Trends in Workers' Comp

Record Hospital M&A Deals Spell Trouble for Workers’ Comp Payers

Hospital-system mergers reduce competition, elevating the importance of cost-containment measures for workers' comp payers.
By: | July 31, 2018 • 4 min read

Eliminating unnecessary emergency-room visits and other known cost containment measures is increasingly critical, with a record number of hospital mergers expected to squeeze workers’ compensation payers.


Health-system mergers set a record during 2017, with 115 announced deals. The trend continues in 2018, NCCI Holdings Inc. reported in a July 2018 Quarterly Economic Briefing.

Data shows that overall, the mergers increase hospital service prices 6 percent to 18 percent on average, NCCI said. Although such findings rely on health insurance and Medicare data, NCCI expects the mergers will accelerate the cost of caring for injured workers.

The current wave of consolidations began in 2010 and accelerated in 2014. It likely will increase both the quantity of care provided and the unit price of medical services, even in states attempting to control costs with workers’ comp hospital fee schedules.

“By combining former competitors in a market, consolidation has the potential to reduce competition, affect the quantity of care and increase prices,” the workers’ comp research and rating organization said. “Research to date on completed hospital mergers has yet to demonstrate the benefits of consolidation via improved quality, access and cost.”

In addition to the mergers, hospitals acquired 5,000 physician practices between 2015 and 2016, driving a trend of more hospital-based doctors.

Health care consolidation reduces hospital operating costs by 15 percent to 30 percent,  while improving care integration and eliminating clinical services duplication. But those reduced hospital operating expenses do not find their way to service price decreases, NCCI said.

A study on the precise impact of health care consolidation on workers’ comp does not yet exist, according to NCCI. That is why NCCI researchers referenced commercial insurance and Medicare data to report on the price and utilization increases accompanying health-system mergers.

“Even so, the trend toward increasing hospital consolidation is likely to have produced similar upward pressures on utilization and price in workers’ compensation as those observed for other types of health insurance,” NCCI reported.

NCCI plans to conduct further research into the impact of hospital services concentration on prices for workers’ comp medical care.

Renewed Focus on Cost Containment

The mergers make it increasingly obvious that employers and other workers’ comp payers must double down on strategies for eliminating unnecessary hospital visits and containing the cost of necessary visits.

The self-insured Southeastern Pennsylvania Transportation Authority’s practices for eliminating hospital expenses include training front-line supervisors.

Thomas Ryan, senior principal, Willis Towers Watson

The training educates supervisors on the benefits of addressing minor accidents, such as a bumped knee, with ice and perhaps a follow-up visit with a SEPTA network doctor rather than always considering an emergency room visit as the first line of treatment.

“That way you are not going through the most expensive portal for health care,’ said Rick Graham, SEPTA’s workers’ comp director.

The health system mergers and acquisitions will make proven measures for containing medical-provider expenses, such as bill-review systems and discounted provider network contracts, increasingly important, said Thomas Ryan, senior principal at Willis Towers Watson.

But history also shows that workers’ comp purchasers of medical provider networks will have less leverage when negotiating for the services when health-care provider options narrow.

For example, medical providers in rural areas, where there are fewer options for treating injured workers, historically negotiated for higher fees, Ryan elaborated.

Still, network discounts do have a history of reducing claims payer costs.  But workers’ comp payers must make certain that prices are not the only consideration in the discounted health-provider contracts.

As hospital swallow up more health care services such as local clinics, workers’ comp network purchasers need to be certain the clinics and other services employ occupational-medicine doctors who are experts in treating the types of injuries employees typically suffer.

Clinics only dispensing family medical care won’t do, Ryan said.

Despite the cost and utilization challenges stemming from health-system mergers and acquisitions, there may be a bright spot.


Graham, SEPTA’s workers’ comp director, said his program benefits because the hospitals in his area have their own internal workers’ comp programs, such as return-to-work practices, for hospital employees.

Because of that, the doctors treating SEPTA employees now understand other employers’ return-to-work efforts and know they can safely release injured employees into a work environment prepared for their return.

As hospital swallow up more health care services such as local clinics, workers’ comp network purchasers need to be certain the clinics and other services employ occupational-medicine doctors who are experts in treating the types of injuries employees typically suffer.

Ryan, who has several hospital clients, said there is potential for SEPTA’s experience to become a more widespread trend.

As health systems merge, he is seeing hospitals pour resources into their own workers’ compensation risk management efforts. And, as hospitals acquire more doctor groups, the doctors working in hospital emergency rooms are now employees who may be learning more about their employers’ return-to-work programs.

In addition, with the doctors now employees rather than private-practice physicians who come and go, the newly employed doctors may have greater ability to learn about other local employers’ occupational health and return-to-work practices.

“They are no longer like the rent-a-docs that rotated through the emergency departments where there were a lot of irregularities as far as continuity of care,” Ryan said. “Now they are full-time employees familiar with different employers in the community.” &

Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]