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

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

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

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

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

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

Our customers become much more valuable when…

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

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

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

What does this mean for you?

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

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

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

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

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

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

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

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

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

What does this mean for you?

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

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.

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.