WC Is A Zero Sum Game Of Sorts
I often advise investment groups when they look to invest in the Workers Compensation market – namely ancillary services such as Medicare Set Asides, Physical Therapy (PT), PBM’s, etc. One motto I have stuck with over the years is the Workers Compensation is a zero sum game of sorts. The Latin name for it is ceteris paribus or “all things remaining equal.”
Investment groups are very concerned that – for instance – the allowable amount for each physical therapy is declining due to most states’ fee schedules being based on the Medicaid/Medicare fee schedules. As we all know, the federal fee schedules have been cut dramatically.
Interestingly enough, three years ago, I created a huge Risk Management study for an investment group that was looking to invest in a group of PT clinics in CA. My bottom line conclusion was that everything equals out in Workers Comp as the number of physical therapy visits and procedures per visit increase enough to offset the fee schedule reductions.
This same ceteris paribus was analyzed by NCCI recently. The number of workers compensation claims had fallen, but the severity of the claims had risen. The severity did not necessarily completely offset the lower numbers. I was reading an article in the Insurance Journal this morning that reminded me of this “equalization factor.”
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