Medical Inflation in Workers’ Comp: Dr. Fernando Branco on the Biggest Cost Drivers

In this episode of the Self-Insurance Podcast, CRMBC CEO Kaya Stanley speaks with Dr. Fernando Branco, Chief Medical Officer at Midwest Employers Casualty, about medical inflation and why workers’ comp claims can be especially exposed to rising medical costs.

Dr. Branco explains what is driving medical cost pressure, why workers’ comp can get hit harder than other parts of the healthcare system, and what restaurant operators can do to reduce risk early.

The conversation covers:

•  Why medical inflation matters in workers’ comp 
•  How early intervention can help keep claims from becoming harder to manage 
•  Why strong TPA support and nurse case management matter 
•  How comorbidities and other risk factors can affect recovery 
•  Why restaurant operators should review medical bills carefully before accepting them as final 

His practical takeaway for operators is clear: act early, stay close to the claim, and do not treat every medical bill as final.

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Transcript

Fernando Branco: First and and foremost, uh, never accept a bill before looking at the bill, judging the bill, and probably disputing the bill

Kaya Stanley: today i'm so happy to welcome Dr. Fernando Branco, chief Medical Officer of Midwest Employers Casualty. Welcome Dr. Branco.

Fernando Branco: Well, thank you, Kaya. I thank you for this, uh, great invitation, uh, in such a very, very important topic.

Kaya Stanley: Yes. Before we dive in, will you tell us a little bit about your background and how you ended up at Midwest?

Fernando Branco: Oh, I've been a, a clinician for, uh, 30 years. Uh, I graduate in the mid eighties. Um, I think now everybody can sort of guess my age. Um, and uh, after that I worked for 30 years in clinical practice. I did, uh, residency in physical medicine and rehabilitation. And as I work with this kind of patients, I also noticed that I probably should learn a little bit more about pain. Uh, and I became board certified in pain. And because you guys know that we had a narcotic epidemic for, you know, last 25 to 30 years that now it's finally winding down, uh, I decided also become, uh, certified in addiction medicine. And that's what I practiced for my last 15 years. All three of them.

Kaya Stanley: And today this, this is so critical in the work comp world especially, and it's something that often gets overlooked because we're, we're often thinking of, you know, at least in the restaurant world, the slip trip and fall, and sometimes it gets overlooked of the addiction that happens when someone is given an opioid for pain.

And so I imagine that this has become a, a very important thing over the last several decades with you.

Fernando Branco: Absolutely. Uh, and, and the, the thing that's important about that is that 98% of the time, you know, you have a fall and there is some injury, and the doctors do a good job and the person gets back to work.

The problem is that the 2% that keeps lingering and then it keeps going back and back and back, and we do the crazy surgeries and the right surgeries and the right procedures. In the past, the paradigm has shift. Um, uh. In the past, we used to, uh, have the easiest solution for all the doctors was, I don't know what else to do with you.

Let me give you narcotics. And, and that was the, the standard practice. It created a lot of problems, not just financially that was terrible, but also for the patients.

Kaya Stanley: And this let's, this is a good segue to talk about our topic today, which is medical inflation.

Will, will you first give us a high level picture of, of medical inflation and, and what you're gonna talk about today.

Fernando Branco: Uh, medical care always be expensive. We know that, you know, um, hospitals and doctors like to be paid well. I'm a doctor. I know, I know how it works. Uh, but lately, uh, you know, what used to be a slope of, uh, of, uh, of increase, it became an exponential increase.

Um, as a physician, I'm. Absolutely flabbergasted sometimes with the, the, the charges that come. I don't even know if some of the physicians that are actually doing the procedures understand how much is being charged. And we'll talk a little bit about this. Hopefully, uh, in a few minutes I. Why is it the doctors are even detached to this billing piece of, of this whole process?

'cause in the, in the past was more the doctor doing the billing. And now unfortunately it isn't the doctor. But it has increased exponentially in the next, in the last 10 years. In last five years, even worse. And there are some reasons for that.

