In claims management conversations -- from the water cooler tothe executive suite -- one questions comes up again and again: "Howwill the recession affect workers' compensation claims?" With somany employers struggling to keep their companies afloat, thiscritical issue must be scrutinized from every possible angle.

The jury is still out on whether the recession, and accompanyingworkforce layoffs in particular, will result in an increase inworkers' compensation claims. Historically, the numbers and costhave spiked during economic downturns. But as the Americanworkforce has shifted from blue- to white-collar jobs with lessexposure to physical trauma, an increase in layoffs may not signalan increase in claims. On the other hand, the current recession isthe longest in almost two decades, and unemployment reached a25-year high in March 2009, so the full impact remains to beseen.

Regardless of whether workers' compensation claims numbers go upor not, cost-cutting measures are the order of the day in all areasof operation. Claims management is no exception, and in fact, intough times, the challenges become even greater. Why? Controllingcost has always been at the very top of the claims management"must-do" list. Many would go so far as to say that wringing anymore cost savings out of claims management is like squeezing bloodfrom the proverbial turnip. There's nothing there to squeeze.

Most likely, squeezing isn't the right answer. The imperativetoday is to execute every phase of claims management with thegreatest precision possible and at every step of the way: before aclaim occurs, during the claim management process, and after it hasbeen resolved. This is, of course a shared responsibility involvingthe employer, the claims manager, and even the employee at acertain level. Within each of these three phases -- pre-claim,processing, and post-claim -- and for each of the groups involved,there are specific areas where re-examining current processes andprocedures, identifying and correcting inefficiencies or badhabits, and adhering to best practices will help deliver optimaloutcomes. Realizing the potential will require collaboration andcooperation throughout the claims management cycle.

To that end, here are nine areas that offer practical potentialfor improving claims management efficiency and cost savings.

1. Set realistic employee expectations.

Employers should not hesitate to discuss workers' compensationwith their employees. The more informed employees are about how thesystem really works, the more efficiently and appropriately theycan participate if the time comes. It's all about setting realisticexpectations.

This means not only informing employees about how to report aclaim, but also what they can and cannot expect from the workers'compensation system in their jurisdiction. Employees need to knowthat if they sustain an injury or illness related to their workthat they are entitled to certain specified medical and disabilitybenefits. They should also understand that workers' compensation isnot a system of unlimited largess, and that the ideal outcome istheir return to health and to work as early as possible.

A time-tested technique for communicating about workers'compensation is a brief "payday meeting." Held periodically, even afive-minute session can provide relevant, actionable informationnot only about how to deal with illnesses or injuries, but also howto prevent and avoid them in the first place. Resources for suchinformation abound, and the return on the negligible investment ineducation can be significant.

2. Provide explicit guidance for those seekingcare.

A key element in setting expectations is making sure thatemployees seek appropriate care in both emergency and non-emergencysituations. If employees have specific guidelines on what kind ofcare to seek and from whom, they are much more likely to make gooddecisions. Without adequate training or information up front,especially in an emergency, employees may panic and do all thewrong things, from seeking inappropriate care to consulting alawyer.

The employer's ability to provide highly specific guidance maybe determined by the jurisdiction in which it operates.Nonetheless, the more guidance provided the better, includinghaving a pre-defined medical group to treat injured workers,advising injured employees to seek treatment there, and assuringthem that the provider will bill the employer, not the worker. Bysetting expectations before injuries occur, all involved will knowwhat to do and the fear of the unknown will be removed.

3. Leverage technology for maximumefficiency.

Maximizing the efficiency and effectiveness of claims managementprocesses requires up-to-date, well-integrated information systemsand technology. Make sure that efficiency drivers -- data capture,flagging systems, and automatic adjudication rules for example --are "cooked into" claims management systems at every step. In a badeconomy when price competition is likely to increase and marginsare razor thin, the less efficient claims management companies maynot survive.

4. Focus on timely reporting.

Immediate reporting of an incident is the cardinal rule ofefficient claims management, and its importance has never beengreater. The faster a claim is reported, the sooner aninvestigation can be launched and a decision made regardingacceptance or controversion of the case.

Technology comes into play here, too. Reporting claims by phoneor fax is certainly acceptable, but the preferred method -- fromthe claims perspective -- is to have the completed First Report ofInjury or ACORD form submitted electronically through the Internet.Making the entire process easy to accomplish online helps ensurethat complete, relevant information can be reported immediately,routed to the appropriate claims office and adjuster, and teed upon the claims management system for the next steps in theprocess.

