Author: Joe Paduda

Apr
19

Latest news from the work comp world

Posted by Joe Paduda on Wednesday, April 19th, 2017 | Comments

A few items of interest from the workers’ comp world…

The sale of Mitchell proceeds, with multiple sources indicating four finalists have been selected. Word is one is a strategic, or industry buyer, while the rest are investment firms. Given current Mitchell owner KKR’s avowed intention to double their money (they paid $1.1 billion several years ago), it’s a safe bet the finalists are those with the deepest pockets.

Mitchell’s move to build their workers’ comp and auto pharmacy benefit management business is continuing; the latest deal is an acquisition of Mobile, AL-based PMOA. With this latest transaction, Mitchell has vaulted into the second tier of work comp PBMs, with revenues likely in the $175 – $200 million range.

The expansion into the PBM world makes sense, as it significantly increases top line (revenue).  I’d note that the PBM business is looking less attractive these days as margins have been hammered by states drastically cutting fee schedules.

Optum will announce today – or shortly after – that long-time workers’ comp exec David Young will assume leadership of the company’s workers’ comp subsidiary. Formerly CEO of Coventry Work Comp, David brings decades of experience to one of the largest service providers in the industry.

Congratulations to Gallagher Bassett and Pam Ferrandino; GB has hired the vastly-experienced Ferrandino to help run the TPA’s business development team.  Formerly leader of Willis Towers Watson’s casualty brokerage business, Pam will bring a wealth of knowledge and keen understanding of the buyer to GB. (Pam is a friend and colleague)

Finally, the transactions signal a bit of a resurgence in the work comp transactions. The work comp services world appears to be a focus of attention among private equity firms these days – there are at least two other deals that are in process, both have generated a lot of interest in the investment community.

There are several factors driving this. 

  • the mess in DC makes any business case or investment opportunity relying on or heavily driven by CMS or HHS dangerous at best. With the on-again-off-again ACA repeal effort, it’s impossible to predict what’s going to happen. Investors are well-advised to stay on the sidelines until things get clearer.
  • Interest rates are headed up, making now the time to do transactions before debt financing gets more expensive.
  • Private equity firms have a gabillon dollars in funds looking for investments.  They’ve got to find places to park that cash or risk alienating the entities and individuals who’ve bet on their ability to drive huge returns.
  • Sellers are getting multiples in the double-digits for work comp assets. (Prices for their companies are more than ten times the company’s cash flow) Smart owners know that will NOT continue; workers’ comp is a declining industry overall. The owners who are realists know this may be the last best time to sell.

What does this mean for you?

Pigs get fat, hogs get slaughtered, and investors, be careful.

Apr
17

4 million jobs

Posted by Joe Paduda on Monday, April 17th, 2017 | Comments

may be gone when autonomous driving is fully implemented.

At an average salary of $33k, that’s $132 billion in wages that will disappear from payroll.

This from a report from the Center for Global Policy Solutions released last month – thanks to Insurance Journal for the heads’ up.

A quick primer – this contemplates “Level 5” autonomous driving – that is, the vehicle can handle every driving situation without human intervention.  Today, some vehicles have attained Level 4, which allows hands free driving in most situations such as highway and parking.

Some will scoff, citing regulatory hurdles, consumer reluctance, or just Luddism as reasons this will never happen.  Me?  I’d feel a lot safer if that dual semi trailer had Watson behind the wheel – and I’d be pretty happy to have a lot more time to work, read, call my mom, sister, and kids, text and blog while traveling from upstate New York to Boston, NYC, Philly, or Cleveland.

Implications abound.

  • more productivity for Americans
  • lower work comp premium for insurers
  • fewer injured workers
  • far fewer accidents = less need for replacement parts, less need for body shops, paint techs, wholesalers
  • less need for truck stops, mechanics, motels and restaurants (and these are in addition to the 4 million drivers)
  • lower work comp medical costs
  • way harder to re-employ transportation workers looking for employment
  • increased inequality as transportation is one of the few sectors with large numbers of relatively good-paying jobs.

What does this mean for you?

Denial is not a viable long-term option. Adaptation is.

Apr
14

Beware the Ignorant Antagonist

Posted by Joe Paduda on Friday, April 14th, 2017 | Comments

This was the message Accident Fund’s Jeff White delivered in a recent presentation on disruption in insurance – and specifically workers’ comp. A few of Jeff’s slides are shared here…

The idea is simple – things you used to have to do via phone or fax or in person or thru the (gasp) snail mail you can do on your smartphone or tablet – instantly, securely, and at no cost.