Kaya Stanley: And what. What would you say is driving this medical inflation?

Fernando Branco: Well, uh, I, I, I'll go back into the, the, the, the problem that we just mentioned there was, uh, the, the narcotic epidemic, uh, that created, uh, uh, to a certain degree, a dependency of millions. We know we calculate now between 20 and 30 million people that are dependent on the medical care system, including hospitals and doctors.

And pharmaceutical companies with their drugs, their procedures, uh, their follow ups, and these were young people who we're talking about, we're not talking about the regular elderly people that need care. We're talking about the 25 to 45 years olds that are now dependent on, on the system. And the system made a lot of money out of that.

What happens when the paradigm sh. Shifted. You shifted and boom. Now we don't have all these patients. Now they're all coming out of these drugs. They're not using these drugs and. How do we maintain the, the flow, uh, of money? There is a lot of things that have been added. A lot of them are new medications and some are fantastic medications.

Uh, they're out there, medications for cancer, medications for, uh, chronic diseases like psoriasis, all sorts of things. Most of those drugs are very, very good drugs. The problem is they have to make up the money that they used to make in this pills. They get absurdly high prices and uh, and, and we know.

That, uh, uh, the American public pays for probably around 80% the profit of, of most drugs, and I think we all know about that. We're not gonna go into the details about that because it gets too, too heat ed up. But the issue is that other countries don't pay. We pay. And, and one of the things is that this.

All these new drugs, all these new procedures that are coming in, ketamine, injections, new, uh, electronics being installed on patients, all of this is increasing the price of medical care and regular procedures have increased in price quite dramatically. Uh. Also, you know, we have this, this idea that, uh, COVID didn't change everything, but COVID did change things.

You know, we, we, we, the whole, the whole world went crazy. You know, we had the, the post COV ID inflation, natural inflation, regular inflation, right? That we all expect it to happen and that, I think it's sort of. Got stuck also into the, to the medical area, but it went into a, an excessive, uh, inflation in the medical side.

And also I think what ended up happening with this, and uh, uh, I'll tell you, I grew up. As a kid and in a country they had an inflation of a thousand percent. And what happens with when you have a lot of inflation is everybody's trying to catch up. You know, I call like a, a game of chicken, you know? Then I'm gonna increase because if I don't increase the other increases, and then this price thing becomes kind of this way.

If the hospital says, well, if I don't increase, then I don't get paid because then the other side won't pay. And then my money. My providers will increase it. It becomes a, a, a self-feeding process.

Kaya Stanley: Right, right. And when, and to tie it back to worker' comp insurance, which is is what we do. We've got the work worker' comp, self-insured group.

When we have, we're always trying to explain to our members what you can do to mitigate your costs, what you can do to. To do lost prevention, to, um, lower the instances of claims getting litigated. How do we take care of the, the employee?

So from your perspective, what are things, are there any things that the employer can do to mitigate any of this, these risks that are facing them?

Fernando Branco: Yes. There, there's definitely several things that that can be done. I think just to add what you mentioned in terms of worker' comp, why is it that we are more. At risk of this medical inflation. And we are, because one of the differences are, uh, being, have been in both sides of this equation in here, uh, you know, hospitals see patients if, let's say, if they don't have the money, they're not gonna go after them.

Uh, big insurance companies. The hospital that I, that I go to every year they fight with, with my insurance company and I, I don't get coverage for a couple months over that, blah, blah, blah. That means the big insurance, they know how to do it. Unfortunately, the worker s' comp., We don't have that kind of how to.

Do this, uh, wheeling and dealing, right? And on top of it, we're very much, very litigious. That means a lot of times the judges and the lawyers force us to pay. And then the hospitals look at that, and I remember being in the hospital and say, Hey, workers' comp., They have to pay what? Whatever we charge. That means think, keep in mind that we are.

The golden goose of being. And that's why it's so important to really to do things, um, uh, to try to avoid these things even. So, we are the, the, the target of it.

