If you’re wondering why your TPA has been changing specialty managed care vendors more often than you are used to, it may well be because the TPA is getting paid to change.
Word from several sources at the comp trade show is some managed care vendors have deals whereby the commissions/fees they pay the TPA for the privilege of doing business are increasing with volume.
The way it works is simple, if not necessarily, or even usually, in line with clients’ best interests. The vendor agrees to pay X percent for the first Y dollars of revenue, X+ for the next Y dollars, X++ for the next Z dollars, etcetera.
But some vendors are applying the higher payment levels retroactively. Yep, if the TPA delivers Z dollars, the X++ commission rate applies to ALL revenue. That’s why employers are being told they can get these services at very low – or no – cost. Hat seems like a great deal is – for the TPA. Unfortunately the TPA’s interests are not always, and in some cases are most definitely not, aligned with the employer’s.
Here’s an example. If a PT vendor controls utilization, and prevents cases from exceeding a reasonable number of visits, the employer wins. But if the case goes on and on, and the vendor does not or cannot or will not end the treatment, then more bills mean more ‘savings’ which mean more revenue for the vendor – and not coincidentally, the TPA.
What does this mean for you?
If your TPA hands you a deal that sounds great, watch your wallet. What drives revenue for many TPAs is driving up your costs.

The exhibit floor at the workers comp conference is abuzz with rumors about sales; companies on the block, new transactions for TPAs, and new business for vendors.
Amongst the rumors are several that don’t appear to be based on fact, including the pending sale of Medata. When asked about the transaction, CEO Cy King looked incredulous. King stated “there’s lots of interest in the investment community and no interest on the part of Medata. It’s just wishful thinking.”
Sedgwick has been capturing business from competitors at a rapid rate. Loew’s will move to Sedgwick shortly as will Boeing. The word in the market is Sedgwick is pricing their claims services at extremely competitive rates; 20% to 30% under the incumbent. The big TPA is also pushing their managed care vendors hard for price reductions. OK so why?
It could be that Sedgwick is prepping for an IPO. Management stock options will vest in the event of a deal, UHC has been divesting other non-core assets, and the company is recruiting big names, all activities commonplace at companies looking to sell.
Among other companies reportedly on the block are MCMC (no surprise there), and Bunch and Associates (I’ve asked Bunch about this and it has been repeatedly denied, but the rumor persists).
More to follow, including corrections where necessary.

The most significant charge leveled against Sandy Blunt, former CEO of the North Dakota State WC fund, never should have been brought. And if it wasn’t, he would never have been convicted of a felony.
Blunt was charged with authorizing sick leave for and failing to collect moving expenses from a Fund exec who was terminated within two years. In theory, if he left within the two years, the moving expenses paid by the Fund should have been reimbursed.
Turns out that the prosecutor who brought the charges, Cynthia Feland, knew that failing to collect the moving expenses was not a crime – yet she brought charges anyway.
She had in writing that the ND Attorney General advised state auditors in October of 2006 that the exec did not voluntarily leave and thus there was no legal authority to collect. This fact was then put in writing to Feland a year before the trial and she
– added it as a crime just weeks before the trial and
– withheld the memo proving it was all legally done, thereby not giving the defense exculpatory evidence she was legally required to provide.
Feland clearly violated her obligation not to bring charges without probable cause, she violated her obligation to turn over witness statements, she violated her state obligation to turn over exculpatory evidence, she violated her federally mandated “Brady” obligation to turn over exculpatory evidence, she violated Blunt’s due process rights by not allowing him a preliminary hearing for probable cause on the issue, and she lied right to the Judge’s face in open court about the whole thing (including that it was in the audit when it was not).
I repeat my query from earlier this week:

What in the hell is going on in North Dakota?
And why is there no coverage of Feland’s potentially criminal activity in the press up there?
Is North Dakota some third world country where the State’s employees can decide which laws they are going to comply with based on what best suits their personal/political needs? Where a person’s personal and professional life can be ruined in what can only be a personal or political vendetta? Shouldn’t someone from the State, the FBI, or another law enforcement entity be investigating Feland?
What does this mean for you?
If Sandy Blunt can get absolutely screwed by the system, so can you.

Is detailed in the biweekly Cavalcade of Risk, managed by good friend Hank Stern of InsureBlog fame, and this week authored by the incredibly talented Julie Ferguson.
While Health Wonk Review is focused on health policy stuff, CoR is more risk and insurance oriented – there’s some overlap, and a definitely different perspective.

Different perspective is often just what we need…

The health plans’ lobbying group is out with a new analysis of the Baucus bill, claiming it will dramatically increase costs.
It’s tempting to dismiss this as another industry-biased report produced by a firm bought-and-paid-for by the same industry the report helps. And while the characterization is true, there is some truth to PWC’s analysis.
The PWC report (pdf) claims health insurance costs will increase more if the Baucus bill is passed than if nothing happens – but according to PricewaterhouseCoopers, this claim is based on a review of only four components of the bill.
The components are

• excise tax on high-cost or ‘cadillac’ plans
• cuts in Medicare reimbursement that would drive up cost shifting
• taxes on health industry firms that PwC says would be passed on to consumers
• Insurance market reforms without an enforceable universal mandate

.
Sure, the PwC report misses a lot – and much of what it misses is less than favorable to the report’s funders – health insurance companies. But the central point is indeed accurate; without a tough, enforceable universal mandate, you can’t force insurers to take all comers without charging more for higher risks or excluding them altogether.
This has been proven in Massachusetts. Health plans have to take all applicants, but there is no real financial penalty for individuals who don’t sign up. Sure, there’s a fine for those who don’t have coverage (but can afford it), but it is so small as to be negligible. Not surprisingly, health plans have seen an explosion in the number of individuals who sign up for coverage, get their problems fixed, then drop out. One health plan has reported that their costs for these ‘drop-in’ insureds are six times higher than their premiums.
And now Senator Baucus et al want to foist this off on the rest of the country?
As much as I want national health reform, the Baucus bill – as currently conceived – makes no sense.

