Category Archives: Medical Provider Networks

A Deeper Dive into Medical Cost Rising for Lost-Time Claims

It is said, a picture is worth a thousand words, and I have ten pictures, courtesy of NCCI’s Barry Lipton’s presentation on that subject.

It was brought to my attention by my fellow blogger, James Moore, of J&L Risk Management Consultants. I met James back in February at the NCCI 2017 Data Education Program in West Palm Beach.

Mr. Lipton is the Senior Actuary and Practice Leader, and his presentation was called, “Medical Cost Trends Then and Now.

Yesterday’s posts regarding the slight increase in the average medical costs for lost-time claims only scratched the surface of the subject. I hope this post will dive deeper into it, so that we can see the whole picture.

In my first post from yesterday, “Slight Increase in Average Medical Costs for Lost-Time Claims, Part 1”, I discussed how physician costs and prescription drug costs impacted medical costs for lost-time claims.

On the issue of physician costs, Mr. Lipton showed that there was a decline in the 2015 medical payments per claim due to physician costs, but as the following chart proves, despite this decline, physician costs contribute a larger share of the total costs.

Chart 1.

Chart 6.

Source: NCCI Annual Issues Symposium 2017

According to James, the main reason for the reduction in costs is the physician utilization per claim. Even though it is only a3% reduction, it is significant, James says, in a time of upward spiraling medical costs. Chart 2 bears this out.

Chart 2.

Chart 7.

Source: NCCI Annual Issues Symposium 2017

The second part of my post yesterday, “Slight Increase in Average Medical Costs for Lost-Time Claims, Part 2”, looked at the steady rise of the average medical cost for lost-time claim.

If we compare the chart from yesterday’s post to the one Mr. Lipton presented, we will see that his chart does show increases and decreases over time in the average medical costs per lost-time claim, but my chart indicates that ever since 1995, it has been rising steady.

Both charts, do show that the average medical cost per lost-time claim is hovering around $30,000, and if the numbers are consistent with ones for earlier years, represents almost 60% of the total claims cost.

My Chart.

Chart 2.

Chart 3.

Chart 4.

Source: NCCI Annual Issues Symposium 2017

To examine this in greater detail, Mr. Lipton broke down the Accident Years into three separate periods and slides, to show the change in medical cost per lost-time claim. He compared the change in Personal Health Care (PHC) Spending per Capita with the Medical Cost per Lost-Time Claim.

In the period, 1995-2002, the average growth rate (AGR) for WC was 9%, and the AGR for PHC was 6%. In the next period, 2002-2009, WC AGR was 6%; PHC AGR was 5%, and finally, in the last period, 2009-2015, the WC AGR was 1%, while the PHC AGR was 3%, as seen in chart 4.

Chart 4.

Chart 10.

Source: NCCI Annual Issues Symposium 2017

To understand what was driving the decline in Accident Year 2015, Mr. Lipton identified six different drivers, as indicated in chart 5.

Chart 5.

Chart 8.

Source: NCCI Annual Issues Symposium 2017

Finally, Mr. Lipton discussed how hospital costs contributed to medical cost per lost-time claims by highlighting the difference between inpatient and outpatient costs, which are rising.

The following chart looks at the four years prior to the 2016 Accident Year, 2012-2015.

Chart 6.

Chart 9.

Source: NCCI Annual Issues Symposium 2017

In 2012, Hospital Inpatient Paid per Stay amounted to $19,514, in 2013, it rose to $22,944 (18% increase), in 2014, it was $24,558, or a 7% increase, and last, in 2015, it was $25,320, or 3% increase over the previous year.

As for Hospital Outpatient Paid per Visit, the number are considerably lower for each year when compared to Inpatient Stays, but nonetheless have been rising.

So perhaps this, at the end is why the average medical cost per lost-time claim has been rising over a period of over twenty years, from 1995 to 2015.

I wrote to James last night when I saw his recent posts on this presentation, and he responded that we are both correct in our analysis, but looking at it from different points of view.

My conclusion after reading this presentation and my discussion with James suggests to me that there are two things going on here. One, when a worker is injured and receives medical care, unless and until he or she goes to a hospital, the best way to lower costs is through what James calls one of his six keys to reducing workers’ comp costs. One of those keys is medical control by the employer, which James said reduced cost by 75%.

