Author: Joe Paduda

Jun
29

Friday catch up

Posted by Joe Paduda on Friday, June 29th, 2018 | Comments

Happy last June Friday – going to be a blistering weekend here in upstate New York with temps likely to blast thru records.  Hope you’re cooler than we are…

Here’s a few newsworthy items that crossed my virtual desk this week.

First up – WCRI’s got the latest on perhaps the biggest cost driver in work comp medical – outpatient facility costs.

Couple quick takeaways:

  • States without fee schedules had significantly higher prices
  • States with percentage of charges fee schedules were way more costly than those with fixed fee schedules
  • Medicare’s reimbursement scheme is becoming more pervasive – my view is this is a very good thing.

Speaking of cost drivers…Health systems are buying up physician practices at a record pace. But does this make good business sense? “…some larger health systems’ physician operations are generating nine-figure operating losses, which are major contributors to the deterioration in hospital earnings. ”

Best line in a news article this week goes to the Economist; in a great article about why meetings suck.

MOST workers view the prospect of a two-hour meeting with the same enthusiasm as Prometheus awaited the daily arrival of the eagle, sent by the gods to peck at his liver.

The solution? “the best solution to tedious gatherings is to have far fewer of them.”

Excellent discussion of the Infrastructure issue – how it affects local business, why tolls should only cover operating and not capital expenses, and why Dodge City didn’t become Dallas – Forth Worth – and DFW did.

Health status is driven by many things – but perhaps the most important is food. One out of six Medicaid recipients surveyed who are working didn’t eat anything for the entire day. Details here.

In the Road-To-Hell-Is-Paved-With-Good-Intentions department, we bring you Medicaid work requirements; they make sense, right? Well, most of the recipients who would lose coverage are actually working today – but they’d be kicked out due to the administrative hassles of complying with reporting requirements.

Prescription Drug Monitoring Programs  – when effectively and intelligently implemented – are associated with reduced opioid prescribing. The best results appear to come from Kentucky…

Ok, time to get to work.

Don’t forget the sunscreen, eh?

 

Jun
27

The trade “war” and workers’ comp

Posted by Joe Paduda on Wednesday, June 27th, 2018 | Comments

Responding to the European Union’s new import tariffs, Harley Davidson will be shifting some production from American factories to its plants in Brazil, India, and Thailand in an effort to keep it’s bikes affordable.

A store in Paris

Motorcycles aren’t the only US product suffering from the not-quite-yet-a-trade war. Orange juice, cranberry juice, peanut butter, bourbon, tobacco products, steel, jeans, and playing cards are among those that are incurring at least 25% import duties.

Farmers and those in the “food chain” may be the next to feel the pain. In response to Trump’s tariffs, Beijing has said that it will retaliate by imposing duties of fifteen per cent on a wide range of American foodstuffs, According to the New Yorker the products affected include: “soybeans, cashews, almonds, apricots, strawberries, and other fruits. Pork products, which are very popular in China, would be hit with a tariff of twenty-five per cent.”

Harley-Davidson’s move was driven by the European Union’s increase of import duties, aka tariffs by 25%. This was in response to President Trump’s higher import duties on certain EU products.  With the new EU tariff raising prices by an average of $2200 per bike, HD management is now eating the losses in order to keep market share in Europe until the company can ramp up production overseas; this quote from HD is from The New Yorker:

“Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe,”

Farm products have already been hit by trade war fears; corn and soybean futures are at a two-year low. While there’s a lot driving those prices, the short-term outlook for farmers, wholesalers, farm-equipment manufacturers and others in the ag value chain are not good.

China buys over $20 billion of US agricultural products every year, and is moving to buy more from Brazil and other countries as US goods will be much more expensive with the import duties.

Our neighbor has 1300 acres of soybeans and corn, so this is pretty real to us.

One company that’s getting hit from both sides in this trade thing is John Deere. The company’s steel prices are up while future demand for its products – both here and overseas – is in doubt. According to one analyst,

Deere & Company could end up seeing years of depressed US agricultural sales, because it may take farming households years to recover financially.

So, what does this have to do with workers’ comp?

Insurers and employers are enjoying the latest in a string of really, really good years. 2017’s combined ratio was a stellar 89, the best result we’ve seen in two decades. While premiums were down marginally last year, the pre-tax operating margin hit 23 percent, a level we haven’t seen in recent memory.

All this really really good news has been driven by a nine-year long recovery, a continuation in the structural decrease in claim frequency (and likely total claims), and relatively low medical inflation.

