Author: Joe Paduda

Sep
13

The Purdue Opioid “settlement” – key takeaways for workers’ comp

Posted by Joe Paduda on Friday, September 13th, 2019 | Comments

Reportedly Purdue Pharma, the fine folk behind OxyContin, is nearing a settlement with 23 state attorneys general and thousands of other governmental entities.

Here are the key takeaways:

  • this does NOT appear to be a universal settlement; other state AGs, local governments, employers, and other affected entities will almost certainly seek their own compensation from Purdue.
  • The Sackler family, Purdue’s owners, will lose up to $3 billion of their personal fortunes estimated to total $13 billion – most of which came from OxyContin sales.
  • Purdue Pharma will enter bankruptcy and future earnings will go to addressing the awful repercussions of the opioid crisis

What wasn’t included are criminal charges for the Sacklers; that is an outrage.

It is crystal clear many members of the family were intimately involved in Purdue’s efforts to shove more and more opioids down more and more throats. Not satisfied with those billions, the arrogant bastards were going to make yet more treating the addicts they created. (Note not all of the Sacklers were involved in the opioid disaster)

This from NY’s opioid lawsuit (credit Vox)

The unmitigated gall of the Sacklers is stunning; they knew their drugs were killing tens of thousands, and now wanted to profit from the untold damage they had done.

For workers’ comp, there are a couple of implications.

First, as the tort industry dives deeper into this, they will sue more and more participants. My informed opinion is payers are pretty safe for several reasons;

  • state regulations are the primary and ultimate driver of work comp coverage;
  • work comp entities led the charge to reduce opioids when they first grasped the size of the problem;
  • payers did not receive rebates from opioid scripts so there was no financial benefit to allowing the scripts; and
  • payers were damaged by the opioid industry due to much higher medical costs, extended disability duration and death claims.

I haven’t heard of any workers’ comp entity being sued for damages related to opioids – but it is possible.

Second, work comp payers have been damaged by the Sacklers and their ilk. While state funds may be involved in some of the suits seeking compensation for damages (it’s impossible for me to unpack all the plaintiffs in all the filings), I have yet to hear of any suits involving commercial insurers or reinsurers.

I’ll admit to being surprised at the work comp insurance industry’s seeming lack of interest in taking on the opioid industry. Every day:

  • Insurers go after claimants for double-dipping and false claims,
  • Insurers go after employers for falsifying payroll data,
  • Insurers go after providers for fraudulent billing for practices, and
  • Insurers sue each other over coverage issues and reinsurance claims.

Before anyone else could spell opioids, work comp payers saw the damage being done and took action.

What does this mean for you?

Work comp insurers must be a highly visible part of the solution; we owe it to policyholders and taxpayers, we owe it to patients, and we owe it to all of the insurer staff, regulators, researchers, and other stakeholders who’ve dedicated untold hours to fixing the damage done by the Sacklers and their ilk.

Need more incentive? Here’s David Sackler’s $22 million Bel Air mansion your workers’ comp dollars helped pay for.

 

Sep
11

The soft market’s impact on work comp service providers

Posted by Joe Paduda on Wednesday, September 11th, 2019 | Comments

Yesterday I briefly summarized today’s work comp market, which in a word is

While this has been very profitable for work comp insurers (that are enjoying double digit returns for the first time ever) and has saved employers and taxpayers hundreds of millions of dollars, it’s been causing agita amongst service providers – with several notable exceptions. (by “service providers” I am referring to TPAs, medical and disability management entities, networks and other parties)

TPAs are flourishing.  As insurers look to reduce their overhead costs, they are finding fewer dollars available to invest in systems, IT projects, training and recruitment. They are also facing the reality that claim frequency declines mean there will be fewer claims to handle next year than this.

The net effect – why spend dollars to get better at handling a shrinking business, when you can outsource claims to a third party?

That’s driving growth at ESIS, Broadspire, Sedgwick, GB et al; most TPAs have seen significant increases in carrier business over the last few years.  That growth will continue.

Medical management entities are in a different situation – but it’s not a simple one.

With fewer claims to handle, there’s less demand for case managers. With medical costs flat, the volume of bills to handle, visits to schedule, and services to provide is static. Of course, while that’s true for the industry as a whole, there’s wide variation amongst the individual companies in the space. Some are growing quite nicely, while others are losing share and revenues.

Of course that’s due primarily to service providers’ abilities, competency, customer service, and how easy they are to do business with.

