Insight, analysis & opinion from Joe Paduda
do your real work, and get out early to enjoy the holiday.
Not to worry, we’ll be carefully monitoring all things relevant to workers comp, medical management, and health policy while you’re doing the family thing, soaking up Vitamin D, and avoiding Hurricane Arthur.
See you Monday.
A rather busy week to be sure. Not exactly beach reading, but plenty of food for thought while you’re manning the grill, watching the game, or lolling about.
Reform rollout
The biggest news was the decline in health care costs, an occurrence that surprised everyone. If you missed it, healthcare spending declined by 1.4% in the first quarter of 2014 – earlier predictions had it increasing by almost 10 percent.
Pundits who had cited the earlier incorrect figures as evidence of the horribleness of Obamacare are looking pretty, well, stupid. If they blame increases on O-care, shouldn’t they attribute declines to it as well? Not if you’re the Wall Street Journal...who gets this week’s prize for convoluting facts to fit their worldview…
Before we get too giddy, I’d expect costs to bump up this quarter and next as the newly insured start using their benefits. Hopefully PPACA advocates won’t make the mistake opponents have and read too much into the numbers. We’re a long way from understanding the impact of PPACA on cost trends…
A helpful analysis by the Kaiser Family Foundation on the impact of Medicaid non-expansion in the South reveals:
Another KFF report indicates:
The work comp world
With the reports that Aetna is looking to sell Coventry’s work comp business, there has been lots of talk about who’s going to do the deal. CWC’s revenues have been declining for the last three years, so there isn’t a huge amount of interest among financial buyers. Apax/OneCall is the early frontrunner; the investment firm seems to have an insatiable appetite, bottomless cash (and credit) resources, and a remarkable ability to see high values where other potential investors do not.
A key point worth pondering – Aetna has NOT re-contracted their provider network; any buyer will have to convince providers to sign a work comp-only contract. Considering comp is just over 1 percent of US medical spend, and many providers never see a work comp patient, and very, very few providers have more than one work comp patient a month, and (sources tell me) at least half of the Coventry work comp network’s providers likely don’t even know they are IN the Coventry work comp network, that’s going to be a heavy lift.
A timely report from WCRI analyzes Ambulatory Surgical Center costs, prices, and expansion; the brainiacs in Boston have come looked at 23 states and find there’s not a lot of consistency across the group with ASCs less costly than hospitals in some states and pricier in others. Another report looks just at prices paid to ASCs – which are also wildly variable…
The agenda for this fall’s Las Vegas National Workers Comp meeting is out; one timely session will feature principals from three investment firms very active in the work comp space; they will be discussing the role of private equity in workers’ comp.
Make those plans now!
It was perhaps the worst-kept secret in the industry; Aetna’s effort to sell the Coventry work comp business.
Now the secret is out, and yes it is true – they are looking to sell the entire thing – network, bill review, PBM, case management, and the rest.
While a couple of friends have chided me – and undoubtedly more will – for my statements that this wouldn’t happen, I’d suggest that it may not.
The reasons are two-fold. First, the PBM, FirstScript, uses Express Script’s retail pharmacy network and processing engine. It represents about a third of the total revenues of Coventry Work Comp (CWC). If Express decides it wants to own that business, or terminates the network and processing engine deals, FirstScript is in trouble. Anyone looking at CWC is going to look at that as a risk.
Second, Aetna still has not figured out how to deal with the network contract issue. As I noted in a previous post:
The network generates the lion’s share of the margin; if Aetna wanted to sell the WC business it is hard to see how it could transfer the network’s provider contracts to the new owner as most are a combined WC/group/governmental contract. Sure, Aetna could guarantee access to their contracts going forward for some period certain, but given Aetna’s history with workers comp, any buyer would be very reluctant to bet the future of their investment on that guarantee.
Word is Aetna is NOT going to support the work comp contracts, which means whoever buys CWC – if anyone does – is going to have to convince providers to sign a contract based solely on work comp claims. Considering workers’ comp accounts for just over 1 percent of total US medical spend, that’s a tough sell.
So, who’s likely to bid on the asset that some lunatic said could go for as much as $1.5 billion? (must’ve been on their way out of Colorado at the time..).
We’ll dig in to that later…
It is a gorgeous day in upstate NY – not that every day in upstate isn’t fabulous. Hope your weather is equally spectacular. This week has been nuts…between deals, indictments, PPACA enrollment…gosh how’s a guy supposed to keep up!
First up, my post earlier this week about non-competes generated a lot of attention and more than a few resumes. I can’t act as a clearinghouse for folks hiring and looking to be hired (much as I’d like to), but a couple companies did reach out to let me know they are looking for workers – non-compete or no.