5. Investigate early and thoroughly.

The timing of claims reporting is extremely important, as is thequality of the information provided. The quantity and accuracy ofinformation has a significant impact on expediting and enhancingthe quality of the subsequent investigation and follow up. Even asthey are submitting the first report of injury via the Internet,forward thinking companies are also conducting elementalinvestigations in the incident. Is the injury consistent with thejob function of the claimant? Are there witnesses? Is thereanything unusual about how the injury occurred?

The more and better detailed the information from the outset,the more efficient adjustors can be in moving the claim forward.They can ask more specific and relevant questions when interviewingclaimants and be more thorough in verifying it with the employerand witnesses. The sooner all the criteria -- injury,circumstances, witnesses -- have been satisfied, the sooner theadjustor can contact the provider to determine diagnosis,treatment, and estimated loss of time and set up the reserve.

6. Maximize the use of evidence-basedmedicine.

Medical costs now account for more than half of the total costof workers' compensation costs. In many respects the workers'compensation system is based on the quantity of services provided,which can lead to over-treatment. Making sure the claimant isreceiving the appropriate level and type of care in the appropriateenvironment is critical to optimizing efficiency and costeffectiveness.

Doing this can be challenging, but it will be more effectivewith evidence-based medicine, which uses scientific data to helpproviders determine how to best treat a patient for a particularset of condition. For claims managers, evidence-based medicinesprovides clear step-by-step therapeutic guidelines to helpdetermine whether or not a particular treatment plan is bothappropriate and cost effective to the employee's condition. It canbe a very useful tool in ensuring that quality and not quantity isthe chief determinant of care.

7. Be aware of opportunities and challenges with careproviders.

As unemployment rises -- it's now double-digit in many areas --the demand for healthcare services will most likely decline, andmedical providers will be competing for fewer dollars. That maytranslate into opportunities for more favorable cost or serviceconcessions from professionals and institutional providers.

At the same time, the shrinking pool of dollars may prompt careproviders to become more aggressive in billing and treatmentpatterns to make up for diminishing revenue. Effective utilizationreview could become the defining factor in cost effective medicalmanagement.

With more attention paid to reimbursement, claims managers mustcontinue to adhere to the highest standards and best practices inadjudicating claims. Anything that might contribute to decreasedoperational efficiency, such as an increase in challenges to claimsdecisions, should be avoided whenever possible.

8. Emphasize return to work and follow up.

Prompt return to work is one of the most effective ways toreduce the costs of workers' compensation claims and to avoid"open-ended" disability. When possible, employers should haveoptions for modified duty or transitional employment alreadyidentified and readily available if needed. Any type of activitythat will get the employee back into gainful employment is apositive step. The longer people remain away from work, the morelikely that "disability syndrome" will set in.

In addition, as unemployment rates climbs, expect regulators tomanifest more vocational oriented programs that focus onre-training or developing new job skills. Claims organizationshould ensure they have the right trade partners and internalprograms to provide compliance and success.

9. Close claims as quickly as possible.

Statistics consistently prove that companies that close claimsfaster generally achieve better outcomes and enjoy greater costsavings. The ideal goal of claims closure is an appropriate,satisfactory conclusion for all parties. This may include fullreturn to work, modified duty with ongoing medical costs, or asettlement. Ideally, claims are managed to avoid legal involvement,but that doesn't mean avoiding it at all costs. Sometimes it is theonly reasonable avenue of resolution. But given that a compensableinjury has happened, the aim is to restore the individual, make anylegally required settlement, and close the case. As a rule ofthumb, play fair and others will do the same.

Put it all together.

The pressures for managing claims with great efficiency and costeffectiveness will remain extremely high for the foreseeablefuture. The most reliable tools in times of uncertainty areconstant vigilance, continuous improvement, and adherence to bestpractices at every critical juncture of claims management. None ofthe measures outlined in the article can guarantee success on itsown. Applied in a concerted, coordinated effort, however, they canhelp ensure greater stability for the present and lower claimsmanagement costs for the future.

Lori Daugherty is president and CEO of Avizent in Columbus,Ohio. Company information is available at www.avizentrisk.com or888-646-9675.