Many are cutting prices and giving up margin as they try to stay competitive, hold onto current customers, and have any shot at adding new business.  In general this makes sense, but you have to wonder at the long-term viability of the strategy.

A somewhat different approach is worth contemplating.

What’s working for some providers is their ability and commitment to take work off their customers’ desks and do it for them quickly, easily, and with minimal disruption.  These days this tactic isn’t just a nicety, it allows insurers to reduce their internal workloads by offloading tasks to vendors.

Some are doing this intentionally, others may not even be aware they are solving their customers’ strategic needs as well.

There’s a wildcard out there as well – or rather two.

First, most payers require at least two service providers for most services (excluding pharmacy and bill review).

Second, should one of the big service providers stumble or hit financial difficulty, there will be significant opportunity for competitors able to jump in and help out.

What does this mean for you?

Even in a very tough market, there are opportunities for those who think strategically.

 

 

 

Sep
9

Work comp’s ongoing soft market

Posted by Joe Paduda on Monday, September 9th, 2019 | Comments

Work comp rates continue to drift ever lower, with new declines announced pretty much every week. While this is great for employers and taxpayers, the impact on insurers, TPAs, and the work comp ecosystem is rather less than “great.”

It’s going to end…someday…right?

It always does, but this time around feels different.

Here’s where we are today – and why.

Rates and payroll drive premiums; as we’re at or darn near full employment with pretty static average weekly wages, premiums are likely holding steady or up just a hair.

Graph shows changes in average weekly wages adjusted for inflation from the Bureau of Labor Statistics

Florida’s rates will likely drop for a third straight year, New Hampshire employers are even happier as rates have declined for 8 straight years – this time by almost 10%. California – by far the biggest work comp state in terms of premiums, gets another decrease in 2020. Same story in Missouri, Wisconsin, and Virginia.

Rates follow declines in claim costs, so insurers are making tons of money. Historically high profits result from low combined ratios (defined as the ratio of total losses plus admin expense to premiums earned). As long as claim costs continue to drop, profits will remain strong.

Result – insurers are really happy. So are employers.

With work comp medical costs static [see detailed report from NASI, free to download] and claim counts stable-to-lower, there’s little if any growth in the number of claimants, the number of medical bills, and the volume of medical services. This means payers have fewer dollars to upgrade systems, pay staff, invest in improvements and training. As premiums drop, overhead costs get squeezed too.

Think of it this way – a California insurer collects $1 million in premiums this year. If it keeps all its current business and doesn’t gain any new customers, that same customer base = $900,000 in revenue next year. The 10% decrease means 10% fewer dollars to spend on IT, marketing, staff training, process improvement.

The impact on service companies isn’t quite as straight forward – for reasons we’ll dive into tomorrow.

What does this mean for you?

Fewer dollars is good news for some, but is likely preventing many insurers from much-needed investment and upgrades.

 

Sep
6

No, hospital mergers do NOT reduce your costs

Posted by Joe Paduda on Friday, September 6th, 2019 | Comments

The takeaway from the American Hospital Association’s “study” of hospital mergers is NOT that mergers are good for patients, employers, and taxpayers.

It is that all of us should be skeptical readers of research conducted/paid for by entities that have a stake in the results.

The report authored by Charles River Associates – and funded by the AHA – on mergers and acquisitions in the hospital made several claims, all focused on the hospital that was acquired:

  • mergers reduced expenses at the acquired hospital;
  • quality at the acquired hospital improved; and
  • revenue per admission decreased.

Clearly the intended message is that mergers are good for us – quality goes up and the cost to us – the patients and employers and workers comp insurers, go down.

Except that’s highly misleading.

