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May
24

The problem with Workers Comp provider networks

Several of the larger workers’ comp payers are strongly considering using group health provider networks for their claimant population. And, some have already inked deals with these entities (Hartford-Aetna; Hartford-Horizon NJ). This marks a shift in strategy, and the reasoning behind the moves is telling.
Workers comp networks such as First Health, CorVel, and Focus have several challenges.
First, they apply a generic, one-size-fits-all model across all markets and types of providers. While a PPO predicated on getting the best possible discounts from as many providers as possible sounds good, it breaks down when one remembers that unit price is but one-third of the medical cost equation; the other two being utilization (volume of services per claim) and frequency (number of claims with that type of service). Physical medicine and pharmacy are but two examples of types of care where total costs are minimally impacted by unit price.
Second, with the (possible) exception of First Health, the WC networks rely on their WC business to leverage discounts with providers. The problem with that is very few providers have much WC business; out of the nation’s $1.4 trillion health care bill, $30 billion is WC. Another way of looking at this is that one large HMO in Florida pays more for inpatient hospital care alone than the entire WC medical spend for all payers in that state. So, WC-only networks have little buying power.
Third, the level of customer service delivered by most of these WC-only networks has ranged from mediocre to abysmal. For some of these self-styled WC networks, there have been significant and on-going issues with data quality, provider recruitment, systems changes, state certification, and basic responsiveness, coupled with a level of arrogance that is, on occasion, breath-taking.
Added to those issues is the inability of WC networks to deliver results, defined as control of medical expenses, and it is not surprising that payers are looking elsewhere.
What does this mean for you?
If you are a WC generalist network, get your act together. If you are a WC payer, your frustration is understandable, but I have little confidence that group health companies will remain committed to this business over the long-term. UnitedHealthcare, HealthNet, Aetna, and Blue Cross of Florida are just a few examples of the group health companies that have entered, exited, and in some cases re-entered the WC network business.


Joe Paduda is the principal of Health Strategy Associates

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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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