Kaya Stanley: I'd love for you to give us some actionable steps that employers can take.

Fernando Branco: Absolutely. Uh. One of them that it goes for every case is early intervention.

Uh, be a catastrophic case, be a simple case. Uh, never. Assume that, oh yeah, this is, uh, just gonna resolve yourself, you know? Uh, that's why it's so important to have a good TPA involved. Also, very important if necessary, we don't need it for everybody, but if the, the, the injury is severe enough to engage a nurse case manager to coordinate care because the, you know, sometimes people think, ah, what's the point? You know, you put a case nurse case manager there, and the only thing they do is follow and look and go into the meetings and everything. No, no, no, no, no. They, they really look at the whole thing and they start, if they see red flags, they let us know.

They, they're on top of it. They create a relationship with the patient before he becomes litigious. A lot of times, because we know that litigation is one of the worst things that you can ever have because then we lose a lot of, uh, uh, control. And actually it's worse for the patient because it doesn't really, the best treatments are not necessarily, uh, be given.

That's one of them. Uh, another thing

Kaya Stanley: We find. I agree with you on that one. Mm-hmm. We, we find that a lot, that sometimes just the fear that sets in when they're not hearing from someone when an injured worker just doesn't know what to do, and so then it, they get in touch with a lawyer and then it becomes litigated. So we, we, I definitely see that one. What else can an employer do.

Fernando Branco: Well, uh, one important thing is you are gonna have your, let's say you're a nurse case manager. Your, your, your adjuster in there. And these are people that hopefully, uh, you know, now we have AI that can also help, uh, uh, with the adjuster and, uh, and uh, nurse case manager to sort of open their minds. You know, I, I, I hate the idea of using AI as a substitution because it never will substitute my adjuster and my nurse case manager. But the AI can really help in terms of opening some things that may be the adjuster hadn't thought about it or the nurse case manager, because you need to look at the whole picture in here.

Uh, what about comorbidities? Is this person coming in. Into this. Most of us are not ultra healthy, right? We are not all perfect. We have our, uh, issues from before, be psychological, be uh, physical, and any injury can disrupt all of that. And then you need to be very, very careful to avoid, um, having these things in the beginning or at any time to get engaged into the file. However, sometimes if you don't treat them, you also create a problem because if you have somebody that had severe depression in the past, the next thing you know they get a PSTD diagnosis and, uh, you didn't need that. And for that, you need to probably give, give service, but not take over the diagnosis.

Kaya Stanley: So we, we aren't scheduled to talk about AI today, but since you brought it up, I am interested to hear how you guys at Midwest are utilizing AI in, in this area.

Fernando Branco: Uh, AI for us is, is an assisted tool. You know, so much that we don't call it artificial intelligence, and Ben Birch will discuss that in details. He is one of our geniuses in here and we call assisted. Intelligence because that's what it should be. You know it, it's not here to substitute human beings because humans give a completely, bring a completely different, uh, approach to the table. What it does is you save you time. Let's say you have 500 pages of records, you're still gonna go over those records, right?

But you might miss something here and there. Because you're human and the AI will help you with that. Also, sometimes maybe you think about some recommendations or some actions, but maybe you forgot one. A AI is so much more. Uh, detail that sometimes that can be helpful. That means for us it is called assisted intelligence and that's how I see it.

Kaya Stanley: And Midwest is nationwide and we are only California, which is an animal unto itself in the work comp world, as you know very well. Yes.

Uh, what if you had a crystal ball to tell us what are the biggest risks and what are the biggest opportunities ahead? For us as an insurance company that will benefit our members, uh, re around this medical inflation,

Fernando Branco: uh, the things that you, you should prepare yourself. I think definitely, uh, we discussed already the data analytics. I think you need to make sure that you have some good vendors working with you. Because remember the, the, the chicken game that I was talking about, all the hospitals are playing. And all the doctors are playing, and it's not so much the doctors, as I said, I don't know if you realize that since COVID, the vast majority of doctors, thousands and thousands retired and literally millions, join big corporations, health corporations.