The very strong labor market helps a lot; re-employing injured workers is a lot easier when there are lots of job openings and employers work really hard to get injured workers back on the job to meet demand.

One would do well to remember what happens when good things come to an end. Claims jump up, possibly driven by workers scared of layoffs deciding to report that nagging pain. Employers stop hiring, afraid to be stuck with lots of idle workers when demand drops off.

If the current trade conflict gets any more heated, we’re headed for a nasty trade war, one that will have deep and lasting effects on every sector from steel to transport to agriculture to tourism.

What does this mean for you?

Trade wars will hurt the economy and hammer workers’ comp insurers. Companies serving the claims sector may well see an uptick as claim frequency and claim duration increase.

 

 

Jun
25

HWR’s Midsummer Nights edition is up

Posted by Joe Paduda on Monday, June 25th, 2018 | Comments

Thanks to the estimable Hank Stern, we bring you the June edition of Health Wonk Review, a fast read of the latest intel on health policy and related matters.

Hank’s summary includes notes on the CVS’ donation kerfuffle; a very readable review of the Trump Administration’s Association Health Plans plans; what may happen if the Trump folks kill off ACA; and how Medicare might be expanded.

Read on!

Jun
22

What’s up with M&A in work comp services…or, will it pass the Gremlin Test?

Posted by Joe Paduda on Friday, June 22nd, 2018 | Comments

After a spate of mega-deals and “tuck-in” acquisitions, things seemed to have calmed down in work comp services M&A.

In reality, there’s a lot going on – for reasons I’m not sure make sense.

There’s been consolidation throughout work comp services; every niche from pharmacy management to MSA vendors to networks to IME firms to case management to TPAs has gone thru this. There’s been both vertical (companies in the same business merging (e.g. EXAM buying IME companies) and horizontal deals (companies in dissimilar areas joining forces (e.g. Mitchell buying MCN).

While your take on this depends on where you sit, (e.g. fewer vendors bidding on a payer’s business), there’s another, arguably more important issue here.

I’m going to caution buyers to not conflate scarcity with value.

I’m seeing renewed enthusiasm among both strategic and financial buyers in companies that weren’t that exciting just a couple of years ago. Those heretofore-not-exciting companies seem to have gotten much more attractive now that there are far fewer potential acquisition targets available.

This is just human nature; we tend to value things more when there are few of them.

For example, I give you the Ford Pinto…

A horrifically crappy car rushed into production during the gas crises of the early seventies, thankfully there are few left in circulation.

Even worse, the AMC Gremlin (why a company would name a product after a manufacturing defect is one of the great mysteries of the Universe).

Yet people still spend stupid money on Pintos and Gremlins…

Why? because there are few of them left. That doesn’t make these awful examples of design and engineering incompetence any better, it doesn’t make the build quality less than horrific, and it sure doesn’t make them any more visually attractive.

What does this mean for you?

Before you plunk down your (or your investors’) hard earned cash on some company you passed on or wouldn’t have given a second look at a few years ago, you may want to ask if it passes the Gremlin Test.

Jun
21

Why we’re not solving opioid addiction

Posted by Joe Paduda on Thursday, June 21st, 2018 | Comments

The reason opioid abuse disorder (OAD) is such a huge problem is because no one’s figured out how to a) fix it while b) making a shipload of money.

Sure, there are “solutions” that address bits and pieces including:

  • urine drug testing identifies patients who aren’t taking prescribed drugs and/or are taking other licit or illicit medications;
  • Medication Assisted Therapy (MAT) can and does help many wean off opioids without going thru withdrawal;
  • inpatient or outpatient detox is essential for some OAD patients;
  • physical therapy and exercise is helpful for many; and
  • cognitive behavioral therapy (CBT) is essential for many patients.

But many patients require many of these services, while some do fine with one or two.

There is no single silver bullet.

What we aren’t doing is funding community-based treatment facilities and providers. This is essential because OAD is a long-term chronic disease, and patients need follow up and support for years.

The real issue is three-fold – treating OAD usually requires dealing with the patient’s chronic pain as well; OAD is a lifetime disorder; and every patient is different.

The terror of withdrawal coupled with the dread of chronic pain is hugely difficult to overcome. Patients are justifiably terrified of both, and this fear must be addressed throughout the treatment process. This is a long-term process likely involving different treatment modalities delivered by diverse providers.

Some patients respond to MAT, others do not. Some have family support systems, others are pretty much on their own. Some respond to PT and exercise, others are too afraid the effort will trigger a resurgence of pain. And the only way to find out what works for Patient X is to keep trying different approaches, providers, modalities until you find something that works.

