What Happened? Follow the Money.

The stated philosophy of the workers’ compensation system, while the words vary from state to state and program to program, is to expeditiously return the injured worker back to the workplace.  Among my many observations of the work comp space thus far:  nearly every economic incentive that exists within the “system” today runs counter to the philosophical goal of returning the injured worker to work.  Doctors have clear economic incentives to over-treat.  Attorneys have clear economic incentives to create the perception of disability and, in many cases, prolong litigation matters that should otherwise be settled.  And as Richard Victor of WCRI has adroitly pointed out, the injured employee has economic incentives to prolong lost time – there may not be a job to which the employee can return. 

Like most social and political issues through the ages, many of the problems inherent in the work comp system are a result of rational economic behavior.  Given the incentives that exist, it’s little wonder we find ourselves in our current state.  Doesn’t make it right, but it does make it logical. 

I don’t have a clear view on how to fix the medical/legal aspect of work comp claims management – I’ll defer to the likes of David DePaolo on those issues (David’s blog, by the way, is an absolutely essential tool for ramping up and staying informed).   

I do have a view on the health care provider component of work comp – we must align the economic incentives for care delivery with the desired outcomes of that care (a view, by the way, shared by David and many others in the industry).  Once upon a time, I worked for the management consulting firm founded by a pretty smart guy named Michael Porter (The Monitor Group).  When Porter shifted his attention to the health care space (particularly in his 2006 book “Redefining Health Care”), I studied his views closely.  When he teamed up with Robert Kaplan (his fellow Harvard Business School professor and father of modern cost accounting), I became convinced.

I co-authored an article on this back in my consulting days (“Value Management: Optimizing Service, Quality, and Cost,” Journal for Healthcare Quality, January 2010).  To quote from that article:

“Because of the nature of services provided in the healthcare industry, our belief is that quality (i.e., clinical outcomes and patient safety) will become the most visible indicator of value.  Health care organizations will not be seen as leaders unless they go beyond what is mandated, and make it an organizational mission to demonstrate value.”

Though it wasn’t published until January of 2010, we actually wrote the paper almost three years ago.  Still so much work to do.

Michael
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