Author: Joe Paduda

May
15

This won’t last.

Posted by Joe Paduda on Monday, May 15th, 2023 | Comments

Back from the boys’ annual mountain biking trip…this one to Hurricane Utah. Great riding in a beautiful area…

Okay, at last week’s NCCI conference we learned workers’ comp insurance is earning insurers record profits…despite continued drops in claims frequency, rater reductions and pretty much flat medical spend.

Oh, and they’ve got billions more in the form of excess reserves socked away for…reasons that escape me.

For an industry that loves to catastrophize (medical marijuana!!! presumption!!! interest rates!!!  COVID!!!  WFH!!!) there’s precious little to be concerned about over the near term.

Comp insurance rates and profits are cyclical…have always been and always will be. That does NOT justify the too-high premiums employers and taxpayers are paying today…but smart industry execs should be using this flood of cash to prepare for the inevitable downturn.

That will happen when:

  • the opioid hangover ends,
  • facility costs climb,
  • and unprepared payers start calling for rate increases, increases that would be necessary only because payers failed to prepare.

This is absolutely going to happen.

Very few payers are using this time and their billions to invest, innovate, build systems, train their people and build a resilient culture.

Why take “risks” or actually work smart and hard when the balance sheet is glorious?

Nope, payers are (mostly) lazing through these halcyon days taking meetings, playing golf with erstwhile vendors, celebrating their good fortune, and leaving the future to…the future.

Here’s a few things payers should be doing…

  • building much better approaches to facility costs
  • asking their vendors what they can do better
  • building useful tech that makes front-line staff’s work easier, simpler, and most of all more rewarding
  • building a culture based on valuing (really valuing) workers
  • innovating and taking risks by trying new technology and new approaches

What does this mean for you?

May
10

Work comp is rocking.

Posted by Joe Paduda on Wednesday, May 10th, 2023 | Comments

That’s the only conclusion one could draw from this year’s NCCI State of the Line report. 

Very profitable despite declining premium rates, eye-watering pre-tax operating gains, and eight straight years of very solid profits…the corks must have been popping down in Orlando.

(wasn’t able to make the event this year…boys’ annual mountain biking trip kinda took precedence…thanks to NCCI’s Cristine Pike for keeping me in the loop!)

Details..

  • private carriers’ pretax operating gain of 25% – within an eyelash of the record year of 2018
  • loss ratio of 43%…43%!!! – the lowest in two decades.
  • combined ratio was 84%
  • lost time claim frequency dropped 4 points
  • $17 billion in excess reserves

This last is most striking as it is incontrovertible proof that premium rates are still far too high.

There are a bunch of implications that we’ll dive into in the next few days, but let’s start with the biggest one:

Why are employers and taxpayers still paying way too much for worker’s comp?

I predicted this back in 2019 – in a word, opioids.

 

May
8

Quick takes

Posted by Joe Paduda on Monday, May 8th, 2023 | Comments

Stuff you may not have seen/thought much about…

Good work from the Travelers...Analysis of a very large number of WC calms found:

  • watch those new workers – those with < a year on the job account for more than a third of all WC claims
  • workers >60 cost more…a whopping 1.4x more than the 18-24 year olds (but only 15% more than the 25-59 folks)
  • but…the 60+ folks don’t get injured as often.

The report is here.

kudos to the folks under the umbrella and WorkCompWire for getting the work done and news out.

you may have missed this – Texas Mutual is getting into the health insurance business.  I’ve reached out to TM and will be interviewing the new leader. I’ve a lot of thoughts about this…

  • the just-hired leader has a wealth of experience
  • standing up a new health insurance entity in a year is a very heavy lift
  • regulatory structure is quite different from WC
  • all research shows market share is the key factor in negotiating provider reimbursement, making it hard for new entrants to gain traction

Then there’s the question: “Why did legislators want TM to get into health insurance?” If they wanted to cover more people, expanding Medicaid would have been a lot faster, far less expensive, and much more impactful.

Finally, (somewhat) new WC bill review company accuro solutions acquired Splashlight...Splashlight is also in the WC BR business.  Good to see competition in an industry sector that sorely needs it.

