Category: Research

Jan
26

Thursday catch-up; total US medical spend, largest employers, and the Policy Guys Pod

Posted by Joe Paduda on Thursday, January 26th, 2023 | Comments

CMS just reported US healthcare spending topped $4.3 trillion in 2021…almost $13,000 per person.

Meanwhile work comp medical spend for 2021 was likely around $32.5 billion…or 0.74% of US healthcare spend.

Government accounts for about 2/3 of total spend, among private employers Amazon has more health plan participants than any other company…

chart courtesy Mark Farrah and Associates

Old friends and colleagues Adam Fowler and Kevin Tribout’s latest edition of the Policy Guys podcast is up here. Honored to be part of the pod, especially with such distinguished hosts!

Off to Baton Rouge to get together with my friends at LWCC – looking forward to great food and better people.

 

 

Jan
23

Hospital profit margins – a bipolar mess

Posted by Joe Paduda on Monday, January 23rd, 2023 | Comments

For profit hospitals have very solid operating margins.

Some Not for profits are really struggling…others are doing just fine thank you.

credit FierceHealthcare.

That’s the headline – the question is…why? and what does this mean?

First, a little more explanation…

From the Kaiser Family Foundation’s report…

So far this year [2022], operating margins among the three largest for-profit health systems in the country have met or exceeded pre-pandemic levels. HCA and Tenet in particular have had high operating margins.

the largest for-profit systems have had operating margins that exceed pre-pandemic levels. [emphasis added]

Also, most hospitals and systems saw declines in investment income; as this falls outside their core business, we are focusing on operating income which excludes investment and other categories.

Why?

It appears that the more profitable hospitals/healthcare systems:

  • saw surgical and other profitable service line volumes return to or exceed pre-pandemic levels
  • better controlled staffing costs; contract staffing costs (traveling nurses and other clinicians) were a major factor for several not-for-profit hospitals
  • benefitted from non-healthcare operations (insurance for UPMC) and financial gains from mergers (e.g. Intermountain Health)
  • increased prices for commercially-insured patients (this is an assumption although there’s this…)

The merger thing continues to be a major influence, with $45 billion in transactions in 2022 across 53 deals… again the results aren’t consistent as some systems really benefited while others did not.

Meanwhile, the American Hospital Association continues to call for higher reimbursement and other federal intervention to help hospitals financials.

For my workers’ comp readers…

Look at the costs of providing care at an HCA hospital vs some of the not-for-profit hospitals in your service areas. You will very likely find HCA’s costs are several times higher than not-for-profits’. 

Oh, and they are waaaay higher in Florida…

More on this here.

What does this mean for you?

Don’t use HCA or Tenet facilities. 

Jan
18

Why hospital costs are going up

Posted by Joe Paduda on Wednesday, January 18th, 2023 | Comments

Because they can.

Healthcare  – and more specifically facility-based healthcare – is a very mature industry and – with one huge exception – exhibits all the hallmarks of such…continued widespread consolidation, shuttering of marginal locations and elimination of unprofitable business lines and centralization of core services.

The “huge exception” is margin compression and price reduction. When any other sector matures, competition becomes fierce and prices come down.

Not so in healthcare, where pricing is opaque at best, and more often opportunistic if not downright predatory.

Over the last 70 years, the percentage of hospitals in health systems has grown by a factor of ten. Unusual indeed is the standalone facility.

That decades-long trend continued in the 2010s, although the pace slackened somewhat as there were fewer hospitals to acquire.

The net is this – most healthcare markets are pretty consolidated, which means one or two systems have pricing power.

Those systems use that power to force ever-higher reimbursement from commercial payers – and workers’ comp.

What does this mean for you?

Facility costs are going up.

 

Dec
16

Friday catch-up

Posted by Joe Paduda on Friday, December 16th, 2022 | Comments

Lots happened this week while I was hunting, driving, and finishing up the annual survey of pharmacy management in work comp.

A quick update on pharmacy data points…

  • across the 30 respondents we have so far (a few more to come), drug spend was down one percent...however
  • there’s a ton of variation between respondents with some seeing big jumps and others steep drops in spend.
  • 91% of all scripts are generic…that’s a big increase from a few years back
  • pharmacy is viewed as being just a bit more important than other medical categories such as facilities, surgery, E&M.
  • and opioid spend is down again (YAY!!)

