For the Chinese treasure fleets, voyages went progressively further from their home ports, until, some believe, they circumnavigated the globe. Before we explore the ‘other side’ of the work comp world, we need to consider what lies just out of sight over the horizon.
Once we think about sailing past what we can see from land, we are forced to guess what lies ahead. Fortunately we can look back and recall what others experienced on similar voyages. Unfortunately, unlike the Chinese of 1421, no one has ever sailed on these particular ‘seas’, thus we’ll have to make a rather scary climb up the ratlines leading to the top of the highest mast, over and into the crow’s nest.
So what can we see from our ‘crow’s nest’?
Today we’ll confine our discussion to health system bargaining power; about 30% of comp medical dollars go to facilities.
Among health systems and large multi-specialty groups, provider bargaining power is already growing, and is impacting the largest of the group health plans. The increasing leverage enjoyed by large provider groups and health systems is going to be felt from New England to southern California, as systems and provider groups use their dominant market positions to force non-governmental payers to increase reimbursement.
By watching what is happening to group health plans, those in the work comp space are seeing their future. I’ve already discussed the ability of providers such as Sutter Health in northern California to demand – and get – double-digit increases in reimbursement from Wellpoint and other huge healthplans with seemingly-immense buying power. Recall that facility charges account for about a third of work comp medical expense; if work comp payers in California see similar increases, we’re looking at an increase of three points in the loss ratio…
I understand that many states have fee schedules, California included. I also understand that many work comp PPOs, including those operating in the Golden State, have deals that give their clients lower-than-fee-schedule rates at participating hospitals. At some point Sutter et al are going to start asking why they are giving work comp payers this great deal.
I would expect that shortly after that question is posed, discounts will disappear, or at best, become far less attractive.
One could argue that hospitals, health systems, and large provider groups will be loathe to give up what amounts to a very profitable payer line. That’s true so far as it goes, however:
– many providers are highly skeptical of payers’ ability and actual effort to direct injured workers to their facilities;
– providers are facing what could well be a significant influx of new patients as previously-uninsured gain coverage and seek the care they’ve not been able to access until now, making the few additional work comp patients less significant; and
– providers in many areas are already able to force work comp networks to pay at or very close to fee schedule, as those networks know they ‘have to have’ that system or payers will not consider their network. BayCare in the Tampa Bay area is just one system that leveraged their position several years ago, Sutter Health in NoCal and Partners in Boston have similar approaches.
What does this mean for you?
Fortunately, since work comp is a required coverage (except in Texas), payers can just pass the additional cost on to their policyholders.
Unfortunately for payers who choose that ‘strategy’, some of their competitors will figure out solutions that give them a ‘sustainable competitive advantage’.
May
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