First, the study drew conclusions directly contradicted by every other study of hospital/health system consolidation.  This is likely because the study focused on the hospitals being acquired, and not the overall results of the newly merged entity. (Here is a very good review of mergers’ impact on costs and quality, here’s what NCCI had to say.
And here’s what happens to patients – spoiler – you get to pay more.
If the authors had included results from the acquiring hospitals this would have been much more useful.  Overall, the report provides no useful insights into the changes in costs, revenues, or quality resulting from mergers.
Second, the study reported expense reductions from mergers are relatively small at 1.5% to 3.5% of total expenses. As I mentioned to WorkCompCentral’s Elaine Goodman, most every merger outside the hospital industry produces expense savings at or very close to double digits, thus the “cost-reduction” benefits touted by the AHA are rather less than impressive.
Second, claims about improvements in quality of care are not convincing for two reasons.  First, statements about types of improvements consist of examples cited by interviewees. Second, as the acquired hospital may transfer, or more likely, not accept higher-acuity patients, it is not surprising that their quality measures (re-admissions, mortality rates, etc) improve. Healthier patients = better quality ratings.
Third, the report indicates ” acquisitions are also associated with a reduction in net patient revenue per admission “ at the acquired hospital. There could be many reasons for patient revenues to decline, including moving more critical patients  – who cost more to treat – from the acquired hospital to the acquiring hospital. Changes in Medicare and Medicaid reimbursement could also be a factor. Notably the report did not discuss revenue reductions across the newly merged entity.
Here’s what REALLY happens to hospital revenues…
What does this mean for you?
For workers’ comp payers, don’t think this is good news..
Hospital costs are hurting workers’ comp payers.  Revenue maximization efforts by hospitals and healthcare systems in non-Medicaid expansion states, are driving comp medical costs higher.

Note – For years I have been doing research on several issues important to work comp – pharmacy, bill review, claims systems, utilization review. Some of have been sponsored by companies active in the space – but they’ve never had access to respondent-specific data nor any input into the analysis or report writing process.

Still, you should read all my research with a careful eye – as you should read all research.

Sep
5

Chronic pain, opioids, and workers’ comp

Posted by Joe Paduda on Thursday, September 5th, 2019 | Comments

The hammer is starting to fall on the opioid industry and the repercussions are echoing thru the comp industry.

  • J&J owes Oklahoma $573 million after losing its case in the state
  • Purdue Pharma’s owners are trying to settle all suits for $10-$13 billion
  • the huge case in Federal Court in Ohio will go to trial next month

In work comp, opioid spend has been cut in half over the last three years, but the reductions are not consistent across the states. WCRI’s latest report has insights into where the problem is most severe – which helps you figure out where to allocate resources. Kudos to authors Dongchun Wang, Vennela Thumula, and Te-Chun Liu for putting together the report.

Meanwhile, we’re being inundated with “alternative” treatments for chronic pain. One just-published study (hat-tip to Steve Feinberg, MD) shows that invasive procedures are pretty much useless; here’s the takeaway:

There is little evidence for the specific efficacy beyond sham for invasive procedures in chronic pain…Given their high cost and safety concerns, more rigorous studies are required before invasive procedures are routinely used for patients with chronic pain.

BTW for clinicians, Steve wants you to consider attending the CSIMS meeting coming up next month.

As we transition away from opioids, how do we help patients with chronic pain? What works, what doesn’t, and why? And most importantly, how do we work with treating physicians to solve the problem?

Of course, a key reason docs have over-prescribed invasive treatments is financial; there’s a ton of money in doing stuff to patients, compared to a few pounds of money for working with patients. But that’s only part of the story.

Simply walking into a physician’s office with a fancy dashboard and telling the physician that doing X is in their best interest does not work.

To get docs to change behavior, you have to understand why they are doing what they are, provide them accessible data showing why that’s not helpful, and get them involved in change.

Is that a lot of work? Well, maybe. Break it down into chunks and it’s not so daunting.  Identify a few docs you want to work with, talk with them about the issue, and develop solutions together. This takes time, patience, and most of all a commitment to listening and understanding.

The payoff is trust between you and the treating physician, which leads to a lot less work for your front-line staff, and a lot better outcomes for your work comp patients.

What does this mean for you?

You need a plan to help patients with chronic pain. And that plan has to include treating physicians. 

Sep
3

If other services were like healthcare…

Posted by Joe Paduda on Tuesday, September 3rd, 2019 | Comments

There’s this ongoing debate/discussion about healthcare as an economic good.  Fact is, unlike flat panel TVs or cars, healthcare is quite different for a whole bunch of reasons;;

  • we often don’t know what services we need,
  • even experts are often unable to make informed decisions,
  • we don’t know what the cost will be, and
  • even if we’re given an estimate up front, that’s just an estimate,
  • once you’ve paid your out-of-pocket maximum you don’t care about cost, and
  • in many circumstances the emotion involved makes rational decision making impossible

To further explain how healthcare is different, I offer Sarah Mirk’s take on what would happen if other services were like healthcare…

How the health insurance marketplace works – School!

