UR Nation, Pt 2: A Tale of Two States Trying to Control High Medical Costs

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Utilization review in the sunshine state, California.

Original article can be found on Work Comp Wire.

California’s experience with workers’ compensation costs and Utilization Review had been a long road, one marked by legislative attempts to control costs, and legal challenges to the evolving system.

After the early years of stability, the Golden State’s costs associated with workers’ compensation began to soar in the mid-1980s, and tripled in the decade between 1993 and 2003. What had cost, on average, $8,876 climbed to $27,197. Utilization Review (UR) had been introduced previously, but costs kept rising and legal challenges kept mounting.

Finally, in 2004, Gov. Arnold Schwarzenegger vowed to reform the state’s workers’ compensation system as part of a larger effort to make California more business-friendly.

Several changes took effect that improved the system:

  • UR became a mandatory process, rather than a voluntary initiative.
  • The standard for decision-making was changed from one based on the treating physician’s presumption of correctness to evidence-based, clinical guidelines.
  • The UR process must be completed on a tighter schedule – within 5 days – or fines can be levied.

The new guidelines, along with caps on payouts for physical therapy and the application of evidence when reviewing treatment, had a dramatic effect on costs. But still, those costs are rising again. There has been significant improvement to the system in the past 30 years, but some pain points remain:

  • Although UR is mandatory, the procedure used is not consistent
  • The adoption of evidence-based guidelines was a key development in the process, and continue to be refined as new treatments come under review.
  • Because providers can request approval for any treatment, and every request must be tracked against the UR process, costs are still high and non-medical personnel are still making medical decisions.

California still must grapple with issues of growing costs and high approval rates, but its experience with UR is still a valuable guide to processes that other states can study and implement.

For more thinking on the California experience, please see my article on workcompwire.com

Lisa Hannusch

Lisa Hannusch is CEO of UniMed Direct and founder of UR Nation. With experience in virtually every aspect of workers' compensation medical management, she is a nationally recognized authority on effectively managing utilization and medical claim issues. Lisa has direct experience as a healthcare provider, has conducted healthcare fraud investigations leading to prosecution, designed claims and medical software applications, and has worked as an insurance regulator and state agency rule and guideline author. She was an influential leader for requiring evidence-based medical determinations. At UniMed Direct, Lisa has built an industry leading managed care company specializing in ReviewStat – a leader in hosted medical management software, supported with services for UR and a national independent Peer Review Panel.

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