I’m going to try something relatively new for this conference: using Twitter to do mini posts a few times a day. You can sign up at Twitter.com for my feed, which is labeled mysteriously as Paduda.
It’s a brutal day of meetings tomorrow. We’ll see if I can keep up and the iPhone battery has enough juice.
Used a good bit of the battery taking pictures at Fenway today on a perfect day for baseball. Thanks to an invite from Medata I was able to start the conference put on the right foot; it’s not every day you get to talk one-on-one with Dennis Eckersley about Roger Clemens, umpires, the National League, and why Mariano Rivera is so damn good.
Almost as much fun as workers comp. Almost.

Yesterday and Monday we reviewed the macro and micro impacts of health reform on work comp.
Today we’re going to focus on how reform will impact the comp network business.
There are two types of comp networks, those based on group health network contracts and comp-specific PPOs. The comp-specific PPOs include HFN, Rockport, CompPartners; they are contracted specifically for work comp although they may include some rental network agreements. These networks are likely to come thru the next few years relatively unaffected by reform.
Not so the group health-based ‘work comp’ networks.
To understand their future, consider how reform affects health plans. It’s all good; despite their complaints about government interference and regulation, execs are gleefully rubbing their hands in anticipation of tens of millions of new members.
But these very same plans will no longer be able to compete by being better at risk selection; instead they’ll have to get a whole lot better at managing cost and care.
This will require a lot more focus on provider assesment and partnership, development of new and innovative provider-payer relationships and contracts and reimbursement mechanisms and communication.
Health plan staff will be working flat out on these initiatives with precious little te for anything else.
Now let’s think about work comp. Total medical spend in comp is less than two percent of national helth care spend. Coventry, which dominates the work comp network business, gets about 9% of revenues from comp, and probably no more than two percent from network revenues. Aetna, which actually provides the networks for Coventry in 18 states +/-, may get 0.1% of total revenues from work comp networks.
So. You’re a health plan exec with limited resources. Are you going to spend any time, devote any resources, focus any provider relations, IT, or compliance staff on work comp?
Didn’t think so.

Yesterday I highlighted four main ways health reform will impact workers comp. Today we’ll focus on the less-noticeable ways reform will change the comp industry. But we’ll start by addressing one of the common misconceptions; people without health insurance are more likely to file comp claims.
The research indicates the opposite is the case. As I’ve reported previously here (can’t link to the post cause I’m posting from my iPhone), a recent study documented the opposite; those with health insurance were more likely to file a comp claim than those without coverage. That appears to be more of a statistical than a causal link. There are other factors – e.g. the way the employer treats their workers, the workers’ pay level and immigration status, that appear to have more influence on filing than does coverage.
So don’t expect to see a decline in frequency due to broader health insurance coverage.
Medical devices
While the reform bill does include excise taxes on certain medical devices, it also promises to dramatically increase the number of potential customers for those devices. There has been some concern that manufacturers would raise prices to offset the new taxes; this remains a distinct possibility as there is little price elasticity in the device market. For comp
payers, there is the distinct possibility that device usage will increase driven by suppliers’ enthusiasm for new customers, a potential negative that may be offset by the suppliers’ focus on the much bigger employer and CMS (Medicare and Medicaid) health markets.
Medical management
What passes for medical management in the group and CMS world, while mostly ineffective, is nonetheless far more robust than what passes for med
management in work comp.
That isn’t likely to change anytime soon, but within the next couple of years I fully expect group insurers and health plans will invest heavily in medical management, data mining, analytics, chronic disease management, and electronic health record technology. This will help comp payers in two ways: as comp trails about a decade behind group, these new and improved med management tools will find their way into comp; and the improvements in patient health will reduce the need for comp payers to fix non-work-related medical conditions that complicate treatment of the comp injury.
Healthier claimants
Which brings us to what may well be the moat significant long-term impact of reform; the likelihood that workers will be healthier, their underlying conditions and comorbidities will be at least addressed by their health plan, and therefore comp payers won’t have to pay for treatment of those conditions in order to resolve the work injury. Think diabetes and surgery, spinal stenosis, and hypertension.
Degenerative conditions
Finally, for some diagnoses, identifying the cause of the injury is becoming increasingly problematic. It is often difficult for a physician to determine the ’cause’ of back pain or dysfunction; it may, or may not be wholly or partially related to a work injury and different physicians often reach different conclusions about the cause of injury. While reform won’t clear up those medical mysteries overnight, it will reduce the need for comp payers to pay for what are clearly non-work-related conditions.
What does this mean for you?
Opportunities for observant payers that quickly adopt innovations, and more need for COB expertise for claims staff.
Tomorrow – what’s coming next…how ‘fixing’ physician reimbursement will affect work comp.
Posted via iPhone.

