Optimizing the Vertical Integration of Workers’ Compensation Medical Treatment in Healthcare

Viewpoints from Jeremiah L. Paul, Esq.

Challenges and Solutions for Workers’ Compensation Medical Treatment Integration in Healthcare

Healthcare systems are ideally positioned for the consolidation of workers’ compensation treatment. The vertical integration of care has become a competitive necessity and due to budgetary shortfalls, retaining every penny possible has become a mantra in most hospital systems.

In theory, the efficiency in keeping Workers’ Compensation treatment in-house should have numerous advantages, including improved coordination of care, reduced redundancies, and financial incentives. However, multiple studies have found the opposite to be true.

A December 2023 study by the Workers’ Compensation Research Institute (WCRI) found that vertically integrated programs result in increased treatment costs and extended recoveries. Specifically, the study found that vertical integration caused the cost of medical payments per claim to increase by 7.3% at six-months and 11.4% at 12-months. The increase was almost double those rates for claims involving low-back pain.

Similarly, there was an increase in the duration of lost time. The study found a 6.8% increase in Temporary Disability benefits at six-months and 10.1% at 12 months. Once again, the increase was substantially exaggerated with low-back claims.

Arguably, any increase in cost is offset by the efficiency of care and improved experience, but why not have the best of both by better management of your integrated program? Here are three good places to start:

Identify and remove barriers that delay care.

The increase in lost-time days suggests that vertical integration fails to deliver faster recovery for workers after their injuries. This result is counterintuitive in that the goal of consolidation is to create a “one-stop shop” for treatment.

Even though all the needed disciplines are under a single roof, I’ve found that most hospital systems remain siloed and are not procedurally designed to provide timely multidisciplinary care within the constraints of most states’ workers’ compensation requirements. The good news is, that with a bit of work, it is possible to identify the internal barriers and procedurally engineer out the delays.

Fine-tune medical management protocols.

When working with in-house providers there is a tendency to assume that your colleagues are also looking out for the system’s financial well-being by providing only treatment that is reasonable and necessary. Not only is that line of thinking often misplaced, but it also commonly leads to a relaxation of medical management protocols.

Interestingly, the WCRI study found that the increase in medical payments per claim was not a result of an overall change in the number of visits, but rather the amount of care provided per visit. Specifically, there was a noted increase in the use of diagnostic studies such as MRIs. A well-run medical management protocol can provide the checks-and-balances required to ensure that only reasonable and necessary care is provided.

Educate in-system providers.

Unless associated with the system’s employee health services, most in-system providers do not understand, and are often afraid of, the workers’ compensation system. Unfamiliar procedures, laws, and forms can slow down the recovery process. Also, the more they understand and become comfortable with the process, the more they will buy-in to the ultimate goal – healing employees so they can return to work as quickly and efficiently as possible.

Although potentially controversial, I believe that system providers need to understand the economics of workers’ compensation claims. I’m not suggesting that providers should allow money to guide their treatment recommendations to the detriment of your injured employees; however, they need to understand the dynamics of workers’ compensation costs and how it affects the organization.

For a full assessment of your vertically integrated workers’ compensation program, contact the experts at EPIC.

The Workers Compensation Research Institute does exceptional work in breaking down the true cost and impact of Workers’ Compensation claims nationwide. I highly encourage you to visit and support them at www.wcrinet.org.

Jeremiah Paul began his career as a Workers’ Compensation defense attorney before transitioning to risk management for a large, self-insured healthcare organization. He is experienced in complex, high-value litigation and claim management issues that uniquely challenge the healthcare industry. As a Workers’ Compensation Consultant, he specializes in advising self-insured and high-deductible programs on reducing claim inventory, reducing program cost, compliance issues, litigation management and streamlining processes.

EPIC offers this material for general information only. EPIC does not intend this material to be, nor may any person receiving this information construe or rely on this material as, tax or legal advice. The matters addressed in this document and any related discussions or correspondence should be reviewed and discussed with legal counsel prior to acting or relying on these materials.