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Digital EditionUnderstanding Vertical Integration’s Impact on Workers’ Compensation Claims Costs
Vertical integration has become a growing trend in health care as more hospitals and health care networks acquire physician practices.
According to a recent WCRI study, the proportion of physicians practicing at hospital-owned sites increased from 32% to 49% between 2012 and 2018. Cornell reported that “between 2019 and 2022 alone, hospitals acquired 4,800 additional practices, and 58,000 more physicians became hospital employees.”
On paper, vertical integration makes sense for health care: If physicians work directly for hospitals, there should be greater efficiencies and quality of care for patients due to easier coordination and information-sharing.
However, as WCRI’s “Impact of Vertical Integration in Workers’ Compensation” study posits, the workers’ compensation industry is faced with a few challenges — namely, when it comes to medical management and claims costs.
“Workers’ compensation claims outcomes are heavily influenced by medical management, as medical costs traditionally constitute the largest part of the claim. To achieve favorable outcomes and enable injured workers to return to their pre-injury life and work, it is crucial that they receive the most appropriate treatment,” said CJ Cypcar, CorVel’s vice president of network solutions.
“This ongoing trend of vertical integration presents multiple challenges, such as increased medical payments, network participation and outcomes.”
Vertical Integration, Medical Management Costs and WC
CJ Cypcar, vice president of network solutions, CorVel
WCRI concluded that increasing market consolidation within health care has led to higher medical payments per claim (an increase of between 0.9 and 4.5%), more services billed/provided per visit (an increase of 18.9%), and more evaluation and management services (an increase of 10.5%).
“As more hospitals and health systems continue to buy physician practices, the practices will have less autonomy on specialty referrals, impacting the outcomes that adjusters can achieve on these claims.
“Additionally, it creates even more medical management on claims if this causes network participation to reduce, allowing medical costs to increase.”
Because of this potential for rising costs, comprehensive medical bill review is crucial for the workers’ comp industry.
Should data be captured in a silo, only a small piece of the puzzle will be revealed, potentially causing information gaps. However, a holistic approach, one that incorporates data from various states or business segments, enables workers’ compensation professionals to detect data anomalies sooner, uncovering cost containment opportunities or areas in need of further investigation.
“For example, if network participation is lower in an area with multiple hospital systems, we can ask ourselves if an out-of-network solution might be more appropriate on a case-by-case basis,” said Cypcar.
Where AI Plays Its Part
Perhaps the most important tool in the workers’ comp professional’s toolbox, then, is a suite of medical management services that allow visibility and analytics into claims at a holistic level.
Here’s where data, analytics and artificial intelligence can play an important role.
“Data helps drive outcomes,” said Cypcar. Greater integration of services within bill review — including from PBMs, ancillary services and utilization review — brings the data puzzle pieces together, all in an effort to identify gaps or areas of overutilization.
“Technology and AI are poised to remain pivotal forces in the industry,” she added. AI can initially be used to identify trends and insights: “AI could flag that provider X in a specific state and location has been accepting certain reimbursement rates for the past two years, but now payments are increasing.” Based on this data, AI could prompt the team to contact the provider to review rates in that area or provide an alternative solution.
AI can also be employed to identify duplicative services, incorrect coding and treatment trends and to assess network utilization. It can identify exceptions, trends and actions or alerts that need to be escalated and would have otherwise been missed.
However, it should be noted that the effectiveness of AI’s outcomes depends on the quality of the data that it receives.
If AI models receive incomplete or fragmented information, the insights gained will be limited, and any identified trends may not reflect the actual situation.
“If all the data points cannot be connected, it’s impossible to see the larger picture of what’s occurring in the industry,” said Cypcar.
Looking Ahead
As physician practices struggle to attract health care employees, it will become more expensive to sustain their independent practices, causing additional vertical integration. But Cypcar believes the associated costs can be managed successfully.
TPAs can act as a reliable data collection source because they are already keeping pace with medical management costs across states and business segments. They are also in contact with provider networks, PBMs and other resources that can influence claims.
“We have more tools now than ever before, and AI will continue to help not only with insights but also to drive change and action, all to help influence the best outcome for the injured worker,” Cypcar said.
Having a solution that allows for the ability to view outcomes and data across all medical services, not just in individual silos, will allow for a greater ability to identify overutilization, increase network utilization and identify service exceptions.
“We must be vigilant in assessing these consolidations, as this creates less competition and impacts the affordability of health care,” said Cypcar.
“Achieving success will depend on strategic planning, collaboration and a commitment to improving both cost efficiency and patient outcomes.” &