Broadspire is looking for a bunch of talented, motivated, hardworking people eager to work for a company that cares about them. Jobs are listed here.
Dane Street is as well – they’ve got eleven jobs open as of now; check them out here.
Evidently OneCall is also hiring, as a friend asked me my thoughts on potentially working for the company. No comment.
Alas, there are OTHER jobs out there – for people who want to earn “$300 to $1200 per Script and all of its refills” touting compound medications. The fine folks at TYY Consulting are doing their best to get those meds to people who need them!
Gosh these people are great; “Every patient receives their medication, even if not approved. Should a patient’s script be declined, we send them a 40 gram emergency supply, overnight, and free!!!”
Oh, the wonder of it all!!!
In what can only be described as exquisite timing, WorkCompCentral’s Greg Jones authored a piece in today’s WCC concerning the indictment of a bunch of California docs, “business people”, pharmacists, and assorted hangers-on for a scheme allegedly involving payments of more than $25 million to encourage docs to write scripts for three compound creams that just happened to be formulated based on the profitability of their ingredients.
Hmmmm. I’m quite sure this is an isolated, one-off case, and wouldn’t want anyone considering a career in the compounding industry to worry at all about any potential legal issues.
The fine folks at Liberty Mutual are encouraging their employees in PA to let their legislators know they support a bill limiting physician dispensing – a practice awfully similar to compounding in that it sucks money out of employers and taxpayers for no good reason. Kudos to Miss Liberty for pushing this – and hey, other insurers, let’s get cracking, eh?
here’s an excerpt from their piece…
HB 1846 is currently supported by the Pennsylvania Workers’ Compensation Advisory Council (WCAC) so please let your Pennsylvania state Senators know you also support HB 1846, without amendments, by writing an email or making a call today. Take action today and don’t let the orthopods and dispensers dilute this bill.
1) CONTACT one or more members of the Pennsylvania State Senate at the Pennsylvania House and urge them to vote yes on HB 1846
Despite some wishful thinking to the contrary on the part of at least one CompIQ staffer, that app is going the way of…CompReview, PowerTrak, BR 4.0 and other expired/ing bill review platforms. Shockingly, StrataWare will be the survivor of the acquisition of StrataCare by Xerox. I know…who woulda thunk it?
I’d be remiss if I didn’t acknowledge and applaud Bob Wilson’s ongoing efforts to keep us informed about the clustermess that SAIF is making out of the firing of former CEO John Plotkin. Bob is setting a standard here that I won’t even try to meet; kudos to him for keeping a very bright – and extremely well-written – focus on this blatant injustice.
No one can turn a phrase into a knife like Bob can…to wit: ” a huge crapfest ensues, ensnaring all involved into a quagmire-like vortex of controversy.”
Bravo, Bob-o!
I’m also going to nominate SAIF employees for workers of the year; the way these folks have rallied behind John is just, well, unprecedented? And this for a guy who was just there for a few months.
So here’s to you, SAIFers…a toast with your favorite Gilgamesh 22 – or perhaps a great Oregon Pinot Noir!
After spending the last few days on vacation – the boys’ annual mountain biking trip – plane time is needed to catch up on all that happened while I was getting lost in the high desert west of Fruita, Colorado.
CWCI’s June 10 missive listed the top ten work comp writers in California; in addition to indications that premiums will keep increasing, there are a few other takeaways worth contemplating.
There’s a bit more to this; Liberty has been de-emphasizing work comp as it continues to focus on personal lines. The news from the Golden State, along with changes in management wherein personal lines and other non-comp folks are ascendant, look like proof positive that the transformation of the company to one shifting its focus away from workers comp is proceeding. (note – I worked for Liberty way back in the day – 22 years ago to be precise)
Those wretches at the FDA have gone and done it again – according to the American Society of Interventional Pain Physicians (the docs that inject stuff into patients) they’ve issued a “warning that all epidural steroid injections pose a serious risk for neurological injury, paralysis and death…” And, ASIPP is urging all their docs to write letters, scream, yell, and lobby to get this horrible injustice corrected.
This, after studies documented “a 629% increase in Medicare expenditures for epidural steroid injections in use for chronic low back pain, despite the fact that these increases have not been accompanied by population-level improvements in patient outcomes or disability rates.”
As mad as most sentient beings are about the FDA’s unconscionable decision to allow marketing of Zohydro, this is one of those times where the FDA appears to be doing the right thing.
Meanwhile, mergers/acquisitions in the work comp services world – and the fallout therefrom continues. This has been going on for so long that it feels like the normal state of affairs; if one doesn’t hear from at least a couple of analysts, research firms, or investors every week it’s strange indeed.
