of the fate of a claim.

“Don’t forget the basics of compliance,” said Deane.

These include obtaining conditional payment information, analyzing claims causally related to underlying workers’ comp claims, advising Medicare of any disputes in claims not related and obtaining a final demand in order to process the settlement and reimburse Medicare.

According to Andy Tolsma, director of Product Innovation at ISO ClaimSearch Solutions, one type of medical provider fraud is billing for services not provided. This could include applying CPT modifiers describing additional services in order to charge extra. ISO has developed an aggregator database that can identify how long procedures should take and add them together. As an example, Tolsma explained that it could add a particular doctor’s procedure time from different insurers and compile a total for the number of hours billed.

Another type of medical provider fraud is patient sharing. If a patient sees a doctor and is then referred to other doctors, this could be evidence of collusion. Tolsma said it’s important to evaluate the patient’s diagnosis in conjunction with a doctor’s treating specialty. Is there a pattern among the doctor’s peer group, he asked. Also important is whether a particular doctor refers all his patients for imaging tests. Adjusters should question whether that doctor might have an ownership interest in the imaging center, he said. Though many states have laws against this, it’s not unheard of.

Another area of concern is prescription fraud waste and abuse, he said. There is currently no good tool available to identify this growing area of fraud, said Tolsma, though his company is currently working on a system to identify it.