No one has cracked the code, come up with a set process, solution or approach that works for most patients. Until someone figures out how to make gazillions fixing people with substance abuse disorder, I don’t expect the nation will make real progress.

That does NOT mean there aren’t real successes happening every day.

California’s State Fund is one of the leaders, delivering remarkable results through a careful, methodical approach.

Here’s the key – OAD can be a lifetime issue. Do not fear this, rather accept it as reality. It’s far easier to throw one’s hands up at the difficulty of it all rather than dig in and get going, but it’s also what led to hundreds of thousands of workers comp patients with OAD.

What does this mean for you?

Those who are in it for the long haul are going to be the difference makers.

Jun
19

Roads to stability

Posted by Joe Paduda on Tuesday, June 19th, 2018 | Comments

After eight days with family in Tuscany, it’s back to work.

Before we dive into the mundane, an observation from my travels.

This is a road built by the Romans about 2000 years ago. It’s still pretty functional, as were most of the ones we rode on in the hills and valleys of Tuscany. Sure, it could be smoother and a bit less steep (or a LOT less steep) in places, but it’s still there.

The Romans built these by hand, with nothing but human and animal power, with no electronics or computers or drones or satellite or engineering apps, no internal combustion or hydraulics or steam- or coal- powered machines. And they’re still here.

The Romans built these roads to speed communications, trade, and security. The labor that built these roads was drawn from the poor in the cities, local farms and landowners.

Somehow, that bumpy, narrow road of stones buried in the dirt eons ago felt a lot more…reliable.

All those opioid bills in Congress

Now we know why Congress can’t get anything done – At last count there were about 30 opioid-related bills in various stages in the House or Senate – over 20 have actually been passed by the House. One of the bills that addresses the Institutions for Mental Diseases is pretty contentious.

According to the Washington Post, the “IMD exclusion”  prohibits federal Medicaid reimbursements for inpatient treatment centers with more than 16 beds whose patients are mainly suffering from severe mental illness. The House bill would lift the exclusion for treatment of opioid addiction- but ONLY opioid addiction.

This ignores the very real and pervasive nature of other-substance addiction that has long plagued poor rural, minority and inner-city populations – crystal meth is just one example.

Why we’d pass a bill that doesn’t address crystal meth, which is a disaster in many rural communities from Maine to Arizona, is beyond me.

But there’s another issue here that’s even more troubling; this bill ignores the real problem; community-based treatment has always been starved for funds, unable to help millions of people who endlessly wait their turn for treatment.

Experts believe we need north of $10 billion per year to make a real impact on substance abuse disorder

Fact is, many with substance abuse disorder want to get treatment – there just isn’t any available. And allowing Medicaid to spend billions on care delivered in large institutions sounds a lot like a hand-out of taxpayer dollars to big business-owned “treatment” centers.

The IMD exclusion repeal is just window-dressing, a way for politicians to claim they’re doing something while handing billions to an industry with really good lobbying.

What does this mean for you?

The Romans built very expensive and very solid, stable, and durable roads that led to the long-term survival and success of the Empire.

We give truckloads of taxpayer dollars to big business while ignoring the devastation of the rural and inner-city poor.

Where will our decision lead us?

 

Jun
6

What do these acquisitions mean?

Posted by Joe Paduda on Wednesday, June 6th, 2018 | Comments

Two just-announced acquisitions are an indicator of where things are in today’s work comp services world.

Tech firm Mitchell (recently bought by Stone Point (!) thanks for correcting me JT!) will acquire IME and peer review firm MCN.  Based in Seattle, privately-held MCN is one of the larger independent firms in that space, has a national network of 13,000 physician reviewers and a solid customer list. Brian Grant MD founded the company 30+ years ago and built it into a firm serving the auto, comp, and disability insurance industries.

This deal adds depth to Mitchell’s already-extensive utilization review/peer review offering, and adds cross-selling opportunities that should help the company compete with Examworks.

Strategically, the acquisition both broadens Mitchell’s non-bill review business and strengthens its offerings outside the auto casualty space, changes that lessen Mitchell’s reliance on auto and work comp review.  Given the long-term uncertainty about those businesses, the transaction makes sense – especially if the company focuses on disability, a space not subject to the impact of autonomous vehicles and the structural decline in work comp claim frequency.

One source indicates the price was in the 12x earnings range; that could not be independently verified.

In an unrelated transaction, TPA SUNZ bought case management firm Ascential Care in a deal announced on WorkCompWire this morning.  SUNZ sells high-deductible work comp plans to professional employer organizations (PEOs), staffing companies and larger employers.

