Dan Reynolds, the editor in chief of Risk & Insurance, recently had a conversation with Joe Berardo Jr., CEO of Carisk, about the management of catastrophic and complex workers’ compensation injuries and the impact of provider consolidation on health care delivery. The pair also discussed the potential of AI in predicting clinical outcomes.

What follows is a transcript of that conversation, edited for length and clarity.

Risk & Insurance: What changes have you observed in the management of catastrophic and complex workers’ compensation injuries, particularly regarding the behavioral health aspects?

Joseph Berardo Jr.: Over the past eight years, we have seen widespread recognition in the marketplace that we must proactively address the behavioral health aspects of an injury. We have seen over 90% of catastrophic injuries include co-occurring behavioral health challenges. These aspects come in two forms.

First, there are often a number of preexisting conditions — such as depression, anxiety and substance abuse disorder — that have been treated through group health benefits over time. In fact, antidepressants and anti-anxiety medications are consistently among the top five prescriptions in every employer’s group health plan.

While these preexisting conditions may not be directly compensable under workers’ compensation, they are clearly a factor in the life of the injured worker and will impact their ability to recover from the injury, which further impacts the duration and cost of the claim.

Second, we see an episodic nature to catastrophic injuries, where PTSD, anxiety and depression arise due to either the trauma or the debilitating nature of the injury and its impact on the life of the injured worker. Catastrophic injuries are defined as life-altering, and they impact the mental health of the patient given the potential for incomplete recovery to pre-injury function. When I first started these discussions about eight or nine years ago, many carriers were hesitant to address behavioral health, as they didn’t want to “buy the psych claim.” Regardless of whether you want to buy the behavioral part of the claim, it’s still impacting claim cost and duration.

However, the industry has now come around to recognizing the mind-body connection and the importance of addressing these co-occurring mental health conditions that impact physical recovery. The widespread acceptance of mind-body connection has become evident in significant events such as the enactment of mental health parity laws, compensability laws for first responders and the impact of COVID-19. These events serve as tipping points for the industry to recognize the imperative need to address behavioral health within the realm of workers’ compensation.

R&I: How can we improve the delivery of health care, particularly in the context of episodic care for injuries?

Joseph Berardo Jr.,
chief executive officer, Carisk Partners

JB: Episodic care, the approach we take for these injuries, is essentially a bundle encompassing a time frame, an outcome and a price. Importantly, this financial model makes it possible to address the combined clinical and behavioral aspects, as well as the social determinants of health and health equity issues, which are prevalent in catastrophic cases.

We often see a socioeconomic spectrum where insecurities related to food, housing, transportation or childcare are common in the daily lives of our injured workers. While they may not be compensable, it’s crucial to manage these factors through available community resources to ensure that the claim duration and cost are not further impacted.

We can all agree that navigating our health care system is challenging. Consider the difficulty of navigating the system and daily life challenges after experiencing a catastrophic injury, whether it’s for oneself or for a family member.

While it is integral to Carisk’s mission, vision and values, there is a notable trend across the industry toward recognizing the importance of holistic, patient-centered care. Beyond the normal rhetoric, tangible actions in the marketplace are emerging that genuinely attend to the comprehensive needs of individuals throughout their recovery journey. In the care coordination we provide, our primary focus is on removing any obstacles that could potentially hinder the injured worker from fully engaging in their own recovery.

R&I: Has provider consolidation had an impact on health care delivery in the workers’ compensation industry?

JB: Provider consolidation, which has been done under the guise of creating bigger, more cost-effective systems of care, has had the opposite effect. A prime example is the current battle around “site of care” reimbursement, where a hospital might acquire a physician practice and suddenly charge a facility fee for a minor in-office procedure.

Medical inflation has been impactful across both group health and workers’ comp, but workers’ comp often gets the short end of the stick when negotiating rates with hospital systems. As an industry, we sometimes negotiate a 40 to 50% discount off charges, but this can still be over 500% of Medicare rates, which is unacceptable.

Group health payers typically pay 200 to 250% of Medicare at most, so why is it acceptable that workers’ comp claims pay double that? As a workers’ compensation industry, we are arguably the second-best payer in the overall health care marketplace after Medicare, with first-dollar coverage and lifetime benefits — far better than group health plans with deductibles, coinsurance and bad debt.

The worrying aspect of provider consolidation is that the historical contracts between workers’ comp payers and medical providers have not evolved as they should. Discounts based on a percentage of charges are not grounded in anything fixed; instead, consider reimbursement as based on a “Medicare plus” model.

As an industry, we need to be much more aggressive in collectively defining what we believe is acceptable reimbursement.

R&I: Are there other aspects of the revenue model within workers’ compensation that need to be adjusted or improved?

JB: The current revenue models in workers’ compensation have inherent flaws that encourage medical inflation year after year. Many of these models are based on a spread, markup on physician or provider fees, or a percentage of the discount savings passed on to the client.