Hotel reservation?  Hotels Tonite.

Plane? Get a reservation, get flight status pushed to you, change your seat, get an upgrade.

Get dog food? Amazon Prime.

Nearest coffee? Starbucks app – and pay for it too.

Check on your house? Sure – lock status, turn up the heat, watch home security cameras.

Banking? Deposit checks, pay bills, move money around via your phone.

Sports? Get scores, watch highlights, chat with fellow fans, post pictures, buy tickets.

Travel, retail, security, banking, entertainment – all have been disrupted, middlemen eliminated or drastically changed by adoption of smartphones, spread of a very fast internet, growth of artificial intelligence-driven decision making, internet banking.

This is happening with insurance now, driven by those same technologies, processes, capabilities. Think about the implications; here’s one.

Insurance is risk-sharing for potential losses, but it is a very blunt instrument. Risk is estimated using what are really crude tools to assess exposure, potential cost, liability. Technology allows risk takers and risk assumers to narrow down the actual “risk” a lot, lowering cost of risk and more accurately pricing that risk.  Others with similar risks share the burden – but that burden is much lower due to accurate understanding of exposure.


If a loss occurs, tech can pay the claim instantly.

The graphic below is not a “could be”, it’s a “what actually happened in real life.”

Think this won’t happen in workers’ comp?

Ask a former travel agent – there are lots of them.

Most insurance companies will NOT survive the transition.  That’s because they don’t want it to happen as it will reduce revenues, eliminate the need for executives with newly-irrelevant skills and experience, and make existing infrastructure partially obsolete.

New entrants who don’t have lots of infrastructure to support and business models rooted in current technology and buying patterns are the “Ignorant Antagonists”.  Many of them will fail due to “stupid, ignorant” mistakes – but some will survive, thrive, and come to dominate the insurance industry.

What does this mean for you?

Your company tomorrow will be a lot different than it is today.  If it is around tomorrow. 

 

Apr
13

Work comp disruption and “the important vs the urgent”

Posted by Joe Paduda on Thursday, April 13th, 2017 | Comments

A very long time ago a professor in a business school class said “you have to differentiate between things that are important and things that are urgent”.

That may very well be the most valuable lesson I learned in business school – although it’s one I constantly wrestle with.

I bring this to your attention, dear reader, because there’s been a very important series of blog posts sitting in my “drafts” folder for weeks now. I should have finished and posted them a month ago, but more “urgent” things kept coming up. Mea culpa.

So enough of my time-management problems – here’s what’s so important.

Writing in IAIABC’s Perspectives, Jeff White said:

Even more unconventional P2P insurance models are planning to go to market in 2017, some with the intent to cut out the insurance company altogether. Their
plan is to initially appeal to the one-third of the U.S. population that is wildly open to sharing money and property, even if they have never met each other in person before. These companies are adopting models taken straight out of the current Fintech playbook using crowdfunding, microfinancing, and P2P lending models as their guide.

Jeffrey Austin White is the smartest person I know in work comp.  Jeff also has the unique ability to instantly grasp highly technical issues and, more importantly explain them to the rest of us so that we understand the issue, AND get its implications.

You need to read his article, because it explains precisely what the future – peer-to-peer networks, crowd-funding, blockchain – holds for healthcare and workers’ comp.

This future has huge implications for buyers, regulators, suppliers, and other stakeholders. A few examples:

Teambrella will push the limits of our current regulatory system by allowing members to cover their own risk using a distributed network based on the blockchain.

Teambrella’s model will [be]… funded by a closed community of users without a license or the backing of an insurance company, a centralized authority, or state regulators. What? Are they allowed to do that?

Lemonade is one of several new companies, or platforms, that is re-inventing mutual insurance, by operating under what is now referred to as a Peer-to-Peer (P2P) network. This network allows customers to form groups and finance their own claims from a shared pool of funds with excess covered by a re-insurer. In the true P2P model, money left over in the pool, which would normally be profit for the insurance carrier, is either refunded back to the individual participants, paid forward to the next year’s premiums or, in the case of Lemonade, donated to a charitable organization.

