Workers Compensation Metrics can be Misleading

Posted by Veritas Administrators on Nov 21, 2017 12:58:30 PM
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Claim handlingClaim metrics in workers’ compensation come in many forms including process metrics, vendor metrics, outcome metrics and “our” metrics. Any of these views of our metrics can lead to leakage in our analysis of results.

How do you account for leakage in your pharmacy metrics?

As I was reading the study by California Workers’ Compensation Institute (CWCI), “Set-Asides with Opioids Exceed CDC Dosages, Run 20 Years,” I was struck, again, on how the workers’ compensation industry measures pharmacy savings.

First, we know that multiple accident years are impacted by a calendar year assessment of claim data. When we evaluate our metrics in this space, the industry often looks at calendar year over calendar year results based on cost, unit volume, and many other drill-down metrics. As noted by CWCI, set-asides impact pharmacy costs. As cases are settled, the opioid pharmacy costs are lost from the pharmacy processing system and can be claimed as pharmacy savings. While they may be savings, they are not totally due to the pharmacy program.

Claim handlingThe CWCI study notes, “With an average of $33,113 reserved for future payments, opioids accounted for 32.7% of the average $103,393 set-aside amount approved over the last two years.” These cases, when open, would have been actively spending on pharmacy annually. When eliminated from the system via a settlement we have lost these dollars from the annual payment stream. If we were to look at a twenty year pay out of the $103,393 amount, we are pulling out an annualized pharmacy spend of $5,170. This doesn’t sound like much on a per claim basis, but if we look at the numbers across California (study population) and the rest of the country, there is a good impact to the pharmacy spend.

I am not a mathematician, though if we continue to measure year over year spend without looking at narcotic/opioid settlement impacts we miss some key data in our analysis.


As we evaluate loss cost savings, we should understand how we are making progress. During the claim handling process, if a settlement activity or initiative is moving cases, with opioid impacts, we need to capture those savings. Wouldn’t it be important to know the impact of both the pharmacy program as well as claim settlements in our analysis? When we set our initiatives and strategy based on our metrics we should know how each of these two programs are driving our results.

During my career, I have continued to question metrics so that we don’t lose sight of the true end goal. What is your end goal, and do you have the right metrics to know that you have arrived? Bad metrics are like the GPS that says that I have arrived and there is nothing around that I recognize.

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Topics: Workers Compensation

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