New model helps slash WC expenses

Primary physicians paid more, but can’t self-refer

Here’s a new idea for lowering your workers’ compensation costs: Pay your primary care physicians more money. No, that’s not a typographical error; it’s the basis of a new model for treating injured workers that has three primary components:

  1. Substantially increased reimbursement for the primary care physicians who treat the workers;
  2. Automatic on-site consultation by musculoskeletal specialists at no extra cost to the primary care facility;
  3. Inability of the primary care physicians to profit from self-referral for tests and treatment.

This "specialist-direct" system was tested for a period of two years, and compared with a more standard discounted-fee clinic. Patients self-selected the system they used, and the entire cost of the claim was assigned to either system of care. Claim costs were 63% lower in the specialist-direct system, medical costs were 45% less, indemnity was 85% less, and claims were closed nearly six months faster in the specialist-direct system.1

The specialist-direct system was developed by a group in Reno, NV, called Specialty Health, Inc. Steven G. Atcheson, MD, a rheumatologist, is president of the organization, which now has a statewide network. "We started operations in 1995 based on a theory; we had some encouraging preliminary results and opened our first clinic in 1999," he recalls. "We called them Model Clinics.’"

The aforementioned study was arranged with two large hotel-casinos for the calendar years 1995-96, and covered all workers’ compensation claims filed. The work force averaged 4,000; a single benefits administrator processed all the claims, all of which were closed and paid by January 1999.

"[Co-author] Dr. [E. James] Greenwald and I had worked for the person who administered all the claims for these two hotels for several years," Atcheson explains. "We told her we thought that discounting doctors for workers’ comp care is destructive. She already had a handpicked panel of physicians and clinics that had agreed to a discounted fee schedule. We said, If you don’t quibble about the extra time we spend with patients, we’ll come in and not charge you extra. Let’s see if the docs make more when they’re not hassled by managed care.’"

After a year, he says, the hotels saw the savings were substantial, so they continued testing the model for two more years. "We’ve been contracted ever since at a management fee," says Atcheson. Since the casinos were self-insured, they were allowed under Nevada law to direct all injured employees to a specific panel of medical care providers. Employees were required to first report all work-related injuries to security personnel, who were prohibited from recommending one facility over another.

The employees had several options: three local hospital emergency departments; one general practice clinic; three chiropractors (for spine problems only), and three occupational medicine clinics. Of the three occupational medicine clinics, one was staffed by primary care physicians who were assisted by two musculoskeletal specialists. Each specialist attended the clinic a half day each week and could see patients with musculoskeletal problems within three days of the first clinic visit. The other occ-med clinics had to refer patients to an outside specialist. All referrals had to be made to a single panel of specialists.

All the primary care physicians in the discounted-fee clinics were paid a 15% - 20% discount from the prevailing fee schedule published by the Nevada Division of Insurance, as were all the other physicians on the panel. The primary care physicians in the specialist-direct clinic were paid on a fee-for-service basis at 100% of the same fee schedule. Since the consultants were not actually paid during the two-year test period, a fair-market value of $36,000 per year was assigned for calculation purposes.

Atcheson asserts the nearly 50% difference in medical costs resulted from a reduced volume of services provided. Previous studies, he notes, show that physical therapy is initiated far more often by physicians who profit from those services, and that MRI scans are more likely to be medically inappropriate when ordered by a doctor with financial ties to the imaging facility.

As for indemnity costs, wrote the authors, "The rapid access to musculoskeletal consultations enjoyed by the physicians in the specialist-direct clinic was a major contributor . . . patients were rarely taking off work, because the specialists strongly encouraged that patients remain at work with safe restrictions."

Atcheson concedes that not all occupational health clinics could participate in a model like his. "We never made a nickel until we lined up 12,000 people based on expectations of reimbursement," he notes. "Also, it’s crucial to recognize the third leg of the triad is that we did not allow compensation for physical therapy, ordering tests, and so on, so there were no conflicts of interest. That’s crucial — if you look at industrial medicine clinics where physicians are poorly paid, they are forced to own these other facilities. This will dissuade facilities at many industrial medicine clinics from following our model, because they take such deep discounts on medical care."

Nevertheless, he says, the concept is taking hold. "We just made an agreement with a group of hospitals, and we will be their workers’ comp arm; they will use our network for their injured workers," he notes. "We can put our clinics next to any hospital ER and it will work just fine."

Of course, the attitude of hospital administration is a critical ingredient. "It depends on their foresight," Atcheson observes. "If they look just at volume and income, they might not be interested. If they look at a partnership, where ultimately all will benefit, that’s fine."

The bottom line, he insists, is that doctors have to takeback control of basic patient decisions. "If you had a company that decided they would contract in such a way that the doctors at the head of the line were treated the best, then this model would work," he concludes.

[For more information, contact: Steven Atcheson, MD, 93 Bell St., Reno, NV 89503. Telephone: (775)-329-6772.]


1. Atcheson SG, Brunner RL, Greenwald EJ et al. Paying doctors more: Use of musculoskeletal specialists and increased physician pay to decrease workers’ compensation costs. J Occup Environ Med 2001;43:672-679.