The Discount Trap in Workers’ Comp Medical Care

At first glance, medical discounts seem like a win for employers. Lower fees should mean lower costs — right?

In workers’ compensation, the reality is far more complicated.

Discount-driven medical models often create the very behaviors that drive costs up, not down.

The Discount Bargain

The typical model works like this:

• Networks promise volume to providers

• Providers agree to steep discounts

• Employers are told they’re saving money

On paper, it looks efficient. In practice, it creates misaligned incentives.

Physicians who agree to heavy discounts still need to run a business. When revenue drops, behavior changes.

How Discounts Change Behavior

Look at this familiar pattern:

• More services per visit

• Higher utilization

• Longer treatment duration

• Upcoding to offset discounts

Not because physicians are unethical — but because the system forces them to compensate.

Discounts don’t eliminate costs. They shift behavior in ways that often increase total spend.

The Cat-and-Mouse Game

This dynamic creates an ongoing cat-and-mouse game:

• Networks push for deeper discounts

• Providers look for ways to recover revenue

• Employers pay the price through duration and complexity

The irony is that everyone claims to be saving money — while outcomes quietly worsen.

Why Employers Rarely See the Full Picture

One of the most important points made was that employers rarely see:

• Job-specific injury patterns

• Provider-level outcome differences

• Duration trends by physician

Without that visibility, discounts look attractive — even when they’re driving inefficiency.

A Better Model: Pay for Partnership

Here’s a counterintuitive but powerful alternative: paying full fee schedule to the right providers.

When physicians are paid fairly:

• They don’t need to over-treat

• They engage as partners

• They focus on outcomes, not volume

Employers who move toward partnership models consistently see better results, even without discounts.

The Bottom Line

Discounts feel like savings, but they often create worse medical behavior and higher total costs.

True cost control comes from intentional provider relationships, aligned incentives, and outcome-based accountability — not deeper fee reductions.

Michael Stack, CEO of Amaxx LLC, is an expert in workers’ compensation cost containment systems and provides education, training, and consulting to help employers reduce their workers’ compensation costs by 20% to 50%. He is co-author of the #1 selling comprehensive training guide “Your Ultimate Guide to Mastering Workers’ Comp Costs: Reduce Costs 20% to 50%.” Stack is the creator of Injury Management Results (IMR) software and founder of Amaxx Workers’ Comp Training Center. WC Mastery Training teaching injury management best practices such as return to work, communication, claims best practices, medical management, and working with vendors. IMR software simplifies the implementation of these best practices for employers and ties results to a Critical Metrics Dashboard.

Contact: mstack@reduceyourworkerscomp.com.

Workers’ Comp Roundup Blog: http://blog.reduceyourworkerscomp.com/

Injury Management Results (IMR) Software: https://imrsoftware.com/

©2025 Amaxx LLC. All rights reserved under International Copyright Law.

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.