Several major organizations are currently engaged in an international insurance pilot project based on blockchain technology. Aegon, Allianz, Munich Re, Swiss Re, XL Caplin and Zurich are among 15 companies that recently announced the launch of the Blockchain Insurance Industry Initiative — B3i.

I’m going to dig deep into this in the next post.

 

Apr
12

Quick takes…

Posted by Joe Paduda on Wednesday, April 12th, 2017 | Comments

Crazy busy here at the intergalactic HQ of Health Strategy Associates, so I’ve been slacking on my blogging duties…

here’s what came across the virtual desktop of late.

Blockchain!

several articles of note – save them, file them, read them.  You WILL have to understand blockchain, and sooner than you might think.

Blockchain and the sharing economy – which will include insurance

What will blockchain mean for jobs? One expert says: “30–60% of jobs could be rendered redundant by the simple fact that people are able to share data securely with a common record.”

JobLock

The sharing economy depends on the ability of entrepreneurs to leave big employers with good healthplans. If ACA is repealed and/or individual insurance markets tighten up, the gig economy is going to get slammed.  “Job lock” is real; this from HealthAffairs…

Without the ACA, there will be fewer Howards who start their own businesses, resulting in fewer jobs. That’s why anyone who tells you that the ACA is a “job killer” is flat wrong.

Drugs

Express Scripts’ new work comp drug trend report is out – key highlights are:

  • drug spend is down 7.6%
  • opioid utilization is down 11.1%

What this means – work comp PBMs and payers’ efforts to reduce opioid over-utilization are paying off, and this is excellent news for patients and employers alike.

HOWEVER, with half of all patients receiving at least one script for opioids, we’ve still a long way to go.  No vacations folks, now’s the time to keep a relentless focus on reducing opioid usage – especially for patients who’ve been on these drugs for months.

Truth is, some patients demand specific drugs, and it’s difficult for docs to convince them otherwise. And, it’s notoriously difficult to get physicians to change their habits...they are human after all.

Hawaii’s legislature is considering legislation to limit physician dispensing.  Thank goodness the Clifford Yees of the world seem to be sidelined – at least for the moment.

Back tomorrow to a deeper dive into a key issue…

Apr
5

Republicans channelling Monty Python

Posted by Joe Paduda on Wednesday, April 5th, 2017 | Comments

Why the President and Congressional Republicans are still trying to do healthcare legislation is truly a puzzle. Unhappy with their initial effort to completely blow up the insurance markets (and their political future), they’ve re-engaged in a pointless effort that is destined to fail – and wound themselves in the process.

Pointless because every concession to win votes from the Freedom Caucus guys costs votes from those slightly more moderate.  So, it’s a zero-sum game – win an arch-conservative’s support, lose a less-conservative vote.

perhaps they’re thinking the initial AHCA no-vote debacle wasn’t much of a concern…

To be fair, in the disastrous AHCA non-vote they ONLY lost one of their arms.  This time they’re looking to lose more appendages.  This is one of those “if you don’t laugh you’ll cry” moments, because ACA does need significant improvement, but – at least for now – improvements are being ignored as politics prevail.

There are a lot of reasons this is political suicide…

The President and Republican candidates committed to keeping coverage for pre-existing conditions.  The plan being discussed today would gut this entirely, leaving over a quarter of us without coverage for pre-ex.  Ignore claims to the contrary; the combination of changes to what’s covered (essential health benefits) and removal of restrictions on premiums would mean anyone in the individual or small group markets would be subject to medical underwriting (absent state regulations to the contrary).

A close friend and lifelong Republican (including experience working on Capitol Hill) emailed me this morning about this latest “reform the reform” effort using language that would peel the paint off a battleship.

Most Americans now believe the GOP “owns” health reform.  A just-published Gallup poll finds 61% of respondents said “any problems with the law moving forward are the responsibility of Trump and Republicans in Congress…”

Interestingly, ACA is now polling higher than ever, at 55% approval. That’s up 13 points since the election…

I think the Freedom Caucus guys understand their ideological purity means millions of Americans will lose insurance coverage – and thus healthcare. 

And when they do, every mother, father, aunt, uncle, and grandparent will be incensed beyond measure that their wife/husband/child/grandchild won’t get the care they need.

How that is a winning proposition escapes me, but good for the Freedom Caucus for standing up for what they believe in.

Of course, you need to have legs if you want to stand.