Now what you have is this enormous corporations that know how to, to really deal in wi dealing and willing, right? You need somebody in your side, and we have a couple people that we work, uh, with that can really do this bill review and discuss and not just do that. You know, that simple thing, just push the, the things through and oh, check if I fits the, the the state code, it has to be a much deeper, uh, uh, like for example, if you are in California, get somebody that specializes in California, know the providers, the big providers, because one of the things is. You say, oh, I, I don't wanna pay this $800,000 bill. But if you know the managers that work in certain offices and some companies do a and and, and you are able to make good arguments and you bring it up, uh, uh, a good ways to do this, uh, discussion without being, you know, it will be confrontation to a certain degree, but not, you know, to the point that the other side is just gonna say.

I'm not dealing with you. Uh, it has to be done, but I think one very important thing, definitely you need somebody, not just a bill review, because bill review, everybody does bill review. Right, right. I, I think that, you know, you go to a meeting and everybody does try to find good companies, and we have a couple that we really trust in general.

They're smaller, they're more focused, they're more, uh, uh, state wise, uh, uh, wise. That's one of the things that I would say you could use.

Kaya Stanley: Dr. Branco. I'd love to hear your. Your opinion about how longevity and medical outcomes are going to impact the work comp world in the next, in the coming decades.

Because as you know, you know, when we would, when we would do our projections out for how long we're gonna pay long-term disability and actuaries would look at short-term disability. It used to be shorter and, and now people are living longer. There's more treatments out so that someone's longer and you know, great we're, we're super happy for those outcomes from a human aspect. But then there's also a realistic aspect about financially, what does this cost a group and how do we plan for that?

From your perspective as a medical director, can you give us just your high level opinion about this?

Fernando Branco: Um, the, the interesting thing about is because obviously you're extremely knowledgeable because you, you almost answer your own question. You, you pretty much sort of de described the whole situation is the, is the truth. Uh, obviously there is a piece that we are living longer, but some. It's not as much as that. Uh, I, I think there is the longevity of the normal population, but there is also the longevity of the worker because our workers are, are working longer for all sorts of reasons that, my God, I would have to spend an hour here to talk about all the reasons why workers are staying at work much longer, but they are.

That means the older you are, I know. So look at me, I'm an old guy. The more problems you, you're gonna have, there is no doubt. And then if something goes broke, three others go broke at the same time. You know, it's like when you are like 20 years old and, and, and you go to the gym and you pull a muscle and then two days later you're back at the gym.

If you are. My age, 60 something years old. Uh, you pull a muscle, you're gonna wait two months before you can get back to the gym. It, it, it is just the way it is. It's not just the longevity. Also the, the, the employees are getting older. And then you also hit, that's why I said you, you have the answers already.

There are now, uh, fortunately, uh, a lot of new drugs that amazes me, that the pharmaceutical companies have been able to, uh. Do so much research and put so much together, and they must have sped up this process as, as maybe the narcotic money start going down. They says, Hey, we need to push all this, uh, to the forefront.

And they did. And there's some amazing drugs out there, not just a few dozens, dozens of new ones of before headaches. They're very expensive, but very helpful, but also some that are almost impossible, not to approve. There are, there are drugs for cancer. You know, as I, I would like to mention one that has changed completely more than one actually. Uh, the, the prognosis of multiple myeloma, that was, uh, a death sentence to anybody. Uh, you would die in two to three years. And now I have a patient that's alive for 15 years. Wow. Uh, with multiple myeloma. Absolutely. That is going to affect how we reserve and that's one of the reasons, uh, at least internally we have, we, we do a lot of what we call round tables and we analyze a lot of the files. I'm, I'm directly engaged. I have six nurses also. They're heavily engaged on these files and as soon as we see this kind of, or cancer or a new drug or this or that, I will, uh, we'll, we'll do a deep analysis and then we work with the group to make sure that we're reserving appropriately. Yes, you're gonna have to adapt to that.