I’d expect Ascential’s case management to be more tightly integrated with SUNZ’ claims management processes. Employers with loss-sensitive plans almost always buy into proactive, rapid use of clinical staff when claims arise. Getting case managers involved – when appropriate – can avoid problems and help patients feel like their employer is working to help them recover.

Ascential CEO Rich Leonardo is staying on and will continue to lead the business and SUNZ is investing in more staff to meet client needs.

Takeaway

For the umpteenth time time, workers’ comp is a very mature industry (as is auto).  Service companies looking to grow have to either:

  • take share from competitors;
  • buy other, similar businesses;
  • buy related businesses; or
  • expand into other markets.

Mitchell is growing by acquisition, adding more depth to its current medical management operation.  SUNZ is capturing more of the services delivered to current customers, thereby keeping those dollars inhouse.

What does this mean for you?

If you want to grow, see above. If that’s going to be hard to do, think about who may want to buy you.

Jun
5

BWC Ohio picks a new Pharmacy Benefit Manager

Posted by Joe Paduda on Tuesday, June 5th, 2018 | Comments

Several weeks ago Ohio’s state work comp fund – the Bureau of Workers’ Compensation – selected a new PBM to replace OptumRx.

This has me thinking more broadly about the vendor-customer relationship and how that’s evolving.

First, buyers are getting smarter. BWC’s former and current pharmacy directors (John Hanna and Nicholas Trego respectively) are not just pharmacists, they have become expert in pricing, auditing PBM transactions, understanding contracting language, and negotiations.

According to WorkCompCentral’s William Rabb, BWC learned it was paying OptumRx millions more than it should have after conducting an audit earlier this year.  Quoting Rabb:

an audit showed that the current PBM, OptumRx, failed to keep drug prices below the maximum allowable cost as required.

The audit is here.

Without getting too deep in the weeds here, allegedly OptumRx was supposed to keep generic drug prices at or below a Maximum Allowable Cost, or MAC. However, the audit indicated OptumRx failed to do that, resulting in BWC paying about $5.7 million more for generics than it should have.

Seems straightforward, but this can be hard to figure out as the list of drugs subject to MAC list pricing is often not disclosed.  That is, the PBM has a “proprietary” MAC list which it does NOT have to share with its customer.

Obviously this makes it hard for the customer to figure out if it is paying what it should.

Second, major issues don’t just pop up out of thin air; its unlikely BWC first expressed concerns a few months ago.

Moving an $84 million pharmacy program – or any big service – is no easy task; there’s a ton of systems programming to be done and tested; patients to be switched from one PBM to the new one; adjusters and case managers to train; financial arrangements to be agreed upon; pharmacies and employers to educate; and myriad other tasks.

Payers do NOT make changes unless they have no other choice due to the switching cost, potential business and patient care disruption, and internal stress involved in moving to a new PBM (or any other service type).

Service providers need to ensure that their senior managers and front-line staff understand their customer’s situation, concerns, needs, and plans.  Equally important, senior management must empower their client-facing staff, giving those staff the ability to fix problems, highlight issues, and marshal resources needed to meet clients’ needs. (I’d note that Optum’s work comp PBM recently brought Kaye Lewis back on board to run account management; Kaye is universally well-regarded and one of the best in the business; I had mistakenly said Kaye was working with OptumRx which focuses on the broader health marketplace. I regret the error. )

Third, vendors need to own up to and deliver on their commitments to all involved.  Quibbling over contractual terms, arguing over this clause or that, or word-stretching to avoid doing what the customer or the customer’s advocates need done reflects short-term, myopic thinking.

Sure, you may be “right”, but you’ll win that battle and lose the war.

What does this mean for you?

These days customers are harder and harder to come by, so when you get one, make darn sure you keep them. Listen, anticipate, deliver, and be flexible.

And most of all, meet their needs.

Jun
4

Drug rebates, technology, and what’s next

Posted by Joe Paduda on Monday, June 4th, 2018 | Comments

Two years ago, brand drug manufacturers paid out $127 billion in rebates and other discounts and fees.

That, dear reader, is a ship-load of dollars, and shows just how distorted brand-drug pricing has become.  Huge increases jack up list prices and in many instances consumers’ costs, while those fees flow to payers, PBMs, and other entities in the pharma distribution.

Most consumers’ costs are based on the total price of the drugs they buy, not the net price after rebates etc. As a result, consumers may be paying an inflated price while their insurer gets the rebate dollars. I’d note that in some benefit plans consumers do receive a share of the rebates in the form of discounted drugs or lower up-front costs. Two big PBMs indicate they give about 90% of rebate dollars to their clients. 

