Category: General Insurance Issues

Oct
30

Opioids, MSAs, and the Feds

Posted by Joe Paduda on Monday, October 30th, 2017 | Comments

The average California MSA includes almost $49,000 for drugs – about half of all future medical expenses.

69% of MSAs included funding for opioids.

But when researchers compared the MSAs to a

“case-matched control group of closed workers’ comp permanent disability claims for similar injuries, the authors found that the WCMSAs called for much stronger opioids, as average cumulative morphine milligram equivalents (MMEs) allocated to WCMSAs with opioids were 45 times the level used in the control group during the life of the claim.” [emphasis added]

Why?

Especially when the report goes on to say:

Federally mandated formulae to financially account for decades of sustained individual opioid use are at direct odds with a growing body of clinical evidence — and a widespread recognition — that opioids are often over-prescribed for the management of chronic, non-cancer pain.

The Feds want/require employers and insurers to pay for another 20 years of opioids, at relatively high doses, for claims that should not be getting opioids.

This is what makes all of us nuts; one hand of the government is pushing us to assertively reduce opioid use, while the other hand demands we pay for opioids for another two decades.

Worse still, many of the MSA patients are also taking hypnotics and/or muscle relaxants. 

[chart courtesy CWCI]

A couple thoughts…

The claims with MSAs may well be those that payers can’t resolve, where the patient, their attorney, or their provider just won’t cooperate in efforts to reduce opioid use. Thus, the MSA projections make sense.

Why are these patients being prescribed – and ostensibly consuming – a high volume of opioids for an extended time when clinical guidelines and best practice clearly contradict this practice, and other patients with similar conditions aren’t getting these drugs?

What does this mean for you?

We are making progress, but we have a very long way to go – and CMS isn’t helping.

 

Oct
25

Concentra – USHealthworks – implications for workers’ comp

Posted by Joe Paduda on Wednesday, October 25th, 2017 | Comments

Yesterday’s announcement that Concentra owner Select Medical is purchasing US Healthworks sent waves through the workers’ compensation world.  The “new” Concentra will:

  • have 565 occ health clinics and on-site centers in about 40 states,
  • handle around one out of every seven occupational injuries, and
  • further cement Concentra’s position as the largest initial treatment provider in work comp.

The transaction valued USHW at $753 million, or about $3 million per location. Concentra is currently jointly owned by Select Medical and investment firms Welsh Carson, Cressey & Company (and several other firms). It looks like one goal of the deal was to buy out minority investors, a not-uncommon objective for this type of transaction.

So, what does this mean for workers’ comp?

  1. Workers comp services is a very mature industry, where scale and buying power are critical. This is yet another indication that players in the industry recognize scale is critical.
  2. This looks to be continued move on the part of Concentra to focus on occupational care and de-emphasize urgent care – which is focused on non-occupational conditions.
  3. Concentra will have more bargaining power with work comp PPOs and payers. The giant provider can’t quite dictate terms today, but is certainly in a very strong position.
  4. USHW has a reputation for over-prescribing physical therapy, a concern some have with Concentra as well.  Payers would be well-served to monitor this closely going forward.

What does this mean for you?

Consolidation can be beneficial for all parties.

It can also be a cause for concern for customers.

 

Oct
20

It’s been crazy busy.

Posted by Joe Paduda on Friday, October 20th, 2017 | Comments

Hello readers – apologies for my silence this week and a good chunk of the last few weeks.

As some may know, I’m running for County Legislator in Onondaga County, New York (Syracuse and surrounding towns and villages) and the election is November 7. I’d been told this was a lot of work – and the tellers were certainly correct. It’s a full-time job doing this right.

Even more so when you’re a political rookie and don’t know what you don’t know.

There are a couple items worthy of your attention this Friday.

  1.  TrumpCare has replaced ACA. A few key facts have been lost in the debate:
    1. Don’t expect many more health insurers to drop out of the Exchanges; those still in priced in the loss of CSRs a long time ago, which is why rates are so much higher.
    2. Most of the for-profit health insurers bailed out a while ago for two reasons; they can’t figure out how to make money in the individual market and they can’t deal with the lack of clarity due to President Trump’s conflicting statements and action.
    3. Remember only about 6 percent of us get our insurance through the Exchanges…
  2. Reminder – some of the people in DC screwing around with our healthcare have no idea what they are doing. Healthcare is one-sixth of our economy, a major employer, and critically important for each one of us. Yet politicians who admit they don’t know anything about healthcare are trying to “fix” it. This is like putting an English teacher in charge of a nuclear plant.

 

 

Oct
13

Trump’s ACA Orders – One’s big news, the other’s just political fluff

Posted by Joe Paduda on Friday, October 13th, 2017 | Comments

President Trump announced two major policy changes yesterday; one will do little to affect healthcare markets and insurance, the other will have a drastic and almost immediate impact.