I’m hoping this is the last post on the state of Texas’ report on work comp networks.
Believe me.
As I’ve noted in two posts earlier this week my concerns with various aspects of the REG report, concerns which I – and other observers – believe are real and relevant.
There’s a larger concern and that is the effect of the report on decision makers at work comp payers. Several managed care execs I’ve spoken to since the report came out last week said they are scrambling to explain the results of their HCN and why it
makes sense to continue the program despite the negative implications of the report. Their bosses and some peers are asking why they are spending so much in the way of time and energy and legal resources on a program that doesn’t deliver any better results than their ‘old’ managed care program.
The primary reason HCNs may not deliver better results (although one shouldn’t make that assumption based on the REG report) is simple – the HCNs aren’t much different that those ‘old’ managed care programs. The underlying network, bill review, utilization review and ancillary programs employed in the HCN are all but indistinguishable from the non-HCN managed care programs.
Sure there are differences in denial rates and appeals processes and reporting requirements – but the basic nuts and bolts are identical.
What does this mean for you?
That may be – MAY BE – one reason it’s hard to see how HCNs are more effective than non-HCN managed care programs.

John Burton is one of the true experts in workers comp. He has a long record of invilvemt in the comp system including participation on the Federal comp review
conducted back in the early nineteen-seventies.
Dr Burton spoke at today’s AmComp meeting in New York, giving details about that experience and sharing data about the decline in wage replacement adequacy over the last twenty-five years. He noted that standards of eligibility for comp claims have been steadily tightened over that time; reported that his data indicates well over ninety percent of medical costs for occupational diseases are missed by workers comp; and lamented the end of the second injury fund system.
With tongue firmly in cheek, Dr Burton said the myriad failures of states’ workers comp systems can only be attributed to a conspiracy on the part of mysterious forces with the goal of forcing Federal regulation of workers comp. There is no other explanation, except, Burton noted, inattention on the part of legislators and regulators.
In response to a question Burton lamented the lack of research done by states, many of which don’t have any formal research function.
This was written ony iPhone. Apologies for typos.

Reform – whether it happens this year, in ten years, in one big change or a series of smaller steps – is going to have a big impact on workers comp.
That’s the takeaway from one of the sessions yesterday morning at IAIABC’s annual conference.
Greg Krohm, Director of IAIABC, Dr. Dan Juniga, Medical Director of the Minnesota State Fund, Todd Brown, head of compliance for Coventry workers comp, and I were on a panel discussing health reform, universal coverage, and the impact of same on comp.
First, kudos to the other panelists. Dr Juniga gave an excellent overview of the history and impact of Medicare’s Sustainable Growth Rate – the mechanism that in theory determines Medicare physician reimbursement. Dan pointed out that the failure of SGR to be implemented over the last six years means CMS will now have to cut physician reimbursement by 21.5% on January 1, 2010. Of course, this isn’t going to happen – but the failure of SGR to work will result in Congress eliminating the SGR or otherwise significantly changing physician reimbursement.
I noted that essentially every state that has physician fee schedules bases those fee schedules off Medicare – but while some are directly connected, most don’t simply adopt CMS’ changes but go through a process to modify them. Some states haven’t revised their schedules in several years.
That said, when Medicare changes reimbursement, it will affect comp over time.
The most likely scenario is an increase in reimbursement for cognitive services including office visits, a cut in pay for procedures including surgery and a big drop in imaging.
Greg Krohm provided a synopsis of the current Baucus bill, with the trenchant observation that it assumes the 21.5 pct cut will be implemented. In fact that’s part of the ‘cost savings’ the bill is supposed to deliver.
Todd Brown, one of the most knowledgable people I’ve met when it comes to state regulation of comp, gave a lot more detail on state implementation of fee schedule changes; it’s lengthy, complex, and varies significantly from state to state.
I’d be remiss if I didn’t note the audience – for all the presentations – was engaged, curious, involved and very knowledgeable. Regulators are sometimes dismissed as unaware or unconcerned or worse. That certainly doesn’t apply to the folks at this meeting. The level if engagement was significantly higher than I’ve witnesses at most other conferences, a credit to both the organizers and attendees.

The morning panel led off with a talk by WCRI President Rick Victor on the factors impacting workers comp. His view is the economic downturn will have lasting, and deep, effects on the economy. There will be less consumer demand; changes in housing markets as people seek cheaper places to live; and older Americans with drastically reduced retirement portfolios will work for more years in jobs that are likely more physically demanding.
Can’t disagree with any of those points, and his take on the implications for comp.
Older folks take longer to heal, although they (we) tend to have fewer injuries as well. A dropoff in consumer demand may well mean less investment in retail, shopping malls, and logistics – fewer jobs in higher-injury classes. And reductions in the value of housing stock (more sellers in wealthier/northern/older areas than buyers) will in turn reduce the tax base, likely leading to cutbacks in municipal and governmental services.
Some factors will push comp costs down, others are more likely to push costs up. But Rick’s right, the economic downturn’s impact will be felt for at least a decade, and perhaps even longer.
He also mentioned health reform, and specifically the potential issues if work comp medical is included. Fortunately, there is a less-than-zero chance that work comp medical will be included in a final bill, and (as I’ve been lamenting for weeks) I don’t see reform happening this time around.
I know, one of the 564 amendments pending in the Senate is a move to expand medical coverage to cover all care for occupational injuries and illness, and care for auto accidents.
The

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