Finally, I’ve heard from three entities of late who are looking for data analysts. Many insurers, managed care firms, and TPAs are increasing their investment in analytics. The emphasis appears to be provider performance, care analytics, and other aspects of medical price, utilization, and cost.
It’s official – in a press release that hit the wire just after 5 pm EST, Examworks announced that they have bought MedAllocators for $80 million. Cash.
That’s a pretty hefty price, as MA’s revenues were less than half that amount.
It’s going to be a great weekend for Ken Loffredo; he almost certainly got a big payday (and well deserved); he will also be running ExamWorks Clinical Solutions, a new division at Exam. Ken was smart enough to take his payout in cash, rather than stock. Exam’s management folks recently sold off a big chunk of their holdings, and the stock dropped rather dramatically at right about the same time.
The weekend will be a pretty crappy one for many MedAllocators/ASN workers. Word has come from several sources that the layoffs have already begun, and they may have started at Solomon Associates, the Pennsylvania IME company also bought by Exam today.
Yet another big company getting even bigger. Seems that’s a trend these days…
Here’s my quick take on other interesting/important news of the week…
There’s been a good bit of chatter about and fallout from Apax’ acquisition of Genex.
Yes, the specialty networks (NSI and MDN) will be part of OneCall, while the case management and bill review will be operated separately. HOWEVER, a single Apax fund purchased all parts of Genex, so the financial ownership is the same. Is it possible that Genex and OCCM will operate independently? Highly doubtful; big investment firms don’t invest hundreds of millions of dollars then ignore opportunities to drive revenue to their other companies.
On a personnel matter, I’ve been inundated with LinkedIn requests and other contacts from current Genex and NSI staff. According to two individuals, they’ve been asked to sign non-competes by early next week. If they don’t, they have been told they will be terminated. Ouch.
NCCI published an excellent review of the underwriting cycle, one that is a lot more worthy of a read than that trashy novel tucked into the beach bag.
The on shoring movement, where manufacturers are moving their operations back to North America, appears to be gathering momentum, Big potential impact on workers’ comp, altho it is important to remember that a) injury rates and severity in manufacturing have declined precipitously and b) a lot of the returning work is going to Mexico.
The rapidly-changing hospital market is dramatically affecting prices, costs, and utilization. Two excellent pieces in Health Affairs dig into this in detail; the link takes you to one.
Lots more, but time to get to work!
The impact of provider market consolidation is being felt all around the country – but the effect may not be as clear as one may think. From the good folk at Health Affairs we get two Contributing Voices pieces on provider consolidation and market power in health care:
While hospitals are consolidating, there’s also significant stress within management as many hospitals are still struggling to transform their culture from one that worked in the past to one that will thrive in the new world of health care. And some places, like Lehigh Valley Health Network, are further along in the journey.
Despite Its Best Efforts, ObamaCare Might Improve Some Health Care Delivery is by John R. Graham, NCPA Senior Fellow; Graham finds that certain aspects of ObamaCare might be leading to unintended outcomes that improve medical care.
Kynecting the Dots on Obamacare discusses the puzzling but very real dichotomy between what people don’t like (Obamacare) and what they like (all the parts of Obamacare). Sen. Mitch McConnell’s recent comments about Obamacare and the state health insurance marketplace in Kentucky make it clear that he’s in a quandary as well…
The public debate about the price of Sovaldi (sofosbuvir – Gilead) continues, but is completely focused on whether $1000/ pill for a “miracle” cure can be justified, not on whether in fact the drug is a miracle cure. But a third skeptical appraisal of the current evidence from clinical research about the drug concluded that the evidence that the drug cures nearly everyone, will prevent most bad results of hepatitis C infection (cirrhosis, liver failure, liver cancer, premature death), and is safer than previous alternatives is weak and questionable. It seems that the marketing and public relations blitz for Sovaldi and other new, extremely expensive anti hepatitis C drugs has been so effective that it has prevented people from thinking critically about the evidence. Skeptical, level-headed appraisal of clinical evidence would go a long way to addressing our dysfunctional health care system. Fortunately, Roy Poses has kept a sharp focus on the important issues…
At Workers Comp Insider, Tom Lynch profiles Dr. Jennifer Christian, a key thought leader in the occupational health arena, focusing on some of her key initiatives aimed at changing the landscape for disability management.
We conclude with a very different type of post, by Amy Berman; Updating her April 2012 Narrative Matters essay, Berman discusses her experiences since being diagnosed with terminal cancer and choosing to utilize palliative care.
Next up to bat: June 19 when Julie Ferguson at Work Comp Insider takes the reins!