But I also realized that when an injured worker goes to the ER or an Ambulatory Service Center as an Outpatient, has an Inpatient stay, that this is where the medical costs go up.

Naturally, Workers’ Comp medical spending is only a fraction of the overall health care spend of the US, and as costs for health care in general rise, so too does costs in workers’ comp.

So, while many have argued or shown that they can lower costs on the front end, from time of injury to return to work for most claims where no surgery is required, one of the largest reasons for the steady rise in the average medical cost per lost-time claims is hospital costs.

On this, both James and I agree. However, it is important that many in the industry see this as well. Keep thinking that it will change by doing this or that has not worked, the numbers prove that. Maybe it is time for something out of the box.

Washington State Workers’ Comp Accepts Foreign Medical Providers

Seven years ago, when I was working on my MHA degree, I wrote a paper which has become the basis of this blog.

During that time, I found the website of the Department of Labor & Industries for Washington State, and was surprised to find landing pages that listed physicians in Canada, Mexico, and other countries. These countries were mentioned in my paper, and I have referred to it in subsequent posts from time to time.

However, in the period since, I have noticed that the landing page for other countries was removed. I contacted WA state a while back and was told they were updating it. Yet, as of recently, it is still not been replaced, so I contacted them again yesterday.

I received a reply from Cheryl D’Angelo-Gary, Health Services Analyst at the WA Department of Labor & Industries. She indicated in her response that she is the business owner of the Find a Doctor application (FAD).

According to Ms. D’Angelo-Gary, “our experience showed that most of Washington’s injured workers who leave the country travel to one of these adjacent nations. Workers who travel further afield are advised to work with their claim manager to locate (or likely recruit) a provider. All worker comp claims with overseas mailing addresses are handled by a team of claim managers who have some extra training to help the worker find a qualified provider.”

I asked her to clarify this statement further in my next email by asking if this means that any claimant who travels outside of North America will have to ask the claims manager to find them a doctor.

She replied, “interesting questions!” She also differentiated between an injured worker who is traveling versus one who has relocated out of country.

She went on to say that, “a worker who is traveling and needs claim-related care would be instructed to seek treatment at an ER or urgent care clinic, where the providers do not need to be part of our network and would not be providing ongoing treatment. To be paid, the provider would have to send us a bill and a completed non-network application (available online). Under no circumstances should the provider bill the worker.”

However, she continued, “a worker who has relocated overseas must send in a change of address (required whenever a worker moves). That allows us to transfer management of the claim to a unit that specializes in out-of-country claims. The claim manager would work with the injured worker to help the worker find somebody in their new location. It’s critical (per state law) that the worker choose their own provider, though the provider must meet our requirements and standards of care. Proactive workers tend to handle this well, and find a provider in very little time; less proactive workers can find this challenging. We’re currently looking at this process to see how we can do this better.”

And in final emails to her last night, I tied the first scenario to medical travel, and the second scenario to ex-pats living abroad, but needing medical care. I also asked about workers who wanted to travel back to their home country for medical care, and said that I write about medical travel for workers’ comp.

As of today, I have not heard back, but it is early, and there is a three-hour difference between us.

It must be pointed out that WA state is what is termed a ‘monopolistic state’ in that the state does all the work of handling workers’ comp insurance and claims. Thus, when Ms. D’Angelo-Gary says that worker must work with the claim manager, the claim manager in question is a state employee, and not an employee of a commercial insurance company.

It may be possible, therefore, for medical travel to be implemented in workers’ comp, and it should be something that the medical travel industry and the state should explore together. Ms. D’Angelo-Gary did say they were looking at this process to do better. What better way to improve the process then by utilizing medical travel?

Follow-up to Employee/Employer Choice: Three Years Later

Not that long ago, Michael Grabell of ProPublica, and Howard Berkes of NPR, published a report called “The Demolition of Workers’ Compensation”.

There was much industry condemnation about the report, and my fellow blogger, Joe Paduda, tried to set the record straight, but got nowhere.

I managed to write to Michael and corrected him on the issue of choice of treating physician, which I covered in these two articles: “Employee vs Employer Choice of Physician: How best to Incorporate Medical Tourism into Workers’ Compensation” and “Employee vs. Employer Choice of Physician Revisited: Additional Commentary on How Best to Incorporate Medical Tourism into Workers’ Compensation“.

