In light of those numbers, it is surprising that claims organizations often overlook the management of physical therapy services to focus instead on pharmacy (accounting for only 12 percent of the increase in severity) or hospital services (accounting for only 14 percent).

One reason for this common oversight is the relatively moderate 19 percent price increase in physical therapy costs, compared to the pharmacy price increase of 42 percent or the hospital services increase of 48 percent.

Pricing, however, is not the only factor that drives the increase in medical severity.

Physical medicine services (physical therapy, occupational therapy, and chiropractic care) typically generate small treatment charges per service. These small charges are easy to overlook, but they can occur repeatedly over a period of weeks or months. The utilization of services, not unit cost, is the key cost driver of physical medicine services.According to the five-year study period, the utilization of physical therapy has increased by 67 percent and, as a result, has become the number one contributor to the increase in medical severity in workers' compensation.

What are your best options to manage the utilization of physical medicine services?

1. Implement a comprehensive managed care strategy. Make sure that your physical medicine management strategy incorporates a tiered set of services that can touch any type of claim, whether it is a directed, managed, undirected, or unmanaged claim. Ideally, claims organizations could direct care to a special group of providers with workers' compensation expertise and a program of financial incentives geared toward delivering best-practice treatment. However, provider direction is not available in all states, so it is important to have a program that captures additional savings on non-directed claims. This could involve assigning specific treatment protocol for a diagnosis, education in evidence-based physical medicine, and/or having expert advisors.

2. Connect injured workers to providers with expertise in treating work-related injuries. Cost studies show that providers with a high volume of workers' compensation cases have total claims costs that are significantly less than their peers who work mainly with group-health patients. In workers' compensation, the goal is to successfully restore functionality and return an employee to the worksite as quickly as possible. The therapist will often use different techniques than his or her group counterpart with more frequent and aggressive treatments, combining techniques in different sequences.

3. Make sure the providers have easy access to evidence-based treatment guidelines. In order for a managed care strategy to be judged effective, it must be both cost-effective and clinically effective. This means that the selected organization should make data-driven, expert-based, literature-supported and outcomes-validated guidelines accessible to providers and provide case-specific coaching to ensure that they follow them.

4. Look for systems that reimburse the provider appropriately. Asking providers for a discount per service will not reduce the overall cost of a claim. In fact, it will likely encourage unnecessary treatments, and it is the frequency and number of treatments that drive costs. Savvy managed-care organizations incentivize providers to deliver the right treatment by compensating providers based on claim-specific best practice guidelines.

5. Select a managed care organization that has the technology to provide feedback on outcomes. Like all medicine, best practices in physical medicine continue to evolve, and it is important to continually evaluate clinical and financial outcomes. Look for an organization that captures and aggregates data to analyze outcomes and validate results. Protocols should be in place to identify and facilitate new strategies as new evidence becomes available. Additionally, the system should be able to communicate these practices and the new evidence to all the parties involved, including the payer and provider.

In physical medicine, best practices produce the best outcomes, both clinically and financially. Claims organizations can reduce their workers' compensation medical severity by addressing the largest component of their medical costs -- physical medicine. With a sound and comprehensive strategy in place, insurers, third-party administrators, state funds, and self-insured employers should be able to significantly reduce their physical medicine costs.

Ruth Estrich is chief marketing officer at MedRisk, Inc. Company information is available at www.medrisknet.com.