Author: Joe Paduda

May
8

What’s your company worth? part 2

Posted by Joe Paduda on Monday, May 8th, 2017 | Comments

A couple weeks ago I shared a post on company valuation – how to figure out what your company is worth to a potential buyer or investor.

We focused on customer value as a key driver.  Sure, There’s a lot more to this than just customer value – some obvious and some not. And it has been done with a lot of success by work comp service providers…one is referenced below.

External factors such as interest rates, industry attractiveness (for some reasons work comp is kind of hot again), success of other investments in the space,  Not much you can do about that – but there is a lot you can do to maximize the value of your customers.

A big part of that calculation is how long customers stick around – and how their “value” increases over time.  Customer longevity – or lifetime customer value – is much more than how many cases you get per month times the price per case times the length of time you keep a customer.

In fact, that’s a very limiting way to view your customers, especially if you show that calculation to potential investors.  Those investors want to see how you are going to manage, grow, improve your business. If you aren’t strategic enough to think about how you can deliver more to those customers so they drive more revenue, that isn’t going to impress smart investors.

Briefly, here’s a better way to think about customers…(thanks to Harvard Business Review)

Our customers become much more valuable when…

  • they give us good ideas
  • they evangelize for us on social media
  • they reduce our costs
  • they collaborate with us
  • they try our new products
  • they introduce us to their customers
  • they share their data with us

Even if you aren’t going to be selling your company anytime soon, you should be thinking about this – a lot.  A far-too-common mistake – and one I make all the time – is not focusing on the important stuff because I’m caught up in the urgent.

Final comment – the “old” One Call Imaging was very good at this.  OCI got their customers to share data with the company so it could figure out where “leakage” was going, and then worked to identify why and where and who was involved.  From there, OCI and their payer customers worked together to close gaps and plug the holes. This led to OCI dominating the workers comp imaging space for quite a while.  It also maximized the company’s value when it was sold to Odyssey, and later when Apax bought the next gen OCCM.

What does this mean for you?

I don’t know ANYTHING more important than thinking about your customers – what do they want, why, how do they want to get it, what makes them successful, how you can help them be successful – all will help you determine where you need to go.

May
5

What’s in the House version of AHCA?

Posted by Joe Paduda on Friday, May 5th, 2017 | Comments

Here’s the quick summary of the Republican bill. Lots of details here.

Net is the bill attempts to give states much more leeway in establishing and regulating health insurance policies and programs – sort of returning to the world we had pre-ACA.

While the bill was passed without a CBO evaluation/score, it is similar enough to the original bill. My guess is we could expect at least 15 million people will lose insurance coverage under this bill…but remember it’s not going to pass the Senate.

  • It replaces income-based subsidies (basing financial subsidies on a person’s income) with age-adjusted tax credits of fixed amounts.
    This means – wealthy and near-poor people of the same age get the same $ amount
  • Eliminates the individual and employer mandate
    This means – no requirement that people have health insurance.
  • Increases premiums for older people and reduces them for younger folks who get their insurance from small employers or in the individual market
    This means – more young people may sign up, more older folks will find insurance unaffordable
  • Ends funding for Medicaid expansion and caps future federal Medicaid payments
    This means – fewer low-income people will have coverage, states will have to come up with more money.
  • Penalizes individuals and families that don’t maintain continuous insurance coverage
  • Allows states to let insurers drop coverage for different types of medical care
    This means – consumers may not be able to get coverage for their condition or the type of care they need (e.g. drugs, behavioral health, maternity)
  • Eliminates taxes and tax increases from ACA
    This means – Medicare will run out of money in a couple of years instead of 10+

This is just what’s in the actual bill – which is already under fire by Senate Republicans; Portman, Heller, Graham, Scott, and Snowe have all voiced objections.

Instead of adopting or modifying the House Bill, expect an entirely new bill from the Senate. If the Senate bill is passed (which may – or may not – require 60 votes), then the House and Senate will have to figure out how to move forward and which bill is the vehicle.

 

 

May
4

ACA Deathwatch: No, AHCA is not going to pass Congress

Posted by Joe Paduda on Thursday, May 4th, 2017 | Comments

AHCA is not going to become law.