 

May
3

It is not the price Dammit!

Posted by Joe Paduda on Wednesday, May 3rd, 2023 | Comments

In work comp services, far too many buyers focus solely on the price of the service.

That’s the wrong metric..it isn’t the Price, it’s the Cost (we’ll leave aside the RoI/Value/…for more on that see this.)

Price is what you pay per unit.

Cost is the total expense that you pay.

Example…

Some PBMs are trying to buy business by offering amazing prices – as in AWP-80% for generic drugs.  Sounds great…right?

Sure, until you have to explain to your boss why drug spend went up even though your discounted price went down…

While workers comp payers have (mostly) figured out that the price of the pill is a lousy way to decide on a PBM, every now and then I get a call from a payer who’s just been offered a GREAT price from a PBM, and is either a) gleeful that they have been so smart and such a cunning negotiator; or b) panicked because their boss wants to change PBMs and the vendor manager knows it’s going to blow up.

Okay, let’s walk thru this.

The price of the pill is important, but it is only ONE part of the equation. Which is as follows:

Price per pill x number of pills per script x percentage of scripts processed in the PBM’s network.

Price per pill is determined by the definition of generic and brand, discount below AWP, brand:generic mix, and, most importantly, by the type of pills dispensed.  If a PBM does a crappy job managing the clinical aspects of the pharmacy program, you’re going to pay for far too many pills, and for the wrong kind of pills.

I’ve also read PBM contracts with quite creative definitions of “generic”…some so creative that what any normal person would say is a generic is – for price purposes – a “brand” drug.

Since brand prices are typically AWP-10-15%, a mis-categorized generic is going to be super-profitable.

Next, if the price is too good to be true, it isn’t.

A PBM cannot afford to pay for pharmacist support, bill review fees, call center costs, compliance/state reporting, IT connections and customer service if it is charging AWP-80% for what are REALLY generics.

So, it’s safe to say you’ll be paying for lots of opioids, fenoprofen, convenience kits, and other highly-questionable-if-not-downright-harmful-drugs.

But hey, at least you’re getting them for cheap!

Lets say you don’t care about the kind and volume of pills, you just want the deep discount.  Even then, you will likely find the cheap PBM delivers crappy results.  Here’s why.

PBMs that pitch really low per-pill pricing are likely using a group health-contracted pharmacy network, which leads to big-time problems with paper bills and administrative hassles for adjusters.  You may not see these costs as they are buried in bill review “savings”, and may not show up in your pharmacy report.

But they are most definitely there.

Oh, and Rule #1 in work comp services – do NOT piss off your adjusters.

Regardless, the network penetration for the cheapo PBMs tends to be pretty low compared to real WC PBMs.  There’s a bunch of reasons for that which I won’t get in to here.

What does this mean for you?

Do you want to explain to your boss why drug spend – and the combined ratio – are higher even though you got a great price from your PBM?

 

May
2

Just the facts: Medicaid and work requirements

Posted by Joe Paduda on Tuesday, May 2nd, 2023 | Comments

House GOP members are pushing to add work requirements for Medicaid recipients.  This makes sense, right? They are getting taxpayer-paid benefits, and should be:

  • working or
  • looking for work or
  • in school preparing for work.

Let’s see…

First, most Medicaid recipients are totally disabled (according to Social Security), are pregnant moms or moms and new babies or are poor older folks.

Among recipients that are none of the above,

  • 3 out of 5 are already working
  • 1 out of 5 are in school or are caregivers for family members

Of the remainder, at any one time more than half not working because they are sick or disabled.

Which leaves just 7 percent of which most are:

  • retired or
  • can’t find work (often because they have no transportation).

Are there freeloaders? of course…there will ALWAYS be cheaters, like my former neighbor who owned millions of dollars of real estate and bragged about how he had great free insurance from Medicaid. (Yes I turned him in).

source KFF

Oh, and the Supreme Court has weighed in...dismissing pending appeals in cases that had found work requirement approvals unlawful. This ruling essentially confirmed lower court rulings against work requirements.

What does this mean for you?

