May, 2000 How MCOs Transformed Workers' Comp (Article as it appeared in Columbus C.E.O.)

Column submitted by CareWorks President and CEO, William W. Pfeiffer, as it appeared in the May, 2000 issue of Columbus C.E.O. magazine.

(COLUMBUS, OH) -- In 1993, Ohio’s workers’ compensation system had reached a critical stage. Former Ohio Gov. George V. Voinovich tagged the system “the silent killer of jobs in Ohio.” When corporations considered expanding or relocating to the Midwest, Ohio was hampered by an expensive and unresponsive workers’ compensation system.

Change was overdue. Ohio’s General Assembly and administration looked to a partnership between the public and private sectors. About the same time David Osborne and Ted Gaebler, authors of Reinventing Government, argued that government should “steer, not row.”

In the fall of 1993, the General Assembly enacted House Bill 107, paving the way for the outsourcing of portions of Ohio’s workers’ compensation system. This prompted the Ohio Bureau of Workers’ Compensation (BWC) to reinvent itself, outsourcing its medical case management to private sector managed care organizations (MCOs).

Titled the Health Partnership Program (HPP), Ohio’s new system was implemented in March 1997, giving Ohio employers the opportunity to select the MCO of their choice to medically manage their workplace injury claims. HPP was designed by a stakeholder group made up of business, labor and medical provider representatives.

Critics of this new system feared a decrease in quality of care for injured workers. Today, these critics have been silenced. Ohio’s cutting edge approach to workers’ compensation has not only been successful, it has become an international model on how to allow private industry to pick up some of the “rowing”.

Today, MCOs are directly responsible for reporting new injuries to BWC, medically managing these injuries through successful return-to-work programs, processing and adjudicating medical bills and educating Ohio’s employers about new developments in managed care.

The impact MCOs have had is staggering. Although much work needs to be done, Ohio’s workers’ compensation system is more efficient today than at any other time in history. Prior to reform, there were few standards for measuring the effectiveness of Ohio’s system. Today, not only are MCOs financially accountable for meeting aggressive return to work standards, they are focused on continuous performance improvement.

New injuries are report 60 percent faster. Today, it only takes an average of 26.7 days to report a new injury to the BWC, a dramatic drop from a 66.3 day average in December 1995.

A higher percentage of claims are determined faster. Today, 21.5 percent of claims are determined within 14 days, a 900 percent improvement over the 1.2 percent prior to HPP.

The return-to-work rate is at an all-time high. Today, 93.6 percent of injured workers recover from workplace injuries and return to Ohio’s workforce. MCOs have not only reduced employers’ comp costs, but they have alleviated the unnecessary expenses associated with temporary employees, training new employees and lost efficiency when valuable employees are missing.

While there are still issues and differences of opinion regarding Ohio’s system, there has been cooperation between business and labor to bring about the successful transformation of claims administration to private industry.

In fact, the BWC’s 1999 Satisfaction Survey showed that overall 78.8 percent of Ohio’s injured workers and 82.6 percent of Ohio employers were pleased with the system. On a scale of 1 to 5, injured workers rated the system 3.94, an improvement from a 1997 rating of 3.83. Employer ratings improved to 4.13, up from 4.03 in 1997.

There are a number of components built into Ohio’s system that would not be present in a monopolistic government setting, including:

A clear focus on reducing the financial burden of workers’ compensation. In 1999, employers received 75 percent dividend credits on each of their semiannual premium payments, in addition to an overall 3-percent rate reduction announced earlier in 1999. Combined, these discounts represent more than $1.4 billion being put back into Ohio’s economy.

Aggressive, performance-based incentive for MCOs. Return-to-work performance has now accounts for more than 43 percent of an MCO’s incentive payments.

Fair competition promotes quality of care. With 38 private sector MCOs competing in a price neutral environment, efficient claims management and customized services have replaced bureaucracy as the preferred approach to resolving issues and challenges.

Today’s competitive environment also means that employers have greater choice than ever in the medical care their injured workers receive. During periodic MCO Open Enrollment Periods (currently scheduled for May 2000), employers may switch MCOs.

The potential for further government reinvention is unlimited. Gov. Bob Taft and the Ohio General Assembly should proactively seek more government outsourcing opportunities where it makes sense.

William W. Pfeiffer is President and CEO of Columbus-based CareWorks. Operating under the Ohio Bureau of Workers’ Compensation’s Health Partnership Program, CareWorks medically manages more than $500 million in workers’ compensation premium.