An oft-repeated goal of reform opponents is their desire to ‘get the government out of health insurance’.
Let’s say they get their wish, and the vaunted free market is allowed free rein (or reign) to do as they would. What happens?
A lot and none of it good.
Insurers would be able to cancel policies when insurers have the temerity to fall ill.
Individuals with pre-existing medical conditions would not be able to get insurance to cover those conditions.
Employers with aging and/or sicker workers would find coverage language carefully crafted to exclude payment for those workers.
Insurance premiums would be lower, for those who could get coverage.
Larger employers (who tend to be self insured) would be little affected by these issues, at least initially. But over time their costs would increase as providers shift cost to them to cover the expense of treating the growing pool of uninsured.
Those with chronic conditions, the people responsible for three quarters of our health care costs, would in increasingly be on their own.
Local and state taxes would increase dramatically as governments struggle to balance commitments to their workers with protests from hard-pressed taxpayers.
Within a few years the insurance death spiral will have reached terminal status, and voters will be clamoring for any and all relief.
Will this happen? Without regulation, absolutely.
This isn’t to damn health insurers; they exist to serve their owners first and customers second. That’s not good or bad, it’s just reality.
But to hear the anti-government folk, all will be well if government just gets out of the way. Nothing could be further from the truth, and they know it.
What they really mean is government should have a lighter hand. But that’s not what they say and not what their supporters hear. These are the same supporters who would find themselves without coverage, without care, relying on charity if government wasn’t there to ensure insurers operate in a socially responsible way.
Todays version of regulation will slow down the death spiral process but will not prevent it. We are in a macro version of adverse selection; insurers are avoiding riskier individuals and employers, healthy folk are dropping coverage leaving the insured population older and sicker and more costly, and Medicaid enrollment is rapidly increasing as wages and employment stagnate.
What does this mean for you?
The only entity that can fix this is government. The free market has failed to control costs and failed miserably. The solution is apparent; change insurers’ motivations to reward them for care and cost management and not for risk avoidance.

Work comp drug costs account for about one-sixth of medical expenses, and are increasing at a rate appreciably higher than overall medical cost. Why?
And more importantly, how are some payers able to keep drug trend negative?
I’ve just come from CompPharma’s annual meeting in St Pete: CompPharma is a consortium of work comp PBMs run by myself and Helen Knight. Nine of the nation’s eleven largest PBMs are members and together they account for over 75% of work comp drug spend. From conversations with the PBMs, and from discussions with work comp payers there appears to be a couple attributes that are consistently present among those payers enjoying low drug trend.
They partner with their PBMs. The succesful payers don’t tell, direct, mandate or demand, they listen, ask, analyze and collaborate. Most of all they recognize that their PBMs know a lot about managing drug spend. This shouldn’t be a surprise as that’s the reason PBMs exist. Sure, many also provide ancillary services but in most cases these are very much ‘ancillary’ to pharmacy. These payers take advantage of their PBM’s deep experience, the knowledge gained from working with many payers for many years in many states. They understand what works and what doesn’t, and why.
The other distinguishing chararcteristic has to do with size. Smaller payers are seeing better results in terms of drug cost inflation than their larger competitors. This may well be due to their slower adoption of cost controls; in the past larger payers implemented more cost controls sooner and they saw lower trend than smaller payers. So some of this may well be ‘catch up’.
But catching up required smaller payers to set up, implement evaluate and fine tune multiple pretty sophisticated programs, without the staff, funds, and resources of the big boys. Instead they turned to their PBMs, a decision that has paid off handsomely.
This isn’t to say all PBMs are equal performers and worthy of consideration; there are bad actors in every business.
What does this mean for you?
Maybe you should ask your PBM what they would do if they were in your shoes. And do it with a VERY open mind.

Over the last couple of months I’ve spent considerable time with work comp managed care companies and investors therein, and one of the questions that persists in every conversation is ‘how do we/they demonstrate value to our/their customers?’
That one question has as many answers as there are ‘customers’, defined as individuals who have some role in the buying/decision. And that is why the definition of ‘value’ is so elusive and ephemeral.
For the managed care exec, value can be easily defined as costs that are lower, usually on a per-service basis, than they would otherwise pay. X% less than current pricing is better than current pricing, so the benefit is obvious and clear.
For the adjuster, the definition isn’t quite so apparent. With a desk swamped under case files and a screen stuffed with flashing ‘red flags’ on critical diary entries, there’s less focus on finding the cheapest wheelchair and more interest in picking a vendor that can take work off the adjuster’s desk, do it competently and without claimant complaint, and provide documentation that, at a maximum, is readily cut-and-pasted into the claim file.
For the claim manager, it’s about closing files, minimizing litigation, and avoiding those calls from Home Office management about low network penetration and excessive use of non-authorized vendors, while struggling to keep overworked, underpaid, and unappreciated adjusters on the job and out of the clutches of headhunters.
For the employer, value is fast, thorough medical care that gets the injured worker back on the job and keeps her/him there…unless the employer is dealing with declining revenues, in which case they don’t want John/Jane Doe back at work no matter what, as there isn’t any job for her/him and they sure don’t want to yet another unemployment claim.
For the TPA, value is defined as the savings below fee schedule or U&C, which is the basis for calculation of their managed care fees, typically around 25 – 30%. The more services, the bigger the bills, the more ‘savings’ generated and the more fees ‘earned’.
So the next time you take your vendor to task for lousy cost savings reports, think about all the masters they are serving, and ask yourself if you could do any better.
And be honest…
What does this mean for you?
Walk a kilometer in the other gal/guy’s shoes.