It’s really easy for we relatively well-off, college-educated, financially-stable professionals with good jobs, internet access, cell phones and employer-paid health insurance to complain about “freeloaders”…

who are/have none of the above.

 

 

Apr
27

Drugs and worker’s comp, part 2

Posted by Joe Paduda on Thursday, April 27th, 2023 | Comments

Yesterday we posted on top takeaways from our 18th Survey of Prescription Drug Management in Workers’ Comp.

Today, I’M responding to several readers’ questions about physician dispensing (PDD) and mail order pharmacies (twin sons of different mothers) and why they are rearing their unfathomably ugly heads once again.

Mostly because payers have pretty much neglected the issue for more than a decade. Meanwhile the profiteering dispensing industry has been contributing big dollars to politicians, coming up with new and ever-more creative ways to get around regulations, and learning how to get reimbursement from payers – one at a time.

The work comp payer industry is fat dumb and hugely profitable for insurers and some (non PBM) vendors/service entities. Why expend energy on PDD when you’re making bank, employers aren’t complaining, and claim counts are going to continue to decline?

Unfortunately, injured workers are the victims, as are employers and tax payers.

  • PDD are rarely subjected to utilization review (by the time the payer finds out a drug has been prescribed and dispensed by PDDs, it’s way too late to do anything about it.
  • PDDs may conflict with other medications, duplicate other medications, or be contra-indicated for the patient.
  • PDDs are hugely expensive – and often unnecessary or duplicative. Profit margins likely exceed 90%.

The net is payers are usually demanding PBMs “fix” the problem of PDD – instead of partnering with PBMs, employers, and other stakeholders to build and implement a long-term strategy to stop PDD.

What does this mean for you?

If you aren’t fighting the good fight, you are the problem.

 

 

Apr
26

Drugs and workers’ comp, part 1

Posted by Joe Paduda on Wednesday, April 26th, 2023 | Comments

Download the latest Survey of Prescription Drug Management in Workers’ Comp here…

Key takeaways

  1. Total drug spend in workers’ comp was likely around $2.9 billion in 2021.
  2. The multi-year decline in drug spend seems to have flattened out; across all 31 respondents spend ticked up 0.82%.
  3. Opioid spend continued to drop, with 2021 figures showing a 12.5% drop over the previous year. Opioids represented 13.4% of all respondents’ pharmacy, the lowest figure in the two-decade history of this survey.
  4. Legacy opioid patients continue to be a challenge for many payers; most have adopted a “we’ll do whatever might help” approach to these patients.
  5. Physician dispensing is once again rearing its ugly head with respondents rating it the single biggest problem in workers’ compensation pharmacy after a multi-year hiatus from that august position.
  6. Payers continue to highly value PBM customer service; myMatrixx continues to lead the industry in that key category.

Media – if you’d like a much more detailed version of the report (which respondents receive) please leave a request in the comment section.

Apr
21

What business are you in?

Posted by Joe Paduda on Friday, April 21st, 2023 | Comments

Hint – if you are a specialty network, you are NOT in the specialty network business…

Over the  last few weeks I’ve been talking with Rita Wilson of Tower MSA: Rita’s been attempting to educate me about the MSA world, a Herculean task to be sure.

What struck me about our conversation is Rita kept referring back to Tower’s purpose, which is claim settlement. From Tower’s website…

Tower focuses on the settlement of claims as we deliver measurably better Medicare Secondary Payer (MSP) compliance. We identify cost drivers and other barriers to closing claims, recommend and implement clinical interventions, and benchmark our performance against CMS responses [emphasis added]

Tower is not in the MSA business…it is in the claim settlement business.

Work comp payers don’t care about MSAs, they care about settling claims – once and for all.

By clearly defining Tower’s focus, the company speaks directly to the problem its clients and prospects are facing, demonstrating Tower knows what payers want and need.

Back to a specialty network…

NO ONE CARES ABOUT YOUR NETWORK.

What buyers care about is their combined ratio (if an insurer) or controlling costs and return to work (if a self-insured employer).