From HBR comes this trenchant observation…In Supplier Negotiations, Lying Is Contagious

“Lying once can be contagious. It can pave the way for lying again in other interactions or negotiations with people at other companies.”

The brief article is intended to provide guidance to buyers, but sellers would do well to internalize the researchers’ observations.

Health spending in the US is almost twice (as a percentage of GDP) as high as other developed countries’.

The graph is here if the pic above is hard to read.

Which means far fewer dollars to spend on wages, R&D, IT investment, and stock dividends – and much higher taxes to pay for civil servants’ health benefits.

Oh, and costs zoomed up in 2020 and 2021 due to COVID…due in large part to staffing shortages and concomitant labor costs.

What does this mean for you?

Next time someone starts comparing US healthcare to those with national systems, ask them if they have any idea how much more money we spend than those “socialists” do.

Dec
9

Solving “problems” by making bigger ones

Posted by Joe Paduda on Friday, December 9th, 2022 | Comments

Leave it to some misguided folks in the California legislature to come up with solutions to non-problems, solutions that will do more harm than good.

That’s just what AB1127 does…shortening the time period for employers to determine the compensability of claims, a change which will lead to – among other problems – more initial denials and less time for injured workers to receive medical care while their employer researches the claim. Further, AB1127 appears to allow for penalties of up to $50,000 for claims that are “unreasonably rejected” by the employer – but the bill a) doesn’t define what constitutes an “unreasonable rejection” and b) doesn’t exclude claims that are already closed.

That last is pretty bizarre – then again the entire thing is a mishmash of unfounded assumptions and poorly conceived “solutions” that will add litigation expense while doing little to improve the lives of injured workers.

One of the major problems is the timeframe to investigate some claims is shortened – but much of what happens during that investigation is beyond the control of the employer/adjuster.

As a result, payers facing down a deadline may have to issue a provisional denial if they can’t get evaluations scheduled, obtain medical records or med-legal reports or those records and reports are incomplete.

There’s a lot to unpack here – the fine folks at CWCI have provided a detailed analysis of AB1127 here – free to members and at nominal cost for others.

What does this mean for you?

How this benefits injured workers is a mystery indeed, how it benefits applicant attorneys is crystal clear.

Dec
5

Pandemic’s impact on workers’ comp financials has been…

Posted by Joe Paduda on Monday, December 5th, 2022 | Comments

A new report ($25 to download) from the National Foundation for Unemployment Compensation and Workers’ Compensation sheds light on the pandemic’s impact on work comp financials.

MCM readers will not be surprised that the impact has been pretty positive – Mark Priven and I predicted this back in September of 2020.

Several key takeaways.

  1.  Medical costs plummeted  – by over $3.5 billion – almost 12%, likely due to lower employment resulting in fewer claims, coupled with the relatively lower cost of COVID-related claims (much more on this here).
  2. Total benefit payments dropped by almost $3.9 billion…
  3. Over the last decade, the national average benefit cost per employee dropped by 10.2% – BEFORE adjusting for inflation. After adjusting for cumulative inflation of 17%, the real decline in benefit cost per employee was 27.3%. 

What does this mean for you?

Workers’ comp financials are pretty strong…for insurers and employers.

Mark Priven is a really insightful actuary. 

 

Nov
30

The state of work comp pharmacy

Posted by Joe Paduda on Wednesday, November 30th, 2022 | Comments

is pretty good.

Here are the very preliminary takeaways from the latest Survey of Prescription Drug Management in Workers’ Comp...so far 21 phone interviews completed and several more still to go.

[if you’re new to MCM, we’ve done an annual Survey since 2004, past public reports are here (respondents get a much more detailed version)]

  • Drug spend continues to decline, although at first blush it looks like the drop is less than we’ve seen in recent years
  • Opioid spend is also continuing its downward trend
  • Generic efficiency – the percentage of scripts that could be filled with generics that are filled with generics – is just shy of 100%
  • Payers are still struggling with legacy opioid patients with respondents identifying patient resistance (mostly fear driven), recalcitrant prescribers, attorneys and the lack of regulatory/legislative support as key obstacles
  • Physician dispensing is once again rearing its ugly/profiteering/self-serving/taxpayer-abusing head.
  • Payers want more transparency while fully understanding PBMs need to make a profit.
  • Topicals seem to be the latest in the scam-a-rama that is the physician dispensing industry.
  • Respondents are generally very open to non-pharmaceutical approaches to pain management – much more on this in a future post.

What does this mean for you?