That is a true reality.

Kaya Stanley: I agree with you. I see that we could talk for 45 minutes on it, because now you just brought up another thing I wanna ask your opinion about, and that is the cost of pharmaceuticals. Uh, as you know, I'm, I'm very familiar following Mark Cuban's new cost plus model where he's trying to disrupt the, the pharmaceutical industry.

There's many people. Back in the day when I was working for a congressman, uh, I helped to get, uh. Legislation passed that allowed MS patients to get a certain drug that wasn't being allowed until someone was no longer ambulatory. So they were waiting till the drug, till the disease progressed so much that they couldn't walk anymore.

So just the illogical and inhumane decisions that are made every day on pharmaceuticals and who gets them and who gets access to them and how they're priced. And yet I see the other side of it where I just finished a program at Stanford and we were talking about, you know, clear, um, creating drugs and inventing drugs and that, how, how much cost goes into that and shouldn't these private drug companies be allowed to recoup their cost after?

So it's a very hard argument, even though they're also subsidized often by the government.

So I'm, I'm familiar with all the different arguments, but I'm really more interested to hear your perspective on what's happening in, in the drug pricing world.

Fernando Branco: Again, I, I think you, you are so well informed that I, it's kind of hard for me to add so much to what you just said.

Uh, what I mentioned before is that the reasons are not up to me to be discussing in here, but the vast majority of the profits that need to be made, as you clearly stated, because America pretty much creates most of these new drugs that we need. We're saving people. Uh, these are, when I see these drugs and, and, and working, I, I was like elated because I lost so many patients with multiple myeloma in a couple years.

These are young people, vibrant. Who knows? Maybe we can keep them alive and, and see their kids graduate. That that means this is amazing. Uh, but how? How is this can be resolved? I personally don't have a, so a solution, but we needed to have, uh, a price that is, uh, reasonable enough that the insurance are not gonna go broke, uh, that the patient is not gonna go broke, uh, for paying for those medications.

Some of these pills cost. 30 bucks a pill, 50 bucks a pill. I, I have infusions now that cost on average $15,000 an infusion and you're gonna do it two or three times a month. That means how is this possible that, that's not possible? No real world in, in, in other countries, at least in my limited experience, is because they have the systems.

They say, we're just not paying. You know? Right. And, and then because in America, uh, it's one way or another or people pay from their own money or the insurance get pushed to, and workers' comp also gets pushed to pay for, we end up paying this exorbitant, uh, amounts of money. But you are absolutely right.

We need to compensate the pharmaceutical companies because if we stop. We're not gonna have drugs, right. If they don't have the money. We don't have drugs and, and we don't want this to stop because this is what's making us, uh, live longer and longer and, and have a much better life quality.

Kaya Stanley: Yep. It's the ultimate catch 22, isn't it?

Fernando Branco: Yes, it is. Yep.

Kaya Stanley: Okay. Before we go, Dr. Branco, can you give us a couple takeaways that a restaurant owner can do or know this week about medical inflation?

Fernando Branco: Uh, yes, something very short just to hopefully to stick to your mind after this conversation. Uh. First, and, and for, for most, uh, never accept a bill before looking at the bill, judging the bill and probably disputing the bill because in today's system, uh, we have to do that is unfortunately also be updated in what are the new treatments.

Even for a small, for simple injuries, doctors are injecting all sorts of. Strange procedures, more expensive procedures, just be updated. And if you don't know what it is, hey, you have ai, go read a little bit more. Is that appropriate? Not appropriate? And be proactive. Don't wait. Don't be reactive.

Kaya Stanley: Thank you so much for your time.

Fernando Branco: Thank you so much. And uh, and I'll definitely be looking forward to, to another conversation. Maybe we'll have more time, we can discuss a little bit more. I, I love to talk about this topics.

Kaya Stanley: Excellent. Thank you. Have a wonderful day. You too.