One year ago – against my better judgment – I made eight predictions about what would happen in the work comp managed care world. Here’s how I did.
1. Coventry will be acquired.
Well, that’s a helluva way to start out. Needless to say, that didn’t happen. I did note that it would happen after the credit markets loosened “enough for potential acquirers to feel a little more comfortable”; that is just starting to happen, but we’ve a ways to go.
What I didn’t factor in was the huge uncertainty surrounding health reform, and the impact of reform on health plans. My sense is this uncertainty will continue well into 2010 as healthplans and investors therein try to figure out what all this means.
Coventry is still an attractive target, although the recent surge in its stock price makes it a pricier deal…
2. Aetna’s work comp network business will slowly dissipate.
That prognostication worked out a bit better. AWCA network customers continue to struggle with lousy data quality in some jurisdictions, network expansion isn’t progressing as quickly or well as forecast, and payers indicate the effect of discounts is deteriorating. Without a ‘champion’ at mother Aetna, with several key staff moving on to other opportunities, and with revenues totaling well under one-tenth of one percent of Aetna’s total sales, look for that ‘dissipation’ to continue.
3. Corvel’s transition to a TPA with managed care services will accelerate.
According to their latest earnings report, revenue growth for the quarter was “reflective of improved growth in the Enterprise Comp product line, CorVel’s integrated claims management solution for workers’ compensation claims.” The 10-Q expanded on this, stating “The increase in revenues was primarily due to an increase in patient management business, with an increase in network solutions business as well. An improvement in customer utilization of the Company’s Enterprise Comp services was the primary reason for the increase in patient management revenues. ”
CorVel added another TPA to their portfolio in 2009, acquiring Eagle Claims, a five-year old WC TPA with 62 clients based just outside Syracuse NY in February.
4. Several of the larger payers will announce their own, small physician-centric network products.
Didn’t happen, making this about the umpteenth year some of us have been waiting for the big guys (and gals) to decide the one-size-fits-all PPO model doesn’t fit.
5. – Correction- Oregon will do a do-over.
In January I said “Oregon’s new regs require comp payers to reimburse at fee schedule for those services subject to the FS. Non FS services are to be reimbursed at billed charges” and as a result the state would revise their regs.
Wrong. According to a (admittedly very small) sample, payers have dealt with this and don’t see it as problematic. And there wasn’t a ‘redo’.
6. Innovation
I predicted there wouldn’t be any. That’s a ‘true’. (can’t wait to hear protestations of disagreement from those tweaking old processes and products)
7. Specialty managed care will grow
Sure has, especially in physical therapy with the expansion of Align into some additional claims offices and clients, and SmartComp’s announcements of various deals. Meanwhile, MedRisk (HSA consulting client) continues to dominate the space, inking a deal with Coventry to provide PT EPO services in most of the states with people in them.
Imaging is also growing – the recent OneCall transaction is an indicator of the private equity industry’s interest in WC, while NextImage reflects the emergence of new competitors.
FairPay’s acquisition by Riverside is more proof.
8. Medical costs
I predicted costs would “continue to increase far faster than they should, driven by lousy managed care models poorly implemented by payers more concerned with “savings” than claims costs.”
I hate it when I’m right. Drug costs are exploding, with 2008 costs up 7.5% and prices (just one component of drug spend, the other being utilization) up almost 10 percent in 2009. Hospital costs are continuing to grow faster than expected.
NCCI’s latest figures indicate costs have moderated, but these are from 2007, and don’t reflect current results. They also don’t include California, NY, and a couple other states.
Here’s how I’d score it.
Wrong – three – Coventry, Oregon and small networks
Right – four – medical costs, specialty managed care, innovation, CorVel
Neither – Aetna – but just give it time…
Never one to leave well enough alone, I’ll be out with my predictions for 2010 in a couple days.
Insight, analysis & opinion from Joe Paduda
When you talk about small networks, are you calling for narrow networks in WC? Because these have been launching and growing in some places on the group commercial side for a couple years now. Aetna has Aexcel in something like 34 markets now, and Humana has its Preferred Product in about 21 or 22 markets, including Milwaukee and Louisville. UnitedHealth has tried a couple of different iterations of this, too, but they botched a couple of pilots, and have scaled back their attempts at such things. They already think they have the best network anyhow, so I guess it would be tough to convince the bosses there that there is room for improvement.
Thanks for the note, Rick. This was specific to WC, which as usual is a decade or so behind the rest of the world