The soft market that seemingly will never end will – probably by q3 2010. Are you ready? Many employers have lost focus on risk and cost management, lulled into passivity by the longest soft market in memory. Woe unto those that have forgotten the basics, for they will be in even more trouble than the employers who’ve merely been snoozing.
Here are a few suggestions for those risk managers looking to prepare for what’s coming.
1. The fastest growing segment of comp medical expense is facility cost. As health and hospital systems gain negotiating leverage and skill, PPOs with little leverage fund themselves at a distinct disadvantage. The big group and Medicare managed care plans have lots of patients to use as leverage in negotiating deals; not so for work comp networks. Check your facility cost inflation rate over the last few years; expect it will be near double digits, and don’t expect your PPO to be able to do much about it.
Instead look to specialty bill review vendors. I’ve extensive experience with one, FairPay Solutions, that has come to dominate the market on the basis of their results coupled with an impressive track record of wins in court when their recommendations have been challenged by hospitals. They’ve also got an interesting solution to the surgical implant problem. (And no, FPS doesn’t pay me to say nice things about them).
2. Drug cost inflation is increasing again. After five consecutive years of declining trend rates, inflation, driven by a big jump in brand pricing and higher utilization of high cost pain medications, is back. If your PBM doesn’t have answers that address these questions either you haven’t asked the right questions (pretty likely as most PBMs have solid clinical management offerings) or you’ve got the wrong PBM.
3. Getting the most out of UR and bill review – most UR determinations are not automatically fed into bill review applications, thus procedures that are not approved may well be performed – and billed – and paid – anyway. If your audit process hasn’t specifically addressed this you’d be well advised to make sure it does. This is especially important for payers with business in California, where UR costs have exploded since reform.
We’ll be looking at other areas next week. And apologies for typos as this entry comes via my iPhone.
Dec
4
Joe,
This comment is, admittedly, somewhat self-serving.
We have developed software solutions for payment integrity audits in the managed care space.
I am absolutely alarmed by the fact that non-payable procedures are nevertheless paid. With our solutions, non-payable “items” are easily flaggeed to pay $0.00. That leaves me wondering what kind of systems are being employed in the comp space that don’t identify non-payable “items”. It’s so easy!
Thanks,
Mike
We have been hearing about the coming hard market for a while. NCCI just recommended a 7.6% reduction in loss costs for the coming year for Nevada. I do think there will be somes snap back like California in the early part of this decade. In California right now, rates are staying relatively flat after a 60% decline since the reforms, but the costs are out there and there must be a day of reckoning.
Since we manage self-insured groups and compete against insurance companies, we would like to see insurance rates that are more reflective of real costs because in our environment we can do more to control those.