News

Italian sociologist Vilfredo Pareto (1848-1923) is best known for his namesake principle the “Pareto” rule, which states that for many distributions, approximately 80% of outputs are driven by just 20% of possible inputs (called “the vital few”). The converse of this is that the other 80% of inputs – “the trivial many” – drive only 20% of outputs.

One goal for business leaders is to identify those inputs most influential to our desired outputs, and then make them our priority. If we manage inputs equally, we are not optimizing resources, and risk being outcompeted by better stewards of capital. Since they drive 80% of outputs, the vital few deserve 80% of resources, leaving 20% for the trivial. An input among the few deserves 16x the resources (time, money, manpower) as one of the many.

The math looks like this: 80 resource widgets directed to 20 vital gizmos is four widgets per gizmo, with 20 widgets remaining for 80 trivial gizmos (0.25 widget per gizmo).

4 = 16 x 0.25

All gizmos are not created equal. Vilfredo nods…

Theory is great, but does it apply to workers’ comp claims management? As it turns out, yes, and the principle is even more pronounced. In reviewing workers’ comp claims data, we find just 15% of claims frequently represent more than 80% of total costs.

From that finding, we developed an ODG Risk Assessment Score (RAS), updated annually and now available inside platforms such as Sapiens CoreSuite. CoreSuite connects to ODG through an application programming interface (API), leveraging predictive analytics for risk scoring at the claim level. Designed for interventional triage or risk-adjusted benchmarking, it can be used to ensure claims management efforts are first and foremost focused on the vital few.

The inputs are medical codes (FNOL, ICD, CPT, NDC, and HCPCS) plus claim demographics. Two concepts are considered. The first is a Magnitude, which represents severity, and measures total claim duration/cost relative to other claims. The second is Volatility, which represents opportunity, measuring the difference between a good and bad outcome for similar claims. These two scores combine to form RAS. ODG also predicts disability duration and costs using a proprietary causal model derived from “like” claims in the ODG database of millions of claims and tens of millions of medical interventions.

Payers can trigger interventions as resources allow. Below is the visual aid, where each claim is scored in real-time on the 0 – 100 scale-

The post Real-Time Claim Risk Assessment appeared first on ODG by MCG.