The soft market that seemingly will never end will – probably by q3 2010. Are you ready? Many employers have lost focus on risk and cost management, lulled into passivity by the longest soft market in memory. Woe unto those that have forgotten the basics, for they will be in even more trouble than the employers who’ve merely been snoozing.
Here are a few suggestions for those risk managers looking to prepare for what’s coming.
1. The fastest growing segment of comp medical expense is facility cost. As health and hospital systems gain negotiating leverage and skill, PPOs with little leverage fund themselves at a distinct disadvantage. The big group and Medicare managed care plans have lots of patients to use as leverage in negotiating deals; not so for work comp networks. Check your facility cost inflation rate over the last few years; expect it will be near double digits, and don’t expect your PPO to be able to do much about it.
Instead look to specialty bill review vendors. I’ve extensive experience with one, FairPay Solutions, that has come to dominate the market on the basis of their results coupled with an impressive track record of wins in court when their recommendations have been challenged by hospitals. They’ve also got an interesting solution to the surgical implant problem. (And no, FPS doesn’t pay me to say nice things about them).
2. Drug cost inflation is increasing again. After five consecutive years of declining trend rates, inflation, driven by a big jump in brand pricing and higher utilization of high cost pain medications, is back. If your PBM doesn’t have answers that address these questions either you haven’t asked the right questions (pretty likely as most PBMs have solid clinical management offerings) or you’ve got the wrong PBM.
3. Getting the most out of UR and bill review – most UR determinations are not automatically fed into bill review applications, thus procedures that are not approved may well be performed – and billed – and paid – anyway. If your audit process hasn’t specifically addressed this you’d be well advised to make sure it does. This is especially important for payers with business in California, where UR costs have exploded since reform.
We’ll be looking at other areas next week. And apologies for typos as this entry comes via my iPhone.

The work comp managed care world can be brutally competitive, with big dollars (well, big for this relatively small market) riding on buying decisions, and the success or failure of business plans also determined by those decisions. I’ll leave aside the all-too-common lack of objective, dispassionate analysis upon which many decisions are based – that’s a subject for another post.
Today I want to talk about why it can be more productive – and more profitable – to walk away from business than to tie your company in knots, bastardized your operations, cut prices to the bone, and make a host of other concessions in an effort to land or keep a big account.
Because the fact is some accounts just aren’t worth keeping. I’d bet if you look at your customer list there are at least two that take up way more time than any other, that constantly complain and whine and can never be satisfied and don’t pay their bills on time or in full and chew thru account execs like a puppy thru newspaper. Management spends hours each week trying to please the various people at the account, a difficult task because their contacts’ demands are either contradictory or pointless or poorly defined if not all three.
I’ve talked with several vendors over the past few months about this issue, more than once on behalf of the customer’s senior management. The top execs keep hearing about the vendor’s incompetence or unresponsiveness or poor service, which upon investigation is nothing of the sort.
Instead what I’ve found, albeit not in every instance but certainly in more than one, is a relationship that has no or poorly-defined objectives, and/or is overseen by an individual that is not competent or capable, and/or where there are ulterior motives on the part of that individual, perhaps to make the incumbent vendor look bad, or justify his or her existence by appearing tough, or to help out a friend who happens to work for a competitor.
Shocking, I know. Hard to believe this happens in today’s business world, but true nonetheless.
What’s a vendor to do? As tough as it may be, in some cases the best option is to walk away. Professionally and politely inform the most senior customer contact that you aren’t able to meet their needs and requirements (describe those needs in writing in detail), offer to facilitate a transition to another vendor, work diligently to make that transition smooth, and when it’s all over, conduct a post-mortem internally and with the now-ex-client.
And discover that you now have hours more time in the work week, much less stress, higher margins happier employees and a new appreciation for and time to focus on the customers that you actually like.
What does this mean for you?
An opportunity, not a problem.

AIG will probably pay taxpayers backmost if not all of our investment in the once-dominant insurer. Asset sales are proceeding well, valuations of those assets are solid, the new Chartis looks to be off to a good start, and morale is slowly improving.
And where, one might ask, are the plaudits from the politicians? Or at least grudging respect for the AIG staffers who’ve been able to keep the company afloat while dealing with public and private ridicule?
As we enter Thanksgiving week, I’d like to acknowledge the people at AIG who’ve been able to continue performing as well or better than their competitors despite death threats, highly skeptical buyers, and a brutally soft market (in part due to Chartis’ desire to hold on to share and premium dollars).
They’ve got a long way to go, and are far from perfect, but they deserve respect.
Send this to your Congressperson and Senators. Perhaps they’ll have occasion to send their own message of congratulations and thanks.
There’s always hope…