Hidden Cost Drivers
Hidden cost drivers in workers’ comp claims can quietly erode your loss ratio, here is how to spot them fast. As we all know, in workers’ compensation, the difference between an acceptable loss ratio and a disastrous one often hides in plain sight within your claims files.
While most adjusters focus on obvious red flags like overtreatment or surgical authorizations, the real cost bleed happens quietly through systemic inefficiencies and overlooked details. Here is an easy and quick methodology that should help you identify these hidden cost drivers before they become excessively problematic.
- Begin with your open indemnity claims that have been active for more than 90 days. In that most injuries are orthopedic in nature, and normally that all bones heal, most often these soft tissue injuries and bony abnormalities resolved within 6-8 weeks. Are there significant co-morbidities such as tobacco consumption orf diabetes? As such, those files open more than 90 days represent your highest exposure and greatest opportunity for intervention. When conducting your review, look at three areas: treatment patterns, return-to-work efforts, and administrative efficiency.
- Pull the medical bill history and look for fragmented care. Multiple providers treating the same body part (visiting the occupational medicine clinic every week as well as the orthopedic clinic every three weeks) without any significant improvement in the overall clinical situation or a decrease in symptomology. This fragmentation does not just inflate medical costs; it extends disability duration and delays reaching a maximum medical improvement determination. If the pain complaints continue to be 7/10, there needs to be a competent clinical explanation as to why. A Physician Peer Review may be helpful.
- The most expensive word in workers’ compensation is “later.” Review your indemnity files for documentation of transitional duty offers. If your file notes show “waiting for doctor’s release” or other verbiage without corresponding medical evidence as to why, you have found a cost driver.
Check whether work status is being actively managed or passively accepted. A competent clinical explanation supporting the determination needs to be identified.
Hidden costs often accumulate through poor administrative practices. Look for missing or incomplete medical records that slow decision-making, and other administrative tasks that slow claim activity. These inefficiencies do not just cost money directly; they prevent you from making informed decisions about case resolution.
Once you have identified files with these hidden cost drivers, prioritize them using a simple scoring system: one point for each red flag identified. Files scoring three or more points need immediate intervention, comprehensive physician peer review, or other cost containment tools.
The key to this review methodology is speed and repeatability. You are not conducting a comprehensive file review; you are screening specific indicators that research and experience have proven several items to be significant cost drivers. By systematically identifying and addressing these patterns, you can prevent minor issues from becoming major losses while focusing on your case management resources where they will have the greatest impact.