Who hopefully pass those dollars along to their members.

Evidently, rebate contractual terms can be opaque, confusing, and subject to misinterpretation, a rather scary possibility given the billions at stake.

I recently spoke with the CEO of a company that’s deep into the rebate management process. Quantivus uses technology to help payers and pharma track all those clauses, heretofores, and whereas-es in rebate contracts to be sure the right dollars are paid for the right drugs to the right entities.

Quantivus’ solution helps stakeholders standardize terms and definitions, allowing them to ensure that they are comparing apples to apples when considering rival drugs – or rival payers. It does other stuff as well, and the company is working on a related service that will tie the negotiated contract to operational systems, helping to standardize reporting of rebate financials for manufacturers and payers.

It’s interesting in a couple of geeky ways; evidently these contracts are so complex and convoluted that they can be mis-interpreted or misunderstood, potentially costing the pharma company or its customer millions. Which there are plenty of.

It’s also interesting in that CEO Lisa Bair and her team have figured out a software solution to a problem that seems to get more complicated and more financially important by the minute.

If I was an attorney focused on rebate contracts, I’d be just a bit concerned that I could be replaced by Bair’s technology.

 

 

 

May
31

Thursday catch-up

Posted by Joe Paduda on Thursday, May 31st, 2018 | Comments

Lots going on out there – here’s what you may have missed…

Opioids…

The awful people at Purdue Pharma knew damn well their opioids were being misused, repeatedly denied it, and kept pushing their pills on doctors and patients. They lied to investigators, manipulated data, and are directly responsible for today’s opioid disaster. This from Barry Meier’s piece:

credit NYTimes

But the Feds aren’t blameless; in 2007 the US Justice Department allowed Purdue officials and the company to plead guilty to misdemeanor charges.

Think of that – misdemeanor charges for those most responsible for the opioid epidemic. Street corner drug dealers go to jail for years, and these fat cat execs with their lavish lifestyles and fancy lawyers pay a small fine.

I cannot put into words how much I hate these bastards, and how furious we all should be about a Justice Department that let them get away with it..

Breathe…

WCRI is hosting a webinar on the impact of opioids on disability duration on Thursday June 21 at 1pm eastern. Bogdan Savych PhD will address the following questions:

  • Do opioid prescriptions increase duration of temporary disability benefits?
  • Do longer-term opioid prescriptions increase duration of temporary disability benefits?
  • What role do local prescribing patterns play in determining whether injured workers received opioid prescriptions?

The study examines the effect of opioid prescriptions on the duration of temporary disability benefits among workers with work-related low back injuries using data from 28 states, for injuries between 2008 and 2013.

Register here…free for WCRI members, a nominal fee for others.

If you’re wondering why Congress isn’t doing more to attack the opioid crisis – and it isn’t doing much at all – blame the lobbyists, including those working for the AMA, the seventh highest lobbying spender in 2017, with $21.5 million spent.

The AMA is fighting 3-day opioid script limits, mandatory use of Prescription Drug Monitoring Programs, and mandatory opioid education for prescribers.

WTF??!!!

Twisting words to blame the victim

Poor people are less healthy than people who aren’t poor. That’s because their diets aren’t as good, they have poor access to care, their lives are far more stressful, substance abuse is more prevalent, and they are more often victims of crime.

These factors have long been known as “social determinants of health”, the idea that just being poor means moms, kids, dads are going to be less healthy than you and me.

The “work for Medicaid” crowd is attempting to steal the term “social determinants” by using it to claim that forcing people to work for Medicaid is good for them.

That’s just not true. In fact, forcing Medicaid recipients to go thru a maze of paperwork and administrative hurdles to prove they can’t work  – and if that recipient messes up the paperwork, fails to submit it on time, or isn’t able to accurately document their disability,

BOOM! they lose Medicaid coverage.

And they get sicker, and we end up paying for their care in the ER.

And the data shows folks who HAVE Medicaid are better able to find work! From the HealthAffairs piece:

illness and disability are among the primary reasons working-age adults are not employed and this problem is exacerbated when people lack access to the health coverage they need get care for their health problems. Enrollment in health coverage has been shown to be a significant factor in helping individuals find jobs, with over 75 percent of unemployed Medicaid enrollees in Ohio reporting that gaining access to health coverage made their job search easier.

Oh, and at least one state’s policies is blatantly racist.

There’s more, but I have to get to work.