However, these approaches fail to address the underlying fixed costs. As a result, the models inadvertently incentivize increased utilization and longer case durations, as there is a financial benefit to keeping cases open for extended periods.

To effectively tackle these issues, the industry must reevaluate and restructure its revenue models. The focus should shift towards addressing the root causes of medical inflation and prioritizing patient outcomes over prolonged case management.

By aligning incentives with the goal of efficient, high-quality care, the workers’ compensation system can achieve better results for all stakeholders involved

R&I: How would you assess the current state of utilization in the workers’ compensation industry, and how does it impact the overall system?

JB: In the workers’ compensation industry, there is still a tendency towards overutilization. This is evident in various aspects of the system, such as nurse case management and physical therapy.

In nurse case management, the structure is often based on billable hours. As long as the case remains open, it continues to generate revenue for the company, which may lead to prolonged case durations.

Similarly, in physical therapy, the amount charged to the payer is significantly higher than what the provider receives for the actual visit. While running a for-profit business requires investment in administration, cybersecurity and other essential aspects, the current system lacks sufficient bundled payment models.

Bundled payments, which we utilize in catastrophic cases, encompass a specific duration, outcome and guaranteed price. Despite being the most challenging and highest-acuity cases, this approach has proven effective.

At Carisk, we are expanding this model downstream by introducing programs for chronic pain and wound care. By providing a comprehensive care plan with a set price and guaranteed outcome, we assume both the financial and political risks associated with the case.

To improve the workers’ compensation system, the industry needs to adopt bundled payment models more broadly and rapidly. This shift will help align incentives, reduce overutilization and ultimately lead to better outcomes for injured workers.

R&I: Do you foresee industry consolidation having an impact on the workers’ compensation landscape in the coming years? 

JB: The workers’ compensation industry has undergone significant consolidation in recent years. However, I believe that new companies and market share gainers will be those that approach clinical programs with innovative financial structures.

It’s reminiscent of the banking industry, where large banks acquire smaller ones, only for new, smaller banks to emerge and thrive by offering better service. Over the next four to five years, we can expect to see interesting businesses emerge in the workers’ compensation space.

R&I: Can you share your perspective on the potential of AI in predicting clinical outcomes and improving health care results?

JB: Advancements in artificial intelligence will play a crucial role in enabling companies to analyze historical data and develop novel approaches to tackle future challenges. This technology will provide valuable insights and help reshape the industry landscape.

Health care is no different. While the technology for artificial intelligence, machine learning and natural language processing already exists, what is often underestimated is the need to train these models and technologies.

At Carisk, we are currently working on a project within our clearinghouse that exemplifies this. By analyzing the medical claims and accompanying notes we receive, we have developed clinical algorithms over the past four years to train AI models. These algorithms can identify patterns, words, combinations of words, assessments and the sentiment of words within the notes.

By marrying this information with the actual diagnosis code on the claim, we can predict which individuals might be at risk of a delayed recovery. I believe we will see more companies leveraging AI to review notes and other data and presenting insights through dashboards to inform different approaches to patient care.

On the clinical side, AI is already making an impact. Robotic surgery systems, such as the da Vinci and Mako robots, are gathering data from prior surgeries to provide surgeons with real-time best practices on measurements and angles during procedures.

While some may brand things as AI when they are simply data warehouse queries, I believe AI will have a tremendous impact on health care, improving quality and lowering administrative costs.

R&I: How is technology transforming the way surgeons perform procedures and make decisions during surgery?

JB: Surgeons today are using advanced technology that resembles something out of science fiction. During procedures, they wear specialized suits that incorporate heads-up displays, similar to those found in modern cars.

These displays project vital measurements and suggestions directly into the surgeon’s field of vision. This real-time information allows them to make informed decisions while performing the surgery and enhancing precision and outcomes.

The integration of cutting-edge technology in the operating room is revolutionizing surgical practices. It provides surgeons with unprecedented access to data and insights, enabling them to deliver the best possible care to their patients.

R&I: Can you share with us details on the emerging trends you see in the workers’ compensation industry?

JB: I’m encouraged by the increasing discussion among several companies about the integration of behavioral health and value-based or bundled care. There is a recognition that we need to change, and group health is often a step ahead of us in these areas.

Implementing value-based care in workers’ compensation has some advantages compared to group health. Since we provide first-dollar and lifetime coverage for the injured individual, it’s easier to create financial and clinical models and determine who will pay for them and how they will be paid. In our world, the same risk-taker stays with the patient for the duration of their care.

In contrast, group health plans can change annually, making it difficult to invest in certain initiatives. However, workers’ compensation deals with specific, defined injuries and has access to years of historical claims and outcomes data. The increase in AI and machine learning helps us analyze this data more effectively.

Through evidence-based medicine and data analysis, we can determine the expected outcome, the time it will take to achieve it, and the associated costs. I believe this is where our industry should focus its efforts over the next five years or so. &