How emergency healthcare works – Fire departments!

More of Sarah’s work – and a lot of other cool stuff – is at The Nib.

Aug
27

Get uncomfortable.

Posted by Joe Paduda on Tuesday, August 27th, 2019 | Comments

A recent email exchange with a client crystalized an all-too-common problem in our industry – complacency. 

Truth is, too many of us are not comfortable with being uncomfortable.  That is, we don’t want to be pushed, challenged, prodded, forced to defend our ideas, business practices, long-held beliefs.

When we’re confronted with the possibility that there’s a better way than the way we’ve always done it, we don’t listen – instead, we get defensive and withdraw. Yet we all can point to countless examples where complacency led to utter collapse and defeat.

History is chock-full of examples. Unsinkable ships, unbeatable foes, impossible achievements abound. The Titanic, the Tuskegee Airmen, Agincourt, Trump’s election all remind us to beware of assumptions.

The best part of sport is the victory of the underdog; Harvard’s 1998 women’s hoops knocking off no. 1 seed Stanford , the Amazin’ Mets, the Miracle on Ice in 1980, Texas Western’s NCAA basketball championship over Kentucky in 1966 are all great examples where what was supposed to happen…didn’t.

Yet we all know of companies whose cultures can’t possibly conceive that they aren’t the best, smartest, most experienced and knowledgable and expert in the business. The “If it wasn’t invented here it didn’t need to be invented” mindset prevails, killing off any and all efforts to challenge the status quo.

Like Goliath before David, companies afflicted with a culture of complacency will lose to unheralded competitors. In most cases this will happen because the culture of complacency’s rejection of outside ideas prevents it from seeing what in retrospect is obvious.

Unless you get comfortable with being uncomfortable, you’re at high risk. Each of us need to ask the awkward, difficult questions that make us squirm. Why do we do it this way? If we were competing with us, how would we defeat us? Where are our weak spots, and how can they be exploited?

More broadly, how else could our customers’ needs be met [and do we really understand what those needs are today, and will be tomorrow]? As the world changes, how are we sure we will evolve fast and smart enough to lead, if not keep pace? Why are we so sure of ourselves?

One more thought.  Really good athletes put themselves in distress all the time – because if they aren’t trying to perform perfectly when exhausted, stressed, when their muscles are screaming and lungs are burning, they won’t win.

In a word, they get comfortable with being uncomfortable. That’s why they succeed.

What does this mean for you?

When was the last time you were uncomfortable, and did you hide from it or use it to get better?

Aug
26

Monday update – healthcare costs, guidelines, what docs want, and market consolidation

Posted by Joe Paduda on Monday, August 26th, 2019 | Comments

Here’s what happened last week…

People who enroll in exchange programs in red states pay 3.2 percent more for their health insurance than folks in purple or blue states.  Research indicates it is because fewer folks in red states sign up for coverage – and these are likely the healthier people.

Families pay about a third of their healthcare costs, with employers picking up most of the rest.

In part that may be because healthcare now costs more than a new car…Yet one more straw on that poor camel’s back…

Yet another indicator that the healthcare market continues to rapidly consolidate came last week with news that Tufts and Harvard Pilgrim look to be merging.

A you-should-definitely-read-this piece from Harvard Business Review reminds us that variations in data should be considered thru the lens of statistics, not emotion or intuition. An excerpt:

Sorting out variation provides needed context, points to opportunity, and helps managers maintain their cool when something goes wrong. Managers should learn how to measure variation, understand what it tells them about their business, decompose it, and, when necessary, reduce it.

WCRI’s Vennela Thumula PharmD will be discussing Interstate variations in opioid dispensing in a webinar on September 12.  Dr Thumula is one of the nation’s leading experts on workers’ comp opioids and well worth your listen. Register here.

Great piece from HealthAffairs on evidence-based treatment guidelines.  There’s a lot of nonsense and BS out there – especially in workers’ comp guidelines – and this article provides a solid foundation to understand what’s real and what isn’t. Here’s the central message…

There are two core issues that lead to a host of problems. First, there is a lack of centralized authority to coordinate, vet, approve, and catalog guidelines. Second, there is an absence of a universal methodology to create guidelines—every professional organization promulgating guidelines today generally decides freely which, if any, framework they will use to construct guidelines.