If you can directly show how your PT/imaging/DME/whatever network reduces combined ratios, controls costs and improves RTW, then AND ONLY THEN should you talk about HOW you do that.

What does this mean for you?

Be like Rita.

Apr
18

Private Equity healthcare investment in 2022

Posted by Joe Paduda on Tuesday, April 18th, 2023 | Comments

Private Equity healthcare investment declined sharply last year as the average deal’s value and the number of transactions both fell off.

Firms invested over $45 billion in 167 US healthcare deals last year – a pretty massive decrease from 2021’s 216 deals for $107.5 billion.

While 2022 started off quite strong, deal volume halved in the second half of 2022 due to interest rate hikes, tighter credit, economic concerns and Putin’s War.

Those are the headlines from Bain & Company’s Global Healthcare Private Equity and M&A report 2023 (download for free here.)

note – I have worked with Bain entities in the past, respect the firm and the Bain people I’ve worked with. I am not currently working with Bain.

key highlights…

  • Provider sector deals accounted for about half of all transactions and dollars invested…but slowed dramatically to 7 transactions in Q4 2022
  • IPOs pretty much disappeared in 2022 (initial public offerings, when a private company goes public)
  • Value-based care and primary care were a big focus of strategic buyers…
    • Optum bought several provider groups
    • Amazon acquired One Medical
    • Humana and Welsh Carson did a joint venture, investing in a value-based primary care company.

There’s a lot on value-based care…although there’s precious little evidence that it is a panacea, investors are still betting billions …From the report:

For more than a decade, value-based care (VBC) has been positioned as healthcare’s “next big thing.” And while progress has been uneven 

The number of accountable care organizations (ACOs) plateaued at around 1,000 in recent years, while 15 of the 53 entities participating in CMS’s direct contracting program in 2021 experienced net savings losses. 

Value-based care stakeholders are doubling down on their commitment as healthcare spending outpaces GDP growth and CMS leans further into VBC models. 

What does this mean for you?

Expect PE investors to remain quite cautious until interest rates stabilize, the debt ceiling is raised (or much, much better – eliminated) and inflation trends level out.

Warning – if House Republicans don’t raise or eliminate the debt ceiling there will be hell to pay. 

Register for Bain’s webinar on the report here.

Apr
17

Wildly off topic #15 – Leaks and the coming offensive

Posted by Joe Paduda on Monday, April 17th, 2023 | Comments

There’s much rending of clothes and gnashing of teeth in the mass media about how Jack Teixeira’s criminal stupidity will:

  • help Russian generals defeat Ukraine’s pending attacks by identifying attacking units and eliminating surprise
  • really tick off our allies
  • reveal key shortages of materiel (military-speak for ammunition, spare parts, supplies and weapons systems)

Uh, no. Let’s take these in order. (much more detail at Phillips O’Brien’s excellent substack postings.)

The upcoming offensive

Is the worst-kept secret since Trump’s sexual antics with porn stars.

Ukrainian officials, military leaders, Allied intelligence, Russian military bloggers have all talked about this. Heck, they even know the military units that will do the attacking. What we don’t know is when and where…and Teixeira’s documents don’t give a date or location..

Angry allies

What? An ally is spying on us? How…common.

Reality is everyone spies on everyone else all the time. There will be outrage and histrionics from politicians from Israel to Norway, all furious at such conduct.

All will be for public consumption, this will die down pretty quickly, and really…does anyone think allies will abandon the US or Ukraine over this?

Materiel shortages and impact thereof

This is perhaps the most ridiculous “disclosure.” There have been hundreds of public reports, news articles, blog posts and stories about this over the last few months.

Lastly, among the “revelations” in Teixeira’s documents is that our intelligence community has doubts about whether Ukraine’s upcoming offensive will achieve much.

Hardly.  With some notable exceptions (e.g.the timing of Russia’s initial attack) US intel has a rather poor record of predicting what’s going to happen in Ukraine. And that is being kind.

What does this mean for you?

Top Secret…isn’t.

More than 1.3 million individuals have Top Secret clearances.

You can bet your house the Russians knew everything in Teixeira’s documents long before they hit Discord.