Enlyte’s Dave Torrence Explains Why Integration Is Key to Managing Workers’ Comp Costs

As Executive Vice President and Head of Corporate Strategy at Enlyte, Dave Torrence has a front-row seat to the evolving landscape of workers’ compensation. Recently, Michelle Kerr, Workers’ Compensation Editor at Risk & Insurance, caught up with Torrence to talk about market trends, industry consolidation, managing costs and more. What follows is a transcript of that conversation, edited for length and clarity.

Risk & Insurance: What are the top market forces that employers should be concerned about or paying attention to in today’s environment?

Dave Torrence: Many have been well documented, but some are really emerging — these keep me up at night.

Medical inflation is inevitable, but the drivers inside it are super interesting. If you unpack it, there’s price and utilization trends. Price is kind of what it is — payers can’t dramatically affect charges from a macro standpoint. But utilization? That’s where we can bend the loss curve by identifying unnecessary care,  and enabling earlier intervention.

The aging workforce is intertwined with this. It changes claim complexity over time, particularly with comorbidities. The changing workforce demographic is significant, and current administration policies may further affect labor availability and costs, which impacts severity when you’re thinking about wage replacement benefits.

Tariffs went from a frenzy to a negotiating tool, but it’s still unclear how that accelerates inflation in care costs. Healthcare includes hard goods and professional services, and recent brand drug tariffs on European imports add a point or two to inflation.

Lastly, provider consolidation — particularly hospital consolidation accelerated by funding challenges. Medicare and Medicaid funding changes affect systems that can’t withstand shortfalls. These are macro forces that aren’t always easy to address individually, but they’re affecting overall cost of care.

R&I: How is industry consolidation impacting employee outcomes from both the medical provider and insurance service provider perspectives?

DT: On the medical provider side, consolidation means less competition. When practice groups and hospital systems aren’t constrained by market forces, they are in a better position to dictate price, especially in areas without robust competition. When entities acquire systems, they invest capital and need returns, which might lead to increasing utilization or price.

On the service provider side, it’s interesting. Being with Enlyte for twenty years, I’ve seen a different perspective. While there’s been considerable consolidation and we’ve participated in that, choice still exists. Insurers have options for bill review, case management, and networks. In fact, service provider costs have come down significantly over time. Only those operating at scale can continue to service customers as expected, provide the patient experience, and invest in new capabilities and cybersecurity.

While classical thinking suggests consolidation leads to lower quality or higher costs, in the service provider industry — distinct from medical providers — it’s been the opposite. To survive, companies had to focus on innovation, better claims outcomes, better patient outcomes, and more capabilities. Competition among providers like us has brought prices down while elevating product quality and service.

Operating at scale that services very large employers and insurers requires investment that only those who can operate at scale can provide. This reality required us to be more efficient and productive so we can continue to deliver what clients need while thriving and investing in our business.

The key is choice. If there is choice, there’s competition. If there’s competition, market forces drive innovation, investment, and scale. The problem arises when you don’t have choice — when one hospital system has acquired others, going from three competitors to one.

R&I: What are the key PBM challenges you’re monitoring currently that impact healthcare costs?

DT: The biggest one is the proliferation of topicals — private label topical analgesics. These are high cost, low or no therapeutic value drugs dispensed in office versus from a pharmacy. They’re traditionally out of network, so these pharmacies or physician’s offices aren’t participating in a workers’ comp PBM program. They have much higher cost with very little therapeutic value.

Because they’re coming from out of network, payers receive them through bill review, which doesn’t have all the clinical controls, formulary, and decision support for an adjuster to say, “This has no therapeutic value.”

That’s where PBMs who can combine bill review — the out-of-network retrospectively captured prescription care — with their full clinical capabilities really have the ability to have a holistic view of all care being delivered to the patient. They can advise the adjuster on relative risk and provide clinical recommendations on whether to pay or deny those claims.

Traditional workers’ comp PBMs do a great job of prospective in-network formulary management, but that’s only 65% of total pharmacy spend. There’s 35 to 40% from physician-dispensed drugs in office that doesn’t go through PBM, plus out-of-network pharmacies and commingled charges. That stuff sidesteps a PBM and goes through bill review.

