State Fund-Kaiser Permanente Alliance Saves Millions In Calif. WC Costs

September 19, 2003

According to a new study, State Fund policyholders have saved approximately $238 million since 1996 in total workers’ compensation claims costs through the State Fund-Kaiser Permanente Alliance.

The new study confirms that the Alliance continues to lower medical treatment costs for State Fund policyholders throughout California. A partnership between State Fund and Kaiser Permanente, the Alliance has for the past seven years reduced workers’ compensation medical treatment costs — one of the key elements of recently approved legislation to curb and stabilize overall costs in California’s $29 billion workers’ compensation insurance system that serves some 13 million employees and half a million employers.

The study by the Oakland-based California Workers’ Compensation Institute (CWCI) shows that the Alliance continues to provide better control for businesses over the total cost of workers’ compensation claims when compared against non-Alliance State Fund claims.

“The State Fund-Kaiser Permanente Alliance has become a model program for reducing workers’ compensation medical treatment costs which are a major cost driver in the system,” said State Fund vice president Connie Raiche. “The CWCI study reinforces the value and benefit of the Alliance for employers and employees — the two major stakeholders in the workers’ compensation system.”

Raiche added, “The Alliance demonstrates that an insurance carrier and a medical provider can successfully collaborate and draw upon their respective industry expertise to save money for employers and deliver quality care for employees. The study validates that the Alliance has produced significant savings and quality care for multiple years. The study may be the longest running and most extensive ever conducted on a program of this type in California’s workers’ compensation system.”

Estimated savings to State Fund policyholders since the Alliance began is approximately $238 million based on the CWCI study which incorporates previous studies.

In California’s “no-fault” workers’ compensation insurance system, an estimated 55 percent percent of every dollar paid in benefits to injured workers is allocated to medical treatment on a statewide basis. Alliance claims treated by Kaiser Permanente saved an average of approximately 41 percent in medical costs when compared to non-Alliance State Fund claims, according to CWCI researcher Alex Swedlow who authored the study.

Validating employer satisfaction with cost savings, the Alliance has grown steadily each year since its formation in 1995. State Fund policyholders — from San Diego to Sacramento — are enrolled in the Alliance.

The updated study once again shows that providing prompt, appropriate, and cost-effective evidence-based medical care can deliver total cost savings to payors,” said Kaiser Permanente’s Northern California Coordinator of Occupational Health Douglas Benner, M.D. “Reduced medical and disability costs can be achieved along with high levels of patient satisfaction as demonstrated by the marked reduction in litigation by the injured worker.”

“As the new study indicates, when medical care is provided predominantly by a Permanente physician, the injured worker stays under Permanente care almost 90 percent of the time,” said Bernyce Peplowski, D.O., Kaiser Permanente’s Southern California Regional Coordinator of Occupational Health Service. “We believe this is an indicator of patient satisfaction with medical treatment and outcomes.”

Based on the latest study — the fourth of the program — the Alliance is producing:

— 41 percent lower medical costs among medical paid claims.
— 6 percent lower rates and 11 percent lower average costs for total temporary disability claims.
— 19 percent lower temporary disability days per claim on average.
— 33 percent less attorney involvement.
— 39 percent lower total medical paid for non-litigated claims and 16 percent lower total medical paid for litigated claims.

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