I sent Michael all of my research and I think he was convinced that employees had more choice, it was just a matter of what options they had, given each state’s workers’ comp laws.

One of the sources I used back then, and today was a joint publication between the WCRI and the IAIABC,”Workers’ Compensation Laws As of January 1, 2016”, which can be purchased here.

Here is my version of their Table 3:

pic10

Notes: * Employee may seek reasonable care on his or her own at employer’s expense
** Can allow worker to select then other party may choose to direct it for next 60 days
*** Employee for non-network claims, any willing provider; network claims, from list by network
**** Employer may have on-site medical provider that employees must see first, then employee can select

But as you will notice, the far left column has the most number of states where the employees can choose their treating physicians, although some do have certain circumstances where the employer has the choice, or there are conditions that must be met.

Relying on the US Chamber of Commerce, as Michael told me he did, does not get you the right data. Using the statutes and laws themselves is the only way to know what is permitted and what is not permitted. And the employee for the most part, does have a say in his or her care.


I am willing to work with any broker, carrier, or employer interested in saving money on expensive surgeries, and to provide the best care for their injured workers or their client’s employees.

Ask me any questions you may have on how to save money on expensive surgeries under workers’ comp.

I am also looking for a partner who shares my vision of global health care for injured workers.

I am also willing to work with any health care provider, medical tourism facilitator or facility to help you take advantage of a market segment treating workers injured on the job. Workers’ compensation is going through dramatic changes, and may one day be folded into general health care. Injured workers needing surgery for compensable injuries will need to seek alternatives that provide quality medical care at lower cost to their employers. Caribbean and Latin America region preferred.

Call me for more information, next steps, or connection strategies at (561) 738-0458 or (561) 603-1685, cell. Email me at: richard_krasner@hotmail.com.

Will accept invitations to speak or attend conferences.

Connect with me on LinkedIn, check out my website, FutureComp Consulting, and follow my blog at: richardkrasner.wordpress.com.

Transforming Workers’ Blog is now viewed all over the world in 250 countries and political entities. I have published nearly 300 articles, many of them re-published in newsletters and other blogs.

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New Study Confirms ACA May Shift Claims to Work Comp

The Workers’ Compensation Research Institute (WRCI) released a study today indicating that the Affordable Care Act (ACA) may shift claims into workers’ compensation.

Readers of this blog will have read by now the following posts from earlier this year that discussed at length what many in the workers’ compensation and insurance industries said would happen under the ACA.

Here are the posts:

Accountable Care Organizations May Shift Claims into Workers’ Comp

Failure to Expand Medicaid Could Lead to Cost-Shift to Work Comp

Update on Affordable Care Act’s Impact on Workers’ Comp

Challenges Remain in Physician Payment Reform

The WCRI study is quite long, so I will only give you the introduction and summary of findings. You may purchase the complete study by clicking the following link: http://www.wcrinet.org/result/will_aca_shift_wc_result.html.

The study begins by asking the question, “what is the extent to which the move to “capitated” group health arrangements under the ACA leads to cases that previously would have been paid under group health insurance to end up being paid under workers’ compensation.”

They refer to this as case-shifting, as opposed to cost-shifting, and state that if just 3% of group health cases with soft tissue injuries were shifted to workers’ comp, workers’ comp costs in a state like Pennsylvania could increase by nearly $100 million.

In California, the increase would be higher. More than $225 million, and in Iowa, the additional workers’ compensation costs would be around $25 million, or about 5% of the total benefits paid.

One mechanism the WCRI says by which cases would be shifted to work comp is the growth in the number of patients covered by “capitated” health plans.

Medical providers are reimbursed for each procedure in traditional fee-for-service medicine, which is often called, retrospective reimbursement.

Under capitated plans, the study says, medical providers receive a fixed annual payment per patient, which is often called, prospective reimbursement.

As I reported in my previous articles about cost-shifting, a patient covered by a capitated group plan presents different financial incentives about key decisions to a doctor and the health care organization they belong to, compared with a patient covered by a fee-for-service plan.

For example, if a capitated patient has back pain, the provider and the health organization do not get paid for additional care; whereas, for a patient under fee-for-service, the provider and the organization get paid for each service rendered. Workers’ compensation, the study points out, almost always reimburses on a fee-for-service basis.