IF it passes the House, there’s no way it gets enough votes in the Senate.  Two reasons.

  1. Senate Republicans are opposed to the bill.
  2. Enacting AHCA without massive changes would alienate core Trump voters.

Passing AHCA – without drastic changes – would be political suicide for politicians who voted for passage. And while pre-existing condition coverage is a big issue, the big issue is loss aversion – millions of Trump voters would lose coverage under AHCA.

The biggest winners – young, healthy people – don’t vote.

Oh, and AHCA keeps current ACA subsidies and protections for Congress and Congressional staff while chopping both for regular Americans…

This from Nate Silver:

Republicans whose families make less than $30,000 a year were nearly three times more likely than those in families making at least $75,000 to say it was the government’s responsibility ensure Americans had health care coverage.

And from Jonathan Cohn – voters who stand to lose the most in insurance subsidies under AHCA are – by a wide margin – Trump voters…

Subsidy amounts lost by voters in 2016 election

AHCA drastically cuts assistance to older, lower-income Americans in rural areas, a demographic that overwhelmingly supported Trump. And, most of these voters earn too much to qualify for Medicaid, so they’ll be left:

  • with far lower subsidies
  • without coverage for pre-existing conditions
  • facing insurance premiums that are much higher than today’s because AHCA allows insurers to charge older folks much higher premiums.

Some may cynically hope AHCA passes as it will doom the GOP in the 2018 elections. But the cost of that political calculation is far too high; the millions will lose coverage are those most in need of healthcare coverage.

Of course, Congress won’t suffer – they keep subsidies, pre-ex coverage, and all the other goodies.

May
2

Congressional Republicans win; ACA repeal is NOT going to happen.

Posted by Joe Paduda on Tuesday, May 2nd, 2017 | Comments

It’s official – Republicans’ efforts to repeal and replace ACA are done.

Finished.

Over.

And boy are they relieved!

I don’t know why anyone is surprised by this.  Only in the world of fantasy that exists inside the Washington Beltway would one think that changing legislation to appease far-right Freedom Caucus types wouldn’t cost votes from somewhat-more-moderate Republicans.

The latest defection is a big one – Fred Upton of Michigan said “I cannot support the bill with this provision (eliminating protection for individuals and small groups with pre-ex medical conditions) in it…”

What’s truly bizarre is this happened about the same time that Speaker Ryan was telling reporters “There are a few layers of protections for pre-existing conditions in this bill,”

Leaving aside the fact that the Speaker is wrong, think about the political implications for Republicans if they passed this legislation.  Their core voters in many states would find health insurance unaffordable, if available at all.

This isn’t liberal blather, it’s reality.  The best thing that can happen to Congressional Republicans is this bill isn’t going to pass.

And that’s before one contemplates the fate of the proposed bill in the Senate; if the House passes the AHCA repeal bill, their members will be hanging way out on a political limb as there’s no way the bill would ever get thru the Senate.

What does this mean for you?

Ignore the pundits.  AHCA is deader than this guy…

May
1

Do laws directing injured workers to providers matter?

Posted by Joe Paduda on Monday, May 1st, 2017 | Comments

It’s about the details.

Anyone reading the quick headline from WCRI’s just-published analysis of employer direction may well draw the conclusion that there’s no difference in costs between states where the employee or the employer has the ability to choose the treating physician – a conclusion that would superficially right – but actually wrong.

A summary of the study notes it addresses “injuries that occurred mostly between 2007 and 2010 across 25 states in which either employers or workers control the choice of provider. It excludes states where workers can choose a provider within their employers’ established network.”

(I’m not sure if we’d see a difference if more current claims data were used as after 1/1/2014, full implementation of ACA may have affected claim allocation to work comp or non-work comp insurance.)

Note the nuance here; WCRI is careful to describe the “direction” metric as one dividing states into those where employers or employees have the MOST control. The “line” between employer-choice and employee-choice is really not a line at all, but rather a shading of white to black, with many permutations of grey.

For example, there are states where the employer can direct the patient to a specific doctor, others where the patient can choose from a panel, and still others where direction is only allowed if the employer has some sort of state certification.

