For the fifth year, Healthesystems conducted the Workers’ Comp Industry Insights Survey in collaboration with Risk & Insurance® magazine highlighting the work comp challenges industry professionals faced in 2022 and their priorities heading into 2023. Medical care issues topped the list with healthcare provider/service shortages #1 and medical price inflation #2. And the #3 challenge was increasingly complex claims, which is closely related to the top two issues. These concerns are strikingly different from last year when operational efficiencies and changing workforces dominated.
Before the pandemic, the Association of American Medical Colleges estimated that there would be a shortage of between 54,100 to 139,000 physicians by 2034 and the fallout from the pandemic has swelled the numbers. Injured workers face the added hurdle that some practices and services do not accept workers’ compensation insurance payments that have low fee schedules.
While medical inflation has been lower than consumer inflation, there are troubling trends and medical care costs are increasingly a greater share of total claims spending. Changes in pricing contracts and network discounts, a rise in medical facility fees, enhanced negotiation power from hospital systems, and medical provider consolidation, are all contributing to medical inflation.
A recent study from the Workers Compensation Research Institute (WCRI) examined the impact of vertical integration (physicians becoming part of a hospital or a health system of medical providers) on payments for workers’ compensation care and found it increased the average payment per procedure by eight percent. And the trend is pervasive – between 2012 and 2018 the percentage of physicians practicing at sites owned by hospitals or health systems increased from 32 to 49 percent for primary care physicians, and from 18 to 35 percent for orthopedic surgeons. The study notes, “This raises a policy concern that the increasing concentration of medical providers may lead to higher payments for medical care without corresponding improvements in patient outcomes.”
Another study by WCRI found that lack of coordination of care drives costs up in physical rehabilitation post-injury. Most treatment guidelines for low back pain address initial physical medicine care, leaving extended care to the discretion of employers or payers. Coordination of care in cases with multiple physicians, severity, comorbidities, and practice patterns were predictors of extended care.
Prescription drug costs are another area of concern, although the industry’s efforts to control opioid prescriptions have helped keep them in check. According to a recent NCCI report, from 2012 to 2021, the average drugs-paid cost per claim decreased about 2.6 percent per year. The price of prescription drugs grew at an annual rate of 3.7 percent, only to be offset by a 6.0 percent decline in the type and number of prescriptions. Opioid claims saw the largest decrease in drug costs.
Insurers and claims administrators are closely monitoring the impact of the new CDC guidelines, giving doctors more leeway in prescribing opioids, particularly for chronic pain. Some are expecting to see an uptick in prescriptions and higher costs.
For several years, the complexity of claims has been a growing concern, but contributing factors have differed. Currently, mental health issues are the primary concern for respondents followed closely by comorbidities.
This combination of personnel shortage, continued supply chain disruptions for pharmaceuticals and medical devices, and increasing costs has many implications for workers’ compensation. It’s reducing access to care, which delays treatment and prolongs the life of a claim, increasing the likelihood of greater costs, litigation, and negative patient outcomes.
Actions employers can take