Cost Sharing Reimbursement payments help those making less than 250% of the poverty level pay for deductibles and other costs.

Ending CSR payments will force health insurers to:

  • increase premiums by almost one-fifth to offset the loss of CSRs; this is already happening in many markets…many had already done this, but others are sure to do so immediately
  • and/or stop selling insurance immediately and cancel policies already in effect, ending coverage for poorer Americans.

Here’s the funny thing; ending CSRs will INCREASE costs to the taxpayers because people who no longer get the payments will get tax credits – and others will too..

The reaction from many in Congress was negative; CSRs had been funded in the Republicans’ bills to repeal the ACA, and several House and Senate Republicans expressed concern that the President’s move would harm their voters.

This may be an unwise political move as well;

Trump’s supporters (51%)…[and] eight in 10 Americans (78%) say President Trump and his administration should do what they can to make the current health care law work.

Trump’s other Executive order will have far less impact on insurance markets. In sum, the order allows insurance companies to sell policies across state lines and offer stripped down policies 

The first – selling across state lines:

  • is already allowed in 3 states, and no insurers participate because mandates do influence costs, but the underlying cost of insurance is the cost of care.
  • Contradicts Republican orthodoxy – and ACA repeal efforts – that keep states in control of insurance markets. The across-state-line sale of insurance guts state insurance regulatory authority.

As does the part of the order allowing sale of stripped down policies. These plans, known variously as association health plans, multiple employer welfare arrangements (MEWAs), and multiple employer plans (MEPs), have a pretty crappy history. Allowed years ago, many went belly-up leaving healthcare providers unpaid and members uncovered.

There’s a lot of detail to these, (see here) but the real issue is simple – policyholders often get screwed, and, like selling across state lines, MEWAs flout state regulation of insurance.

What does this mean for you?

These orders will further screw up the health insurance industry. The real effect will be to push us closer to single payer, a result unintended and with far more drastic consequences.

Oct
12

Failure is good.

Posted by Joe Paduda on Thursday, October 12th, 2017 | Comments

Had a great conversation with an old friend yesterday; he runs a mid-sized work comp insurer and is one of the most forward-looking executives in this industry.

The discussion worked its way around a wide range of topics, as these conversations usually do, before settling on failure – there it took an interesting twist.

Put simply, failure is under-rated.

Athletes learn more from missing the ball, failing to score, blowing the assignment, over-training than they do from winning. If you win, there’s much less motivation – and reason – to look for things that can be improved.

If you don’t win, there’s lots of reasons to figure out why. Of course you can get too deep into this, spend too much time dwelling on the problems and become fatalistic and negative. If one avoids that trap, one can learn a lot and be much better prepared for the next contest.

As a case study, look at Kaiser.  The huge health plan invested $400 million in a new Electronic Health Record project which failed. Rather than fire the team, blow up the effort, and forget about it, then-CEO George Halvorson doubled down, and the final investment was $4 billion – roughly $444 per member.

One reason – the EHR stripped out a lot of unnecessary cost and streamlined patient interactions:

Just having an electronic health record that is connected with all the systems that have to do with delivery of care to a patient means you don’t have patients taking duplicate tests. In the United States, I believe the cost of duplicate testing is about 15 to 17 percent of the total health care spend. We [Kaiser] don’t have that cost.

In talking with my colleague, we both marveled at the fortitude of Kaiser; if someone in work comp made even a $4 million “mistake” in a systems implementation – or anything else for that matter – their head would be on the block.

That’s one reason innovation is so rare in workers’ comp – the tolerance for failure is low indeed. With that tolerance for failure is an inability to learn, to take risks, to get better faster.

What does that mean for you?

Risk has rewards, but rarely in workers’ comp.

Oct
9

Claims, they are a’shifting!

Posted by Joe Paduda on Monday, October 9th, 2017 | Comments

There appears to be a “trend” among many work comp insurers to shift more and more claims handling responsibilities to third party administrators (TPAs).

I (and I’m sure many others) have been somewhat aware of this for a few years, but like the proverbial frog in the pot, the temperature has been increasing rather slowly, and the consequences have been barely visible.

Currently, the big TPAs – Sedgwick, GB, York and Broadspire are all doing a lot of claims handling for big work comp insurers. AIG has outsourced a big chunk of its claims for decades, but other insurers are slowly following suit.

The drivers are many:

  • decreasing claim frequency is now a structural trend; insurers have to work to stay ahead of the declining volume and off-loading claims to a third party makes managing a shrinking business a lot easier
  • total administrative expense, long a bugaboo for insurers, rating agencies, and regulators, has to shrink as well. Stripping out the upper management, IT, compliance, and related functions slashes unallocated loss adjustment expense, or perhaps more accurately shifts it into allocated expense.
  • some more “self-aware” insurers have realized that their company’s claims handling just isn’t that good.
  • technology, IT/systems changes and improvements, training requirements and the like are becoming increasingly expensive. As carriers look to move from their existing green-screen-based technology to SaaS or other cloud-based technology, some are finding the switch incredibly expensive, very risky, and potentially career-threatening (this last is perhaps the biggest driver). Better to just get out of the business then screw up a tech migration.