Another question the study raised was, “to what extent do the financial incentives facing providers and their health care organizations that arise out of capitation influence the determination of whether or not a case is work-related?

The decision of where to send the bill, the study says, should align with the physician’s assessment of whether the cause was work-related or not. It is the amount of uncertainty about the cause of the medical condition that provides the opportunity, according to the WCRI, for the financial incentives to influence the decision.

How the ACA ties into this is apparent in my post, “Accountable Care Organizations May Shift Claims into Workers’ Comp.” According to the WCRI, the ACA promotes the growth of ACO’s, which will increasingly integrate care from all providers under one capitated payment. They will receive one fixed payment regardless of the treatment the patient receives.

This, they say, will provide strong incentives to classify injuries as workers’ comp cases where possible. To date, over 500 ACO’s have been formed since passage of the ACA.

Additionally, the Obama Administration’s proposed moving to “value-based” reimbursement systems for physicians under Medicare (see my post, “Challenges Remain in Physician Payment Reform”), is also cited in the study as another mechanism leading to case shifting.

The WCRI states that the exact definition of this system is unclear, but that it is widely understood that this would imply more prospective reimbursement.

They point to research that indicates that when Medicare changes its payment system, there is a significant price change among commercial insurers. This, too, could further induce shifting of certain cases, they report. (see “Shared Savings ACO Program reaps the most for Primary-care Physicians”)

What are the findings?

The WCRI looked at three groups of states. The first group was states where capitated plans were very common, the second group was states where capitated plans were somewhat common, and the third group was states where capitated plans were less common.

Case-shifting was only found in states where capitated plans were very common, and there was little case-shifting in the other two groups.

Case-shifting to workers’ comp, the study implies, will be expected to increase as capitation becomes more common.

Here are the key takeaways:

  • Patients covered by a capitated health plan was 11% more likely to have a soft tissue injury (back pain) called work-related than a patient covered by fee-for-service.
  • Patients with conditions for more certain causes (fractures, lacerations, contusions), there was no difference between patients covered by capitation or by fee-for-service; hence no case-shifting.
  • Case-shifting was more likely in states where a higher percentage of workers were covered by capitated plans. Two reasons for this are: more cases would be shifted if more patients were covered by such plans, and when these plans were more common, providers were more aware of the financial incentives to case-shift. In states where at least 22% of workers had capitated plans, the odds of a soft tissue injury being work-related was 31% higher than workers in fee-for-service.
  • In states where capitation was less common, there was no case-shifting. Providers were less aware of financial incentives when capitation was infrequent.

What does this mean?

This study confirms what I have been reporting on for much of the past half year, that the ACA may lead to more claims (or cases) shifted into workers’ comp, thus adding to the cost of medical care under workers’ comp, and further burdening an already burdened and broken system.

But it also confirms that there are rough times ahead for the industry, and that unless new ideas are brought forth and alternatives are seriously considered, and not outright dismissed just because someone say they should be dismissed, no matter how many years’ experience they have in workers’ comp, things will get worse.

The world is changing. Things once thought impossible are possible. Ideas once ridiculed are now accepted reality. No one can stop change, not by saying so, nor by any action on their part, so you might as well open your eyes, ears and minds to new ideas, and not shut them just because you don’t agree with them. One day soon, you will be gone, and the problems will still be there. The way forward is to embrace change now so that the future is better for all.

Clarification

Some of you may be thrown off by the title of this article as meaning that the study confirms that the ACA will lead to case-shifting. That is not what was meant. What was meant was that the study confirms what had been previously reported by others and that I had written about in the posts I referenced in my article. If there was any misconstruction on my part, I apologize.

Employers Facing Double-Digit Premium Hikes

Now that the summer is almost at an end, time to get back to the topic at hand…health care.

In an article late last week, Kathryn Mayer, Managing Editor of Benefits Selling magazine, wrote that nine in 10 employers said that they are facing increases in the premiums they pay for employee health plans.

Nearly 25%, or 1 in 4 employers are seeing rate increases in double-digits, according to research released last Thursday by Arthur J. Gallagher & Co.

Gallagher surveyed more than 3,000 US employers from dozens of industries around the country.