Finally, if you want to understand how to incentivize physicians – and improve your ability to work with them, read this.

take time to develop relationships with physicians. I need to develop trust. I need to convey the why. And then, once we do that, you can begin to move into the how and the what. And then physicians are ready to look at the dashboards to help you move them forward.

 

Aug
22

Three reasons we’ll have major healthcare reform by 2025

Posted by Joe Paduda on Thursday, August 22nd, 2019 | Comments

Middle class voters can’t afford healthcare.

Total health insurance cost for the average family with employer-sponsored coverage is over $22,000 annually.

Even families that have coverage are being crushed by costs not covered by insurance.

lawsuits keep the “Debt and Collections” courtroom in Poplar Bluff busy. (Michael S. Williamson/The Washington Post)

Hospitals and health systems are going out of business, leaving towns and rural areas with reduced access healthcare.

Health systems and hospitals have a Hobbesian choice – force families into bankruptcy or go bankrupt themselves.

Tennessee and Texas lead the nation in hospital closures, with one-fifth of the Lone Star State’s rural hospitals already closed or close to it. Just north, a grassroots movement in Oklahoma driven by closure of a half-dozen rural hospitals, is gaining traction.

While Becker’s reports all but one of the hospitals going belly up are in states that didn’t expand Medicaid.   While there’s no question the problem is much worse in non-expansion states, facilities’ fiscal problems aren’t all solvable by Medicaid. Hospitals from Philadelphia to Chicago are facing bankruptcy, leaving behind massive unpaid bills and huge gaps in the provider landscape.

Improved access to care has big economic benefits.

Growing evidence indicates Medicaid expansion has been a big positive for expansion states:

Medicaid expansion was associated with improved hospital financial performance and significant reductions in the probability of hospital closure, especially in rural areas and areas with higher pre-ACA uninsured rates.

A study in Louisiana found that the injection of federal expansion funds created and supported 19,195 jobs (while creating and supporting personal earnings of $1.12 billion) in sectors throughout the economy and across the state as of SFY 2017. A study in Colorado found that the state supported 31,074 additional jobs due to Medicaid expansion as of FY 2015-2016

Another Louisiana study found that as a result of the federal infusion of Medicaid expansion dollars into the state’s economy, Louisiana derived an additional $103.2 million in overall state tax receipts (which exceeded the state dollars budgeted for the Medicaid expansion program by close to $50 million) and local governments derived an additional $74.6 million in local tax receipts. A study in Montana found positive financial effects for businesses due to infusion of federal dollars to fund health coverage for workers

The net is this – People want their kids to be covered, to be protected from medical cost bankruptcy, to have access to care.

Politicians who offer solutions to these problems are finding receptive audiences, even in red states and states where Medicaid expansion was turned down. Louisiana, Kansas and Maine are three states where healthcare was a significant factor in gubernatorial elections – all have expanded, or working to expand Medicaid.

Voters will drive healthcare reform, and politicians will follow. More coverage = a healthier economy.

What does this mean for you?

It’s going to happen.

Aug
21

High hospital costs? This may be why.

Posted by Joe Paduda on Wednesday, August 21st, 2019 | Comments

Work comp and auto payers in many southeastern states have seen a sharp rise in facility costs over the last five years.

While ineffective fee schedules are partially to blame, the real driver may well be politicians’ refusal to expand Medicaid.

When Medicaid expansion was offered in 2014 as part of the ACA, most states took advantage of the option, resulting in a massive decline in uncompensated care. However, the ACA also reduced federal payments to hospitals in tough financial shape, the rationale being Medicaid’s expansion would reduce the need for additional funding.

Not surprisingly, the cost of uncompensated care dropped dramatically in states that expanded Medicaid.

Equally unsurprising was the increase in the cost of uncompensated care for those states that didn’t expand Medicaid.

In the chart below, the gold bubbles in the top right show how much the uninsured rate increased, correlated with uncompensated care’s share of hospital costs.

So, we have a massive revenue shortfall in non-expansion states; Florida, Texas, Georgia, South Carolina, and others, setting up pretty dire financial situation for hospitals.

What does this have to do with workers’ comp, you ask?

This.

The chart – courtesy WCRI – shows a remarkable correlation between non-Medicaid expansion and higher prices paid for workers’ comp.

The reason is simple. Hospitals, especially those in southeastern states, rural and small ones, are desperate for revenue, and workers’ comp is a very soft target.

What does this mean for you?

If you think you’ve got the right answer for facility costs, you’re probably wrong.