Then there’s the ability of the patient to “opt out” for a course of treatment (Illinois) or change physician to another one, perhaps inside the panel or maybe completely outside the employer panel – after some defined period of time.

And let us not forget that employers can suggest, soft-channel, encourage, provide transportation to, or otherwise get an injured worker to a particular doc or facility in almost every state without violating the law – they just can’t FORCE the employee to go to a doc or choose from a panel of docs.

Or, as authors David Neumark and Bogdan Savych state; “it is common for employees to choose the medical provider when policies give employers control over provider choice, and for employers to choose the provider when workers have the right to direct this choice.”

A key statement: states that give “workers the most control over the choice of provider were associated with higher medical and indemnity costs among the small share of the most expensive back-related injuries…” In other words, claims that are harder to diagnose and where there is less unanimity in agreement on preferred treatment tend to be more expensive in employee-choice states. 

What does this mean for you?

My main takeaway is as it’s been for years – employers should do their damndest to get their employees to high quality physicians who know and understand workers comp.  And then get out of their way.

Apr
27

ACA Deathwatch – A Zero-Sum game

Posted by Joe Paduda on Thursday, April 27th, 2017 | Comments

The ACA repeal movement may have gained a bit of momentum this week…The quick take – odds are this momentum will peter out as changes wanted by some Republicans are anathema to others.

My take is the hands on the Deathwatch Clock just moved back – not forward.

Here’s what’s going on.

The White House continues to push for a vote in the House by the end of this week, apparently to give President Trump a “win” in his first 100 days.

Hard-right Freedom Caucus Republicans have apparently agreed to a rough outline of a repeal plan. (details below)

Somewhat-more-moderate Republicans have publicly weighed in on the outline, and there’s a good bit of concern over coverage for pre-ex conditions and other provisions.

While the challenge faced by the Republicans is pretty straightforward, the solution is anything but. Put simply, changes that get support from the hard-right reduce support from more-moderate Republicans; It’s a zero sum game.

And that’s before it gets to the Senate, where it will die because Senate Republicans are loathe to pass anything remotely resembling AHCA.

Details on the latest legislation

Healthcare is brutally complicated, a reality that’s becoming increasingly apparent to GOP negotiators. To get to some sort of agreement between hard-rights and more-moderates, the latest repeal legislation includes:

  • waivers that allow states to set insurance premiums for older people 5 times higher than younger folks
  • ability for states to let insurance companies eliminate or limit coverage for different types of medical care – drugs, therapy, behavioral health, nursing home care, etc.
  • ability for insurance companies to “medically underwrite” individual and small group insurance again – in English, let insurers decide whether to cover you, and how much to charge, based on your medical history and risk factors.  To do this, states will have to provide high-risk insurance pools to help offset losses (this is a really complicated solution that hasn’t ever worked)

I won’t bore you with the nitty-gritty details, you can read them here.

What’s becoming increasingly apparent to Republicans in DC is they have a Hobson’s choice.

There is no way they can deliver on their campaign promise to repeal ACA and replace it with anything that won’t piss off a lot of their supporters.

But if they don’t repeal ACA, that will really piss off a lot of their supporters.

Add a President who doesn’t care what legislation does or doesn’t do, but cares a lot about “winning”, and we now understand why they are in the mess they are.

What does this mean for you?

The GOP has yet to transition from opposition to governing party.

Apr
24

John Hanna – one of workers’ compensation’s good people

Posted by Joe Paduda on Monday, April 24th, 2017 | Comments

There are few people in this industry I respect and admire as much as John Hanna.

John is the Pharmacy Director at Ohio’s Bureau of Workers’ Compensation, where he and Medical Director Steve Woods MD have done wonderful work on any number of issues.

Perhaps none so important as John’s work to revamp BWC’s formulary, pharmacy program, and pain management approach. After implementing a formulary AND the infrastructure to publicize it to providers and address authorization requests, here’s some of what John has accomplished at BWC:

  • Injured workers were prescribed 15.7 million fewer opiate doses in 2014 than in 2010, representing a 37 percent decrease
  • prescriptions for muscle relaxants and anti-ulcer medications decreased by 72 percent and 83 percent.
  • In 2014, BWC’s total drug costs were 16 percent, or $20.7 million, less than in 2010.
  • Opiate costs were down 36 percent ($19.9 million); muscle relaxant costs were down 78 percent ($3.3 million); and anti-ulcer costs were down 95 percent ($6.4 million).
  • By 2015, total opioid doses for injured workers declined by 41 percent, and
  • the average daily opioid load per injured worker in 2015 was below the 2003 level.
  • The number of work comp patients considered opioid dependent was cut almost in half.