According to James Durkin, president of Gallagher Benefit Services, Inc.:

“Employers are examining all available options to rein in medical costs, while still offering competitive benefits packages that help them attract and retain the best employees in a tightening labor market, With the Cadillac tax due to take effect in 2018, employers are expected to turn to newer, alternative cost-control tactics.”

Employers are increasingly requiring employees to shoulder a larger share of the expense in higher deductibles, and Gallagher reported that 67% are cost-shifting [emphasis added] to employees.

Gallagher also said that in-network family plan deductibles average $3,000, while out-of-network deductibles average $4,500.

Annual deductibles for employee-only, in-network plans now average $1,200, and out-of-network deductibles are an average of $2,000.

About half of employers said they are considering changing carriers to lower costs.

Lastly, nearly all employers (97%), said they will continue to provide employer-sponsored coverage to employees.

Some of the other things Gallagher’s report said was that employers would offer health savings accounts to employees (36%), implement mandatory generic drug policies (15%), and offer reduced network access or narrow provider networks (11%). 35 % may self-insure, while 13 % might offer narrower networks in the next three years.

So, what does this mean to you?

If employers cost-shift the premium hikes to their employees, many of them might do the same, and cost-shift health care to workers’ comp, which has been discussed many times in the past.

One way Gallagher did not mention that employers should try, and why should they, because they can’t think outside of the box, is have them think outside of the border, and consider medical travel for surgery and certain medical treatments and procedures too expensive in the US, and especially if the employees cost-shift to workers’ comp.

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I am willing to work with any broker, carrier, or employer interested in saving money on expensive surgeries, and to provide the best care for their injured workers or their client’s employees.

Call me for more information, next steps, or connection strategies at (561) 738-0458 or (561) 603-1685, cell. Email me at: richard_krasner@hotmail.com.

Ask me any questions you may have on how to save money on expensive surgeries under workers’ comp.

Connect with me on LinkedIn, check out my website, FutureComp Consulting, and follow my blog at: richardkrasner.wordpress.com. Share this article, or leave a comment below.

Change for Change’s Sake: What Real Change in Workers’ Comp Looks Like

Note: This is my 200th post, so I think you will find it to be one of the best articles I have written so far.

Every industry has its share of conferences, conventions and meetings around the country. The insurance and risk management industries, which includes the workers’ comp industry, is no exception.

In the early stage of my career, I worked for a small, retail insurance broker on New York’s Long Island, and the men in my company would attend the Risk and Insurance Management Society (RIMS) Conference every year.

I am sure they went there to learn about things other brokers were doing, make connections with insurance company executives, and workers’ comp service providers. But typically, these conferences allowed the participants to hang out with their buddies at the bar, and play a round or two of golf.

So I was mildly amused when I read an article posted today in The Workers’ Compensation Daily from Safety National Insurance Company, titled “It’s Time to Change Workers’ Compensation”.

The article discussed a recent meeting of the Harbor Health Systems 2015 MPN (Medical Provider Networks) Medical Directors, in which an executive from Sedgwick gave the keynote address. His address discussed the need for change in the approach to workers’ comp claims handling.

Harbor Health Systems is based in California, and through the writings of my fellow blogger, David De Paolo, and the personal experiences of two women I previously wrote about, “Ms. X” and “Ms. A”, the California workers’ comp system could use more than a keynote address to change the problems and abuses injured workers are receiving in that state.

FYI, Harbor Health Systems is a subsidiary of One Call Care Management, a company that for the past two years or so has been gobbling up smaller companies, especially in the pharmacy benefit management arena, as well as other smaller workers’ compensation service providers, and as Joe Paduda reported earlier this week, One Call Care Management has acquired an imaging company called MedFocus.

According to Joe, this acquisition consolidates One Call’s stranglehold on the market, so if this is the kind of change Mr. North of Sedgwick was referring to, then it is more of the same.

The article goes on to say that the role of a medical director is to be there to help injured workers to recover from their injuries and resume their lives. I believe “Ms. X” and “Ms. A” would beg to differ.

The article also goes on to say that for years, the workers’ comp medical networks have focused on two things: discount and proximity. They would send injured workers to the physician closest to the employer’s location who would agree to accept a discount on the treatment provided.