I’d expect the big TPAs to assume more and more responsibility for claims functions over the next few years.

There are implications aplenty for all parties involved; they have different revenue models, different service expectations and definitions, and different priorities.

What does this mean for you?

Good stuff if you’re a TPA. And perhaps fewer headaches if you’re a carrier…unless you pick the wrong TPA.

Oct
3

Watch out for “innovation”

Posted by Joe Paduda on Tuesday, October 3rd, 2017 | Comments

In any very mature industry – and workers’ comp is certainly that, certain truths are immutable. Scale, margin compression, consolidation are all inevitable – or at least two out of three are.

Innovation – mostly “small i” innovation – can and will help smaller entities compete with goliaths, and large companies maintain and even grow margins.

The innovations I’m speaking of are the tweaks, efficiencies, streamlined processes and smoother customer interactions that make vendors easier to work with. Front-line customers benefit from these small innovations, sometimes almost without noticing them.

  • What used to take two phone calls now is done automatically.
  • Medical services are scheduled, visits conducted, and progress reports prepared and delivered with no action by front-line customers needed
  • Bills that had to be reviewed line-by-line are now auto-qdjudicated, with only those lines or bills that qualify via a rules engine hitting the front-line person’s queue.
  • Medical services are automatically authorized, with relevant guideline language attached.
  • Medical service reports are auto-uploaded to the claim file, with only those issues needing attention highlighted for review.

What’s easy to lose track of is the purpose of automation and innovation. The primary purpose is NOT to make the vendor more efficient and reduce vendor costs; it should be to deliver better service to the end user, be they provider, patient, front-line customer.

Therein lies the trap. In a mad dash to strip out cost and improve “efficiency”, many service companiess don’t pay near enough attention – if they pay any attention at all – to how those changes affect the end-user.

For a while, those “improvements” will reduce costs and add to profits. Then, as front-line users suffer in voice-mail hell, or can’t find anyone to answer their questions, or have to ask for another password to enter a “portal” for the umpteenth time, revenues will start to decrease.

Instead, focus your innovation efforts on those that will make your end users happier, less stressed, and less busy.

Take work off their desk/workstand and put it on yours.

That’s innovation that delivers long-term results.

 

 

 

Sep
28

Why the Foresight deal is different.

Posted by Joe Paduda on Thursday, September 28th, 2017 | Comments

There are two big takeaways – the price, and why Paradigm paid so much.

Sources indicate Paradigm has bought Foresight for around $150 million, a huge multiple for a relatively small company with trailing earnings of less than $5 million.

Foresight’s niche is narrow but important – the company’s core business is negotiating prices for implantable surgical devices. More recently the company entered the surgical services business with Encompass, a network of surgeons and facilities.

The announcement was pretty much what you’d expect, but the real news is why Paradigm paid what it did. First, a little history.

I’ll admit to wavering between being impressed with Paradigm and thinking it won’t ever become a significant force in the industry. As noted previously, the company has been around for the better part of three decades, and throughout that time has seemed to be just a year or so away from really breaking out.

Today’s no different.

That’s not to say Paradigm doesn’t have deep expertise and hasn’t produced excellent results for some clients – it most certainly has. The problem is two-fold; the original marketing message is tough – we can manage the really tough claims better than your claims staff can. Hard to see how a claims exec would jump at the chance to show a third party is better at a critical core skill than her or his staff.

The second is what Paradigm missed back then, and I’d suggest still doesn’t understand., Payers don’t like vendors that only solve part of their problem. What I mean is this – Paradigm asks a payer to give them data on claims that meet specific criteria. Then, Paradigm winnows thru those claims, picking the ones it can fix, and sending the rest back.

Wrong approach.

If a payer sends you a big bunch of problems, you should figure out a way to help with ALL OF THEM.

That may be one reason Paradigm recently bought a couple of case management companies; in addition to diversifying revenue sources and adding customers, the deals bring more ownership of nurses who will likely be used to service the cat claims that are Paradigm’s core business. That said, case management is a declining business under strong price pressure – just what you’d expect in a very mature industry.

Which brings us to Foresight.

Diversification, technology, and data on surgeries are all going to help Paradigm diversify even more.  And, the surgical network may provide a consistent and growing revenue stream to complement the case management and somewhat-less-predictable catastrophic case business.  It’s likely margins in the implant and surgical businesses are going to be much higher than case management and more in keeping with Paradigm’s cat case business.

From this outside perspective, this is the reason Paradigm’s owner Summit paid what it did. They’ve owned Paradigm for almost 2.5 years, and it’s time to get things ramped up for another equity event in the next few years.

What does this mean for you?

Good news indeed for anyone looking to sell their workers’ comp business!