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Evaluation of the Washington State Workers' Compensation Managed Care Pilot Project II: Medical and Disability Costs

Cheadle, Allen PhD*; Wickizer, Thomas M. PhD, MPH*; Franklin, Gary MD, MPH†‡; Cain, Kevin PhD§; Joesch, Jutta PhD*; Kyes, Kelly PhD*; Madden, Carolyn PhD*; Murphy, Linda; Plaeger-Brockway, Roy MPA; Weaver, Marcia PhD*

Original Articles

Objectives. This study examined the effect of managed care on medical and disability costs as part of an evaluation of the Washington State Workers' Compensation Managed Care Pilot (MCP).

Methods. One hundred twenty firms (7,041 employees) agreed to have their injured workers treated in managed care plans. Managed care introduced two changes from the fee-for-service (FFS) delivery system currently used by injured workers in Washington State: experience- rated capitation and a primary occupational medicine delivery network. The FFS control group included injured workers employed at 392 firms (12,000 employees). Medical and disability costs were compared for 1,058 injuries in the managed care group and 1,159 injuries in the FFS group occurring between April 1995 and June 1996. Univariate and multivariate statistical methods were used to analyze the effects of managed care on medical and disability costs.

Results. The mean unadjusted medical cost per injury ($587) for the managed care group was 21.5% lower (P = 0.06) than for the FFS group ($748). Adjustment for differences in worker and firm-level characteristics through multivariate analysis had little effect on the unadjusted results, except that the difference in costs between managed care and FFS groups became statistically significant (P < 0.01). The major cost differences were for outpatient surgery (cost per surgery) and ancillary services (pharmacy, x-ray, physical therapy, and all other costs). In addition, disability costs, particularly percent on time loss and time-loss cost per injury, were significantly lower (P < 0.01) in the managed care group.

Conclusions. The results from the MCP suggest that substantial savings in workers' compensation medical and disability costs may be realized using the type of managed care intervention designed for this study. Delivering occupational health services through managed care arrangements whose design is based on an integrated, occupational health-centered delivery model may offer a viable approach for improving delivery systems, reducing costs and encouraging greater attention to disability prevention.

*From the Department of Health Services, School of Public Health and Community Medicine, University of Washington, Seattle, Washington.

From the Department of Environment Health, University of Washington, Seattle, Washington.

From the Washington State DLI, Olympia, Washington.

§From the School of Nursing, University of Washington, Seattle, Washington.

Supported by funding provided by the Washington State DLI. Partial support was also provided by the Robert Wood Johnson Foundation Workers' Compensation Health Initiative (Grant No. 030319).

The opinions and conclusions expressed are those of the authors and do not necessarily represent the views of the DLI or the Robert Wood Johnson Foundation.

Address correspondence to: Thomas M. Wickizer, PhD, MPH, Department of Health Services, Box 357660, University of Washington, Seattle, WA 98195-7660. E-Mail:

Received August 25, 1998; initial review completed November 2, 1998; accepted April 9, 1999.

© 1999 Lippincott Williams & Wilkins, Inc.