PBMs and payers  – well done. Your work has saved countless lives while helping countless others regain control of theirs.

 

Nov
28

Work comp rates drop, behavioral health in WC, and workers as assets not costs

Posted by Joe Paduda on Monday, November 28th, 2022 | Comments

Happy Monday – for my American readers, hope your holiday was most excellent.

here’s good stuff you might have missed…

WCRI is hosting a no-cost webinar on Behavioral Health in Workers’ Compensation Thursday Dec 15 at 2 pm eastern. The webinar will discus their recent primer on BH in WC (available here for download)

The good folks at NCCI published their latest take on work comp industry financials...suffice it to say the party continues…although it may be getting close to ending.

courtesy NCCI

The final countrywide analysis of 2021 results shows:

      • WC Calendar Year 2021 private carrier net written premium (NWP) increased from 2020 by 0.5% to $38.2 billion
      • The WC Calendar Year 2021 private carrier combined ratio was 87.2%, and the operating gain was 23.7%

Meanwhile early data makes 2022 look even better; direct written premiums were up almost 10% over 2021, while the loss ratio for the first two quarters of 2022 is even lower (!!!) then 2021 (no figures cited).

Unpacking this –

  • If 2022 numbers hold up 2022 will be the tenth year in a row profits exceeded the historical average…
  • And the sixth consecutive year the operating margin was above 20%
  • Oh, and this all happened while rates decreased every year since 2014

My take…insurers are still enormously profitable because rate declines aren’t accurately accounting for the opioid hangover.

[A CWCI report addressed this issue; my informed opinion is claims without opioids are much less costly, therefore the continued drop in opioid prescriptions is driving lower claims costs…actuaries develop rates based on historical data – which is not keeping up with what’s actually happening.]

Former Labor Secretary Robert Reich believes organizations aren’t valuing workers correctly…Reich notes workers are considered “costs” instead of assets, a mis-characterization that leads to all manner of bad executive decisions.

Key line –

“increasingly, corporations aren’t just production systems. They’re systems for directing the know-how, know-what, know-where, and know-why of the people who work within them.”

Hat tip to a very good friend for the head’s up.

What does this mean for you?

  1. It’s great to see behavioral health get more exposure – it is a key driver of recovery.

  2. Actuaries use historical data to project the future; execs should factor in what’s really happening to understand where things are heading.
Nov
22

Work comp pharmacy…

Posted by Joe Paduda on Tuesday, November 22nd, 2022 | Comments

has changed dramatically in the last 18 years.

Costs are much lower, brand drug usage has fallen off a cliff, PBMs are by far the dominant delivery channel, and there aren’t any real problems these days/

At least that’s what I’ve gleaned from doing 15 surveys of work comp execs on their perspectives and quantitative measures related to pharmacy.

Way back when:

Expect we’ll have the latest version of our annual survey in late January; in the meantime (and VERY preliminary:

  • generic fill rates are around 90%
  • generic efficiency is north of 98%
  • inflation trends appear to be negative – for about the 7th straight year.

Yet payers are still concerned about drugs, mostly because they are seen as major contributors to disability duration and recovery.

What does this mean for you?

Its not just the cost – it’s the knock-on effects. 

Nov
15

The state of workers’ comp

Posted by Joe Paduda on Tuesday, November 15th, 2022 | Comments

The National Academy of Social Insurance has just released its latest report on workers’ compensation. This is required reading for any serious student of work comp; it’s stuffed with insights just waiting for you.

Here’s a few.

Note – COVID’s impact on 2020 results are significant especially re medical costs and the relation of medical to other work comp financial metrics.

  • From 2016 – 2020, medical benefits paid (per $100 of covered wages) dropped by almost 25%.
  • This followed a 17 point drop over the previous five years …
    • this massive decline is (likely) due primarily to lower claim frequency
  • Medical costs…
    • totaled $27.7 billion in 2020, $2.5 billion less than 2019
    • accounted for 53% of benefits in 2020, down from 56% in 2019
    • a reminder to those who predicted massive increases in medical costs due to COVID; a much deeper understanding of healthcare delivery, cost drivers, and sources of cost data would be quite helpful.
  • CWCI’s analysis indicated the Golden State accounted for a fifth of all benefits paid (Bulletin available at no cost to CWCI members)
  • Overall, employers’ work comp payroll-adjusted costs dropped almost 9 percent from 2019 to 2020

The report can be downloaded for free.