Workers’ comp PBMs have done such a great job that those without bill review and PBM combined will say, “Oh, we have 95% network penetration.” But you didn’t look in your bill review system. You really have 60 to 65% network penetration because the rest is flowing through bill review from physician-dispensed meds or nonparticipating pharmacies.

One benefit of consolidation is when companies own bill review systems and a PBM, so they know where the gaps are. You put these things together and fill the gaps that payers had to figure out themselves when they weren’t owners of these systems.

R&I: What strategies have you found effective for implementing technology solutions, particularly in terms of change management?

DT: You mentioned the answer in how you set it up — giving change management as much importance in the overall project as the technical integration and development.

Many of our best practices are born out of lessons learned. Change management needs a seat at the project table. You need somebody who represents the user perspective, who thinks about clear communications around what to expect and why we’re doing this.

How do we go through the right training loops? Recognizing that as humans, we need to be trained, retrained, and reinforced. A change management leader would recognize that if you make workflows significantly different from what users are familiar with, you’ll have issues. Instead of revolutionary changes, maybe they should be evolutionary.

It’s about taking your time, being iterative, and having clear communications about what’s going to happen, when, and why. I’ve spent weeks in the field with adjusters helping them understand why it was important for them, our business, and our policyholders.

I love having champion groups inside rollouts — that friend in your office you can ask, “Hey, how do I do this?”

Strong executive sponsorship is critical. These messages need constant reinforcement from executives through directors, managers, and supervisors so everybody understands and feels alignment.

While there’s a desire to go live quickly, the most successful implementations are the ones where teams were methodical, took their time, and attended to user communications and change management.

R&I: What legislative trends are you seeing that could have significant financial impact on the workers’ compensation industry?

DT: Major concerns about the impact of tariffs in our industry have settled down but we need to pay attention because elements will leak into the system.

Medicaid funding cuts are significant. When you think about what Medicaid represents for a typical medical provider or hospital, it’s not an insignificant amount of their revenue. These are legislative issues — federal funding at stake.

I also worry about the current shutdown if it isn’t resolved. If Affordable Care Act premiums go up 100% or 200% for those in exchange programs, people may go uninsured. I’m worried about how removal of marketplace funding will manifest with providers trying to pass along that revenue void to workers’ compensation.

It won’t come as direct price increases. It’ll come as utilization — where I used to do two modalities, now I’m doing three. That’s the fastest way for medical providers to address revenue gaps. Anytime you’re removing funding from the system, participants look to replace that funding somewhere.

There are ramifications to all policy choices. While the current administration is expressing themselves through their policies, it has potential for negative consequences relative to workers’ compensation costs. Has it manifested yet? I don’t know. This is worth watching to determine if it’s just politics or something that manifests as hard costs.

R&I: What operational or strategic changes would you recommend for employers to better manage cost changes?

DT: Underlying Enlyte’s strategy is trying to get better outcomes through bringing together disparate capabilities that were all consumed separately. It was up to payers to figure out how to optimize them, which is a heavy lift requiring intimate knowledge of a wide range of solutions.

It’s really about finding nuggets of gold — panning for gold. You’re finding small things that, when added up, become meaningful differentiators. Percentage point differentiation between you and your competitors.

If I were in employers’ shoes today, I’d be looking for how to optimize my program across all the capabilities I’m using, and whether my partners can optimize the intersection between all of them. I’m always looking for what I call “the Apple effect” — cross-product integration, the single user experience where my phone, my watch, and my screen all speak seamlessly.

In the past, I bought my camera from Canon, my watch from Seiko, and my phone from Ma Bell, and none of these communicated in a way that simplified my life. That integration is what I’d be looking for.

Now, it doesn’t have to be simply from what we do. You can invest in your own capability, but that’s difficult because you’re managing a panel of different vendors, different data integration and exchanges, rather than focusing on what you’re really good at — running your business.

The strategic move would be pushing your partners to deliver what you want because competition still exists. Great partnerships push each other to really deliver great outcomes. &