Dirty Business Fears

The single biggest threat to the health of workers' compensation in the United States is a fear of retribution that keeps those in the know about the shenanigans that go on in this "dirty industry."

It's a shame, but it's real.

I get phone calls and emails all too frequently, like the other day from a guy I'll call Mike - not his real name, but as the introduction noted, anonymity is paramount because of fear of reprisal.

But the story is not unusual and, like the others, it goes essentially like this:

Top tier executive in a large claims department puts himself between vendors and claims in exchange for payola.

In other words, extortion for a "guarantee" flow of future referrals, regardless of the quality of services or products, and regardless of outcomes, expense, etc.

Fee schedules and other cost controls are subverted by layering the bills through third party intermediaries, what we like to refer to as "networks."

"I have been in this industry for 23 years," says Mike. "Although I always knew that vendors paid for meals, vacations, and rounds of golf, I never thought that they also paid for the equivalent of vacation homes in Florida and to fund supplemental retirement slush funds for c-suite baby boomers."

"When I asked colleagues about this," he continues, "I was told to 'let it go' because 'everyone is doing it.'

"The problem with workers' compensation today is that policy is driven by people with conflicts of interest.  When 'reforms' call for the potential use of more vendor oversight then you can see what has been happening.  Look no further than the growth in CA MCCP and ALAE costs to prove my point (there are additional 'hidden' vendor costs as well).  Now, expand that same system across the country...wash, rinse, repeat.  Managed care is BIG BUSINESS.  Payers are benefiting because they sometimes own these vendors AND/OR they arbitrage the revenue AND/OR they receive revenue-sharing payments AND/OR they can lower their administrative costs AND/OR key executives are quietly receiving compensation so long as the referrals continue to flow."

This may all in fact be true, and I have no reason to doubt that it isn't. There is enough illogic going on in workers' compensation that I can't discount Mike's cynicism.

Mike suggests several steps to curb or discourage executive cheating of the system, including anonymous hotlines, criminal penalties for bribes or payola, unbundling vendor billings to see what caregivers are actually paid, and transparency disclosures for conflicts of interests.

Many states, however, already have some or all of these requirements or programs in their laws.

The problem is not with the laws or lack of them. The problem is that hardly anyone is willing to spill; without naming names of people and companies, and without willing to testify and/or provide documentation, there will be no stopping such nefarious activity.

And I don't have an answer to that one. I'm quite certain that there are elements of the work comp industry that have ties to organized crime. Most folks don't want to risk disappearing in the middle of the night...

Even if there is no connection to organized crime, work comp is essentially a small industry and word gets around. A sure way to amputate a career is to squeal, because, as Mike was told, "everyone is doing it."

"To conclude," says Mike, "99% of the people in this industry are working every day without knowledge of the corruption that I mentioned above. These are the people who would rightfully defend the integrity of their co-workers and of the system.  If the relatively few bad actors are removed and replaced with good, decent people, then perhaps the WC industry will continue to enjoy its privatization for another 100 years.  If not, a federalized future surely awaits!"

I don't think federalization would be a response to c-suite fraud because wrongful acts can and will occur regardless of who "owns" the system (just look at Medicare as an example).

The bottom line is that without names and sources it's just a story, fiction, unverified and unvalidated.

Anonymity protects the guilty, fosters the hypocrisy, and promulgates the regulatory burden that the 99% must shoulder.