This week’s Diabolical Discount exposes MedRisk—the private equity-backed network infamous for siphoning off provider reimbursements while delivering zero care or services to injured workers.

A California physician treated an injured employee of Reyes Holdings, LLC. According to the Explanation of Review (EOR) issued by Sedgwick Claims Management Services, Inc., the Third-Party Administrator (TPA), Sedgwick paid $187.94 for the treatment.

But the physician never received that $187.94.

Instead, MedRisk—a middleperson with no role in delivering treatment—forwarded just $97.58 to the doctor. For standard Evaluation and Management (E/M) billing code 99214, the doctor received a paltry 41% of the Official Medical Fee Schedule rate, or 62% of the Medicare rate.

The numbers paint a disturbing picture: Sedgwick reports paying nearly $188 for care. The physician received barely half that. So where did the rest of Reyes' workers' comp dollars go?

The answer appears to be: into the pockets of a network middleperson—not into treatment or patient care. When MedRisk diverts its premiums to intermediaries instead of correctly paying the physicians treating its injured employees, what value is Reyes Holdings actually getting?

See the gory details below. With reimbursement slashed to sub-Medicare levels by profiteering networks, how long can California expect doctors to keep showing up for injured workers?

Who Profits From Networks? Hint: Not Doctors. Not Employers

California employers, it’s time to ask: Where are your workers’ comp premium dollars really going?

The answer is certainly not to the physicians treating your injured employees—and definitely not toward improving access to quality care. Instead, a significant portion of those dollars appear to be diverted into the pockets of private equity firms and their web of intermediaries.

Here’s how it works:

• CVC Capital Partners and The Carlyle Group, two massive private equity firms, own MedRisk—a middleperson network that inserts itself between employers and providers.
  
• Carlyle also has substantial investments in Sedgwick, the largest TPA managing workers’ comp claims.
  
• In the case of the injured Reyes Holdings employee, Sedgwick reported paying $187.94 for medical treatment. But the treating physician only received $97.58—the rest disappeared into MedRisk’s black box.
  

This is not an isolated case.

These vertically integrated entities operate with little transparency, siphoning employer dollars away from actual medical care.

The result? Doctors can’t afford to treat injured workers, and employers are left holding the bill for a system that benefits everyone except the parties it’s supposed to serve.

MedRisk Slashes Physician Pay

MedRisk built a business model around inserting itself between providers and claims administrators, then taking a hefty slice of every reimbursement owed to the providers while furnishing zero treatment or services to the injured workers. Essentially, money for nothing.

But when the physician submitted a bill to Sedgwick that included CPT 99214, a standard E/M billing code for established patients, the Explanation of Review (EOR) from MedRisk (below) contained an unpleasant surprise.

The Official Medical Fee Schedule (OMFS) rate for 99214 for this location and date of service is $207.52. MedRisk paid just $85.00. That means that for CPT 99214, MedRisk paid:

• 41% of the OMFS rate
• 62% of the Medicare rate

MedRisk also paid just $12.58 for California-specific code WC002—just 80% of the OMFS rate.

EOR Oopsie Reveals MedRisk Cut

Normally, when a network middleperson like MedRisk is involved, the doctor never knows exactly how much the claims administrator paid for treatment. The doctor simply gets an EOR from the network reflecting what the network paid the doctor.

However, occasionally, the claims administrator sends an electronic EOR to the doctor in error. This e-EOR is invalid, but it allows the doctor to see what the claims administrator apparently paid the network compared to what the network paid the doctor.

In this case, Sedgwick sent the doctor an invalid electronic EOR revealing that Sedgwick paid $187.94 for the entire physician’s bill. Practice staff voided the invalid e-EOR and manually entered the payment from the paper EOR that MedRisk mailed—a payment of just $97.58.

What happens to the difference? That’s between MedRisk and its private equity overlords.

CA Employers Should Demand State Protection

California employers should be outraged.

You’re paying full price for a broken system—one that discourages doctors from participating and delays or denies care for your employees. Meanwhile, private equity counts its profits, hidden behind layers of contractual opacity.

And where are California lawmakers in all this?

Instead of protecting employers and preserving access to care for injured workers, the state allows these exploitative practices to continue unchecked. Legislators must step in to regulate these middleman networks, ensure transparency, and stop premium dollars from being siphoned away under the guise of “cost management.”

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