Over time, they realized this approach was flawed, and that they should identify the medical providers who produce the best outcomes and incentivize them to treat injured workers by compensating them fairly.

They are learning that when they find these superior physicians, they need to get out of their way and let them practice medicine. The rest of the article details how the industry needs to evolve in how they devote resources to claims, how to better explain the workers’ comp system and protections it provides, and to avail themselves of the opportunities the ACA provides to evolve the way medical care is delivered.

According to Mr. North, when it comes to change, there are three main categories of people:

  • Innovators – people who are truly creating change
  • Learners – people who take what innovators created and work to evolve it
  • Ignorers – people who are uncomfortable with change and have a tendency to ignore it as long as possible

He said that workers’ comp cannot evolve if they are unwilling to take risks and become innovators; otherwise change will not happen.

I agree with his analysis, and my posts have attested to that fact time and time again. Therefore using his categories, it is clear that I would be considered an innovator, since I have been advocating implementing medical travel into workers’ comp.

Workers’ comp needs to take risks, and medical travel affords them of one of those risks.

Yet, those who have derided my idea, or who have not paid any attention to what I am saying, are ignorers, and there may even be people who would see to it that medical travel never becomes part of workers’ comp.

So I would like to add a fourth category to this list. Call them defenders of the status quo, or preventers, or even saboteurs, if it ever got that far.

So what is this change Mr. North is talking about? Is it real change, or just change for the sake of change? And what does real change look like?

Real change is not keeping injured workers and the system locked in a padded cell, wrapped in a straitjacket.

Real change is not buying up smaller companies and cornering the market, so that the very idea of competition is tossed on the dustbin of history.

Real change is not doing the same things over and over again and expecting different results.

Real change is not being afraid to look outside of one’s comfort zone, and outside of one’s national borders at a time when your industry is facing challenges from the expansion of out-out legislation that threatens to destroy workers’ comp, rising medical costs, physician shortages, questions of the constitutionality of exclusive remedy, negative media reports, changes in technology and diversification, and other “seismic shifts”.

Real change is becoming a learner, and I am looking for learners to work with. Real change is being fearless and recognizing that Americans are not the only ones who are able to provide quality medical care.

Real change is going with the flow of change in the world today and joining the globalized world; otherwise you stagnate and die. Time is running out. Real change is possible, but you must go after it.

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I am willing to work with any broker, carrier, or employer interested in saving money on expensive surgeries, and to provide the best care for their injured workers or their client’s employees.

Call me for more information, next steps, or connection strategies at (561) 738-0458 or (561) 603-1685, cell. Email me at: richard_krasner@hotmail.com.

Ask me any questions you may have on how to save money on expensive surgeries under workers’ comp.

Connect with me on LinkedIn, check out my website, FutureComp Consulting, and follow my blog at: richardkrasner.wordpress.com. Share this article, or leave a comment below.

STOP THE MADNESS!!!

As this is my official 150th post, I thought that the following post from David De Paolo needs to be seen by everyone who cares about the direction the US is headed, the way the global economy is headed, and what is happening to the working class in the US, especially injured workers such as Glenn Johnson, Cecilia Watt, Linda Ayres, and many others.

We have been lulled to sleep by a slick talking former Hollywood actor (a third rate one, and second rate president), his media and political consultants, a kinder, gentler grandfather figure with two dummy ex-governor sons, their media and political consultants, talk radio pundits who abuse and insult those they do not like, and a conservative movement funded by the late Richard Mellon Scaife, the Koch Brothers, Art Pope, Rupert Murdoch, and many others, to take this country back more than one hundred years when workers had no rights and bosses were like gods.

David’s excellent post should make us all pause to consider what we are doing to our fellow Americans and be angry, for unless you are a millionaire or billionaire, you too can experience the same or similar circumstances these people have gone through, and worse.

To paraphrase Marx (that’s Karl, not Groucho), “Worker’s of the World, Unite! You have nothing to lose but your lives!”

https://www.linkedin.com/pulse/option-necrosis-david-depaolo?trk=hb_ntf_MEGAPHONE_ARTICLE_POST

If you are as angry and disturbed over this blatant disregard for the dignity of working people, and are tired of the “system” being run for the benefit of the insurers and those who benefit financially, then contact me for more information on how we can offer injured workers better medical care that actually saves money, and does not allow profiteers to abuse people.