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Predictions for the workers comp world in 2013

Here’s what I see happening in the world of workers’ comp and WC services in 2013… three today, three tomorrow and the last four Wednesday – unless other news intrudes.

1.  Vendor consolidation

There are two main drivers – the dramatic increase in private equity involvement in workers’ comp services and large payers seeking to internalize services to increase their top lines and bolster profits.  And we ain’t seen nothing yet.  Expect several of the larger players to join forces/be acquired/become “platform” companies that PE firms use to build large, diverse service providers.

2.  Higher medical costs driven by facilities

We have seen harbingers of the future in WCRI’s report on cost drivers in Indiana and other research.  Facilities – hospitals, health care systems, vertically-integrated delivery systems – whatever version or name you want to give them – are becoming an increasingly large, and increasingly expensive provider of medical services to work comp claimants.  According to the latest data, about a third of all physicians are employed by hospitals – and that data is a couple years old.  And, provider consolidation is accelerating – driven by PPACA and market forces as well as much higher Medicare reimbursement (procedures billed by hospitals get paid at higher rates than those billed by docs).

Most WC fee schedules are based on Medicare – or on some mechanism that is even more lucrative.  Thus, as health care systems acquire occ med practices, work comp payers are going to see the same procedure cost more – just because it is billed by a facility rather than a doc.  Providers will figure out work comp is a really profitable line of business.  When they do, they’re going to be upgrading their occ med departments and tying them much more closely to orthopedics, home care, PT, and related services.

3.  Continued ignorance of opioids’ impact on long-term costs and outcomes, coupled with inaction by most payers.

When insurers finally figure out how bad this problem is, they’re going to either go catatonic or their heads will explode. We will know that top execs really understand how bad this is when they get very focused on this issue internally and externally and very demanding of their staff, vendors, and regulators.  This will manifest itself through aggressive efforts to identify and address existing claimants – and not just attempt to prevent extended use of opioids by new claimants. To those who would argue this is already happening, I would respond “perhaps in some small ways at a relatively few payers and in a handful of states, but the response to date is all out of proportion given the size of the problem.”

Three more tomorrow…

4 thoughts on “Predictions for the workers comp world in 2013”

  1. “procedures billed by hospitals get paid at higher rates than those billed by docs”

    What procedures are you referencing? It’s my experience that the opposite opposite applies for facility vs non-facility charges based on the Medicare fee schedule and at least the OWCP fee schedule. Here are some links supporting that conclusion:

    1. Jeff – thanks for the comment, and you are correct – I should have been more precise in my language. What I should have said is “medical treatment billed by facilities is more expensive than the same treatment billed by docs.”

      The issue relates to additional charges for facility fees; I quote a report written by the Center for studying health systems change:

      “…hospitals routinely charge facility fees for office visits and procedures performed in formerly independent physicians’ offices, where the physicians have converted to hospital employment. The terms “hospital-based facility” or “provider-based facility” refer to a facility or office that is part of a hospital but may not be located on the hospital campus. The provider-based status produces substantially higher Medicare payments than when physicians remain in independent practice, because there are now separate payments for professional services and for hospital outpatient facility fees. In short, it is possible for a physician practice to be acquired by a hospital, not change locations or even practice operations, yet the hospital now receives significantly higher Medicare payments if it meets the criteria for achieving provider-based status. Most commercial insurers follow the Medicare fee schedule with some modifications, so this practice can affect not only Medicare patients but privately insured patients.

      Hospitals charging facility fees for physician visits not only results in higher costs for payers, but also for patients because facility fees are subject to deductibles and coinsurance. In isolated cases, litigation has resulted, and institutions have reimbursed insurers and patients for facility fees under consumer protection laws, and the hospitals now post their pricing practices.7”

  2. Joe and Jeff, while you are both persuasive in your conclusions, some are concerned we have not seen the true depth of the “iceberg” of facility fees. I commend to you both the articles below as harbingers of the coming political storm over increasing medical costs. And If facility fees are driving health care costs in non-occ cases, imagine the toll in workers’ compensation.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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