Something struck me during the bloggers speak session on Thursday – at a time when medical costs are heading up, driven by over-utilization, opioids, crappy networks, and percentage-of-savings-based networks, there are few medical experts in positions of real authority in claims organizations – much less leading those claim organizations.
Even more revealing, the medical directors at most (but not all) payers have little real authority. Work comp payers are mostly run by men (mostly) with backgrounds in claims, underwriting/actuarial or finance. Sure, many are highly experienced and very well seasoned, but they’re fighting the last war – the one where indemnity was the enemy.
That’s no longer the case, hasn’t been for some time, and most certainly will not be in the future when medical accounts for 70% of claims costs. What we have is an industry where claims doesn’t adequately consider medical – which is understandable because the top guy is a former claims guy.
They see the world as it was back in the day, not as it is today. A piece on military leadership by Thomas Ricks is worth quoting:
“in Iraq: our military commanders focused on planning the 2003 invasion but virtually ignored the task of planning for what might happen during the long occupation that followed. Though it was clear, almost from the start, that our round-’em-up approach to the insurgency wasn’t working and that using heavy firepower in the effort was counterproductive…
Why weren’t our troops better prepared for the challenges of protecting civilians from resistance fighters, interrogating suspected insurgents and detaining enemy fighters?…The stakes of not finding out are great — for while we know we have a strong military, we truly don’t know if we have the right one for the conflicts we may face during the next two decades.
That was the discovery the British made — the hard way — in the Second World War. On the eve of the war, the Royal Navy was the biggest in the world, but Britain’s military leaders did not understand that the aircraft carrier and the submarine had drastically changed the nature of maritime conflict.” [emphasis added]
Most payers and claims organizations are built for and managed to “fight the last war”, one where indemnity was the enemy. Yes, some few the rare “claims guy” does “get” medical – but most don’t.
Outsiders get this, and that’s why there were a plethora of private equity folks and related people circulating around the exhibit floor and attending sessions. There are a couple three (and that’s only the ones I know about) deals currently in process and lots of rumors flying around about others. Smart people see the opportunity created by this situation, and are moving quickly to position themselves to profit from others’ myopia.
As proof, some may not realize that Coventry is no longer the largest (measured by revenue) WC managed care company. OneCall/MSC is. Yes, OneCall does seem to be buying up everything, but it doesn’t take a genius to figure out they’ve figured out where the future opportunity is – managing medical for payers who can’t do it on their own.
Oh, and contrary to oft-repeated rumors, MedRisk is NOT being acquired – not by OneCall nor anyone else. Lest you, dear reader, think I know not of what I speak, I promise to listen to Rush Limbaugh for an entire week if MedRisk does get bought.
PMSI isn’t on the block either.
I couldn’t agree more with your comments. Appears the industry leaders are obsessed with discounts and not outcomes. Good medical practice and return to work have been lost and replaced with the indemnity model and overemphasis on PPO savings. Total lack of comprehension on what a successful resolution of a case represents.
Thanks for a timely focus on an ongoing issue. Attention to medical quality, rather than cost, has been a missing ingredient in the overall mix for quite a while. You are right on point that most carriers and TPA’s don’t really get it. The intense focus on item cost has left little room for seeing the effect on the overall cost of a claim. While medical and indemnity costs influence and affect each other, medical has always been the key. It is good there is a growing realization of the value of managing medical for quality. As to the trend toward consolidation, this is just another chapter. It will continue until companies get too big not to fail. Then you will hear chatter about “core competencies” and the spin off of functions that don’t really fit into the “vision for the future”.
Working previously for a large TPA, in the medical management unit, this frustration was all too real. Consistently there would be medical determinations overridden, at times rightfully so do to legal/non-medical issues impacting the claim, though most of the time it was simply the path of least resistance. I have been involved in high-level discussion where regional claims supervisors disputed the recommendations of the medical director, and the rationale was less than rational. What I did start seeing was that the employers, the ones who ultimately pay the price, are becoming more and more involved. I truly see this as the next wave in the process of reshaping the WC system and better managing medical costs, which in turn will better manage claimant safety. Those carriers and agents that realize this first will become the leaders while the ones who fail to catch on quickly enough will be stuck with the legacy claims, and trying in vein to manage the skyrocketing medical costs of the claims that “missed the boat”.