Carving out a PPO Network

By Rothenberg, Nancy | Risk Management, September 1995 | Go to article overview

Carving out a PPO Network


Rothenberg, Nancy, Risk Management


There has been considerable debate recently about several innovative methods being tested to reduce the cost of workers' compensation. Many companies are experimenting with ways to bring the cost-containment techniques that have helped reduce the cost of group health coverage into the workers' compensation arena.

Workers' compensation medical care is currently provided in three basic settings, including traditional fee-for-service plans, health maintenance organizations (HMOs) and preferred provider organizations (PPOs). Of these basic delivery methods, it has been argued that fee-forservice provides too little emphasis on cost reduction. Although medical expenses may be lower in an HMO setting, the cost of lost productivity or disability litigation can offset any medical savings.

Advocates of the HMO approach to workers' compensation argue that treatment of a patient injured on the job is no different from treating a patient injured at home. Many providers and payors beg to differ. Issues surrounding injuries sustained by an employee at work are different from those seen by an HMO group plan. Studies have shown that utilization patterns are also different. For example, workers' compensation treatment emphasizes early and aggressive intervention and more intensive treatments. According to the California Workers' Compensation Institute, workers' compensation handled under a group health or HMO plan requires 44 percent more time to reach closure than under traditional fee schedule arrangements.

PREFERRED PROVIDER ORGANIZATIONS

Between these two approaches lies a third option--PPOs. These organizations are becoming increasingly popular among risk managers and human resource departments. PPOs currently cover 53 million employees under workers' compensation specialty programs. According to a 1994 telephone survey commissioned by AIG Managed Care, 70 percent of risk managers believe PPOs provide tighter controls over employee medical care. The survey was based on interviews with 400 risk managers representing Fortune 1,000 industry and service companies with at least 10,000 employees.

Just as employers have reduced costs by using PPO contracts for physician and hospital services, many realize that those same techniques can be applied to a variety of specialty areas, including the treatment of workers' compensation injuries. Many companies are contracting with preferred provider organizations for services such as physical therapy, occupational therapy, speech pathology and other rehabilitative services.

As with other key "carve-out" services, such as chiropractic, behavioral health and pharmaceutical networks, employers seek to contract for workers' compensation rehabilitation services because, in addition to cost savings, specialty PPOs can provide needed medical data access, utilization review and quality assurance programs with their services.

Is NETWORK CONTRACTING FOR YOU?

To determine whether or not PPO contracting is a viable option for your company, consider the following questions:

Is your company self-insured or large enough to have considerable influence over its health plan? Does your company have a mechanism to direct employees to contracted providers? Does your state allow employers to direct employees with workers' compensation claims to certain providers? Does your company have a primary care physician panel in place that can refer injured employees to specialty providers?

If you answer "yes" to most of these questions, then PPO contracting may benefit your organization. There are a number of benefits and qualifications you should examine before committing your organization to a PPO.

PPO CONTRACTING ADVANTAGES

Contracting with a PPO network of specialists or ancillary providers is often advantageous to employers because they can access all health care providers with a single contract. Network administrators are often more familiar than employers with the criteria for selecting quality providers. …

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