Think about that.

Due primarily to John, over 4,000 people are no longer categorized as “opioid dependent”.

His work has undoubtedly saved dozens of lives, will keep families whole and return hundreds of Ohioans to a functional, productive, livable life.

When John reads this he’s going to be kind of upset, because he will point to and credit everyone else involved in what has been, and continues to be, a big effort. And he’s right. That said, he’s the linchpin; the quiet, steady, very persistent and totally committed driver behind the change. This would not have happened without him. He was instrumental in getting BWC to pay for addiction treatment, using creative and personalized approaches to help injured workers get back to living without opioids.

This cut claims costs by tens of millions of dollars too, and therefore costs for Ohio’s employers and taxpayers – but this wasn’t the intent.

As long as I’m getting on John’s cranky side, I’ll also tell you, dear reader, that he’s the most modest person I know. Just one example – read his bio.  See anything there about his service in Vietnam as a Green Beret medic?

What does this mean for you?

We hear too much about crooks, liars, and cheats in workers’ comp. Thank goodness for the John Hannas.

Apr
21

What’s your company worth?

Posted by Joe Paduda on Friday, April 21st, 2017 | Comments

With investors once again looking to buy into the work comp service sector, owners are looking to figure out what their company is worth. Truth is, many work comp services companies are tough to value, in large part due to their “non-contractual customers.”

Revenues and profits from “non-contractual” customers are often discounted by potential buyers, who much prefer locked-in, guaranteed-price, long-term deals for their inherent predictability.

But that isn’t the way the real world works; often case management firms, IME companies, UR vendors and other service entities don’t have formal contracts with many of their customers. Instead, they provide a service, and send a bill to the claims adjuster. There may, or may not be an upfront understanding of the service’s price.

Claims payers like this because it doesn’t lock them into a vendor, while service companies are eager to work with payers and the contracting and price negotiation process can take a long time and yield little real benefit.

Which brings us to a conundrum – how does a seller or buyer value “non-contractual” revenue. Here are six ways to think about that – ways that might get you a higher price. (this is a summary; I strongly encourage you to read the Wharton article and listen to the podcast)

  • How many people have made a transaction, used our product or service sometime within the trailing 12 months?
  • How many people have made a repeat purchase, have engaged with us at least twice over that trailing 12 months?
  • Of all the people who made a transaction with us back in 2015, how many came back and did it again in 2016?
  • With all the purchases that we had today, what percent of them are from customers who did something with us in the previous year?
  • Of all the customers who bought with us, what percent were with us previously? Or of all the orders that were placed with us this year, what percent of them are by customers who have bought previously?
  • Of all the customers who have done anything with us in the past year, how many things did they do? How many purchases did they make or sell on?

I can hear you groaning – how can I figure this out? I don’t have time for this. We don’t have the data.

All likely true – however, if you don’t have time to value your business, you won’t know what it is worth to you.  You also won’t know where you should be investing, what customers drive what part of your profits, and what that means for your strategy going forward.

What does this mean for you?

Knowledge is the most valuable asset you have. It’s worth the time to obtain it.

 

Apr
20

HWR’s “alternative facts” edition is up and ready

Posted by Joe Paduda on Thursday, April 20th, 2017 | Comments

errr. actually, it’s the Laurel and Hardy edition.  

Brad Wright brings us a terrifically readable synopsis of the latest writing from the bestest experts on health policy, work comp, regulations, and why there are lots of treatments that deal with symptoms, but few that actually cure disease.

Two not to miss are HWR maven Julie Ferguson’s piece on worker safety at a time of program defunding, and regulatory collapse, and the increasingly-brilliant Louise Norris’ fact-filled summary of the real story about the “collapse” of exchanges.