 

UPDATE – looks like the Freedom guys and their Republican opponents can’t agree on what the White House said the new bill would include.  Either that or the WH folks told the two parties different things.

Apr
4

Trump, Immigration, and Healthcare providers

Posted by Joe Paduda on Tuesday, April 4th, 2017 | Comments

Today MCM is honored to bring you a guest post authored by the Sedgwick Institute’s Rick Victor, PhD.  Rick is the former CEO of the Workers’ Compensation Research Institute, and a colleague and friend as well.

The post begins below; emphasis was added by MCM.

Trump Immigration Rhetoric and Actions

Risk Higher WC Costs and Slower Return to Work

The Trump immigration actions and rhetoric will significantly worsen the doctor shortage. The Association of American Medical Colleges (AAMC) reports a deficit of 8200 primary care doctors in 2016. It predicts a shortage of nearly 95,000 doctors by 2025. As of 2010, 27% of US physicians were foreign born – 230,000 physicians. Fortunately for US patients, that number has increased each year. Given the large number of baby-boomer physicians who will retire in the next decade, we increasingly rely for our care on foreign born doctors.

The Trump travel ban, rhetoric and recent actions to detain and deport immigrants are creating direct impediments to immigration of needed medical personnel, and a hostile environment for many healthcare workers who consider immigrating to the US for training or jobs. It is in our self-interest to encourage the best and brightest come to the US rather than embracing public policies and rhetoric that repel them.

Seven thousand US physicians were born in the six countries covered by the Trump travel ban. These doctors provide 14 million patient-visits each year. Especially affected are patients in Michigan (1.2 million visits), Ohio (880,000 visits), Pennsylvania (700,000 visits) and West Virginia (210,000). In areas with current doctor shortages, the doctors born in these 6 countries provide 2.3 million patient-visits each year. [The Immigrant Doctors Project used US government data to create a map showing the adverse effects on each local area in the US https://immigrantdoctors.org/.

The negative impact of the Trump travel ban on our healthcare system is much broader than this. First, the rhetoric and initial actions have created substantial uncertainty (and inhospitality) for immigrants from many countries, not just the six listed in the travel ban. The best and the brightest of these have many options other than the US.

Second, both those currently working and training in the US and those considering immigration for training and/or better living conditions are also affected. For those currently training in the US, they wonder if they leave the US to visit family, will they be allowed to returned. When their training is completed, will they be allowed to stay? For those considering training or relocating to the US, they are making a multi-year commitment – mid-course disruption would be very costly to them. The uncertainty created by the recent rhetoric and government actions make the decision to come to the US an increasingly risky one.

Third, we rely heavily on non-physician healthcare workers – 1 in 6 of US healthcare workers are foreign born (nearly 2 million). Forty percent of foreign born healthcare workers are from Asia and the Middle East.

Each year, the US healthcare system depends heavily on immigration to meet the growing demand for healthcare services in the US. Between 2006 and 2010, the number of foreign born US healthcare workers grew from 1.5 million to 1.8 million – adding 300,000 new immigrant healthcare workers.

The US healthcare system relies heavily on foreign born doctors and other healthcare workers. Each year, its reliance grows. The demands on our healthcare system are growing substantially with the aging of the population. Current doctor shortages are predicted to growth dramatically, even if the past patterns of immigration continue. The Trump rhetoric and actions on immigration will impair the flow of healthcare workers immigrating to the US. We will all be worse off as wait times grow and access to needed services becomes more difficult.

Foreign born doctors have choices about where they work. Opponents of single payer models of healthcare financing often cite the longer wait times for patients in single payer systems like Canada and Britain. How ironic if US immigration policies end up reducing wait times in Canada while increasing our wait times.

Apr
3

10% of claims = 60% of costs

Posted by Joe Paduda on Monday, April 3rd, 2017 | Comments

At the Hartford, 10 percent of work comp claims with psychosocial issues account for 60 percent of costs.

It’s not that claims with psych issues are inherently much more problematic, or difficult, or costly, or “bad”; but they are when these issues aren’t addressed early and effectively. We’ve long understood that – and the industry has invested tens of millions in predictive analytics, modeling, and early identification.

The challenge has been – what to do about those claims?

Friend and colleague Tom Lynch has developed the only network I’m aware of with providers trained in addressing work comp patients’ psychological issues.  Tom’s been in the work comp business for about 40 years, so he knows delivering the right care AND ease of use for adjusters are keys to success for any service provider.