Like many, Friday was a quasi-work day for me; rest assured this post will return to its usual Friday timing this week.
While things were a bit quiet, there were a few items worthy of note.
First up, the big news for the week was the announcement that Vern Steiner will be the State Fund of California’s new CEO and President. While I’ve met Vern a time or two, I don’t know him well; those who do speak highly of him. He’s a very experienced claims pro, well liked and very well respected. His election to the top slot appears to indicate the State Fund board is “doubling down” on the claims process as that is precisely where Steiner’s skills lie. A couple people who know him well told me Vern is particularly adept at leveraging technology and putting teams together. In the ever-fractious world of CA work comp, the latter will be key. Fortunately, word is Steiner and the other leading candidate, interim CEO Carol Newton, get along well.
My admittedly-far-away-view is that Steiner’s biggest challenge may well be dealing (or not) with a few folks who seem to delight in finding fault with anything and everything State Fund-related. I will not give advice here other than to suggest we all give the new CEO some time to get things figured out before we start demanding things.
Word is MedAllocators will likely be sold to Examworks for something in the $75 million range. This isn’t a done deal, as another suitor is rumored to still remain in the mix. Regardless, the company will be sold. Congratulations to everyone at MedAllocators, and to Ken Loffredo who oversaw significant growth of the company. I’m still puzzling over EXAM’s strategy; they are clearly focused on the MSA business as this will be their second deal after the earlier purchase of Gould & Lamb.
Meanwhile, their stock price has dropped rather significantly over the last couple of weeks after several management folks sold off a lot of their shares. I don’t pretend to understand how stocks are valued, but it still looks awfully pricey to me (I don’t have any position in EXAM).
PT and Imaging company MedRisk (an HSA consulting client) will be adding significant new business (significant as in eight figures) in the very near future; with the first one a “crooked number”. Kudos to Mike Ryan, Jamie Davis, Ed McBurnie, and the rest of the sales staff – although the real reason for their success is the dramatic improvements in service levels and customer (that’s adjuster and exec) satisfaction over the last 18 months.
In what looks to be yet another re-organization of the managed care department, Liberty Mutual has posted for a Director of Managed Care. The job description talks a lot about medical case management; my take is that may be more a result of an HR person not fully understanding the job than an accurate portrayal of responsibilities. There are some very good, highly experienced, and completely capable folks currently at 175 Berkeley Street; here’s hoping the powers-that-be don’t ignore them.
Finally, there was a good bit of news on PPACA rollout and related matters, enough to justify a complete post on that later this week.
Happy June – hope yours is productive and pleasant.
Like everyone else, I was in a hurry to get stuff wrapped up last week and neglected more than a couple important news items. Here’s a quick update…
Two California counties are suing opioid manufacturers Purdue, Cephalon, Endo, Teva, Johnson&Johnson, and Activis for for actual damages (plus punitive damages) relating to alleged false and misleading advertising and business practices, unfair competition, and a variety of other civil charges. Go get ’em!
(Steven Feinberg MD was kind enough to send the tip)
From WorkCompCentral came the news that a spinal surgery patient is suing Michael Drobot, Pacific Hospital of Long Beach, and her surgeon, David H Payne (now there’s a rather unfortunate name) for damages resulting from the alleged use of defective hardware, an unnecessary surgery, and related allegations.
Somehow I doubt this is the last of the suits; here’s hoping the applicant attorneys take on other claims – and soon.
As health care provider consolidation continues, a recent piece in Health Affairs finds:
an increase in the market share of hospitals with the tightest vertically integrated relationship with physicians—ownership of physician practices—was associated with higher hospital prices and spending. We found that an increase in contractual integration reduced the frequency of hospital admissions, but this effect was relatively small. Taken together, our results provide a mixed, although somewhat negative, picture of vertical integration from the perspective of the privately insured. [emphasis added]
Another piece from Bruce Vladeck has a somewhat different view on the issue; Vladeck’s take is that consolidation is generally positive as it leads to innovation, reduced costs, and more efficiency (my words not his)
many of the factors fueling increased provider concentration are widely believed to be desirable, or practically unavoidable. Meanwhile, health care prices are increasing at historically low levels. Thus, there appears to be a contradiction between efforts to contain health care prices and the fact that aggressive policies aimed at reducing provider concentration might be ineffective and could even have the unintended effect of stunting positive developments.
Finally, I’m in an on-and-off conversation with a good friend and colleague on matters related to bill review in workers’ comp, specifically how to benchmark savings, clear away confusion when comparing different vendors/savings rates, and get to an objective assessment of performance.
Will be posting on this soon – thanks G.