Historically, patients with psych issues aren’t identified early, and the “treatment” that is delivered can take months with little demonstrated progress. There are many reasons for this – but on the provider side, a basic issue is few psych providers know anything about workers’ comp, and many patients are treated for months with little evidence of any substantive progress.

Work Comp Psych Net is currently operating in New Jersey, and delivering remarkable outcomes for patients and payers.  I caught up with Tom a while ago to hear more about the problem and how Psych Net addresses psychosocial issues. (I have no financial or legal relationship with Tom or any of his businesses, including Psych Net).

WCPN is comprised of over 50 psychologists covering the entire state trained in workers’ comp who understand the unique issues inherent in comp.  These providers use a single electronic scheduling and medical record system which streamlines data collection, Quality Assurance, and reporting.  Access and ease of use is critical for both providers and claims staff, a requirement long understood but often poorly addressed.

Today, WCPN is contracted with several payers and actively scheduling patients. To date, on average an initial appointment is scheduled within 27 minutes, with initial reports received by the claims adjuster within 5 days of the visit.

Initial results are promising, with 70% of patients back to work on modified duty within 7 sessions and the other 30% back to work after 11 sessions.

 

Unlike the typical “let’s get as big a discount as we can” reimbursement model, WCPN’s financial value lies in resolving the claims quickly and for the long term.

“We are asking providers to do more but in a lot less time” is how Tom put it. While WCPN’s per-visit fees may be higher than the deep discount model there are far fewer sessions. “We commit to complete treatment within 12 sessions unless extraordinary issues are presented, then we have to present information to the adjuster as to why it needs to go longer.”

What does this mean for you?

Early identification of patients with psych issues + treatment by work-comp trained providers = much better results for patients – and way lower costs for employers.

 

Apr
1

New OSHA Administrator – big changes are coming

Posted by Joe Paduda on Saturday, April 1st, 2017 | Comments

The Trump Administration’s pick to lead OSHA will push the President’s deregulation agenda far and deep as he shifts OSHA to a more “business friendly” focus. According to Administrator-designee A. Prelle Pfuelle,  the watchword will be “compliance assistance” instead of enforcement.

Reports indicate the new Administrator, a former lobbyist for the mining industry, will provide “leadership to curtail funding for enforcement, rescind rules under deregulatory orders, and drop defense of regulations facing legal challenges.” The mining industry has been actively applauding initial moves by President Trump to revoke, rescind, or withdraw several regulations and enforcement actions; Pfuelle may have been instrumental in those early actions.

Pfuelle’s past experience includes stints working as a manager in a diamond mining firm in South Africa, labor relations in Liberia’s oil industry, workplace safety officer in the Pakistani ship-breaking association and most recently lobbyist for the Oklahoma natural gas industry.

The White House’s press release noted Pfuelle’s “extensive international experience in a variety of international industries will help America compete with other countries…getting rid of employment-killing regulations will help our economic recovery…”

In an interview after his appointment was announced, Pfuelle was quoted on a number of topics, including return to work. Responding to a reporter’s question about the employer’s role, Pfuelle said:

“OSHA will work to support President Trump’s efforts to make America Great Again wherever we can. If you think about it, a worker injured on the job opens up a job for another worker…so I’m not sure why we want to push employers so hard to rehire injured workers when there are many great Americans who are looking for work…”

In the White House’ announcement of Pfuelle’s appointment, President Trump said:  “I’ve known Prelle for decades; he helped me find the best diamond for my first wife.  We’ve stayed in close contact, and I was impressed with how he handled the the accident at the Anglo-American Corporation’s Vaal Reefs Mine….while there was some loss of life, he got the mine operating again very quickly…”

According to the reports cited above, first up – after confirmation – is a move to scale back injury reporting requirements.

Speaking about the new electronic reporting requirements Pfuelle opined:

“Employers know when their workers get hurt, and it is their responsibility to make sure they tell us about those situations.  But they have a lot of other things that take up a lot of time, so we can’t and shouldn’t expect reporting to be on the top of their list. As long as they let us know in a reasonable time, that’s fine.”

 

Pfuelle will have to divest his holdings prior to assuming the Administrator position, although, under new rules just released by President Trump’s Office of Ethics, he may choose instead to place them in a “blind trust” directed by his wife Blythe, the daughter of the founder of the Anglo-American Lead Mining company.