That’s the only conclusion one could draw from this year’s NCCI State of the Line report. 

Very profitable despite declining premium rates, eye-watering pre-tax operating gains, and eight straight years of very solid profits…the corks must have been popping down in Orlando.

(wasn’t able to make the event this year…boys’ annual mountain biking trip kinda took precedence…thanks to NCCI’s Cristine Pike for keeping me in the loop!)

Details..

• private carriers’ pretax operating gain of 25% – within an eyelash of the record year of 2018
• loss ratio of 43%…43%!!! – the lowest in two decades.
• combined ratio was 84%
• lost time claim frequency dropped 4 points
• $17 billion in excess reserves

This last is most striking as it is incontrovertible proof that premium rates are still far too high.

There are a bunch of implications that we’ll dive into in the next few days, but let’s start with the biggest one:

Why are employers and taxpayers still paying way too much for worker’s comp?

I predicted this back in 2019 – in a word, opioids.

OK, let’s agree that the best metrics to measure workers’ comp claims are:

• speedy and
• sustained recovery,
• return to work, and
• medical cost.

NOT:

• reductions below billed charges, or
• discounted medical costs, or
• network penetration, or
• litigation rate, or
• case management “impact”, or
• successful denials of treatments.

The latter are process measures – NOT outcomes. Yes, process can drive outcomes – but often does not. (See discussion of mythical “savings” from WC bill review and PPO)

How to evaluate a program, vendor, network, provider group, or delivery system:  First, what types of information are relevant and for what? (we’ll get to benchmarks in a bit)

or…anecdote vs data, and treatment records vs, aggregate reports.

from Statistically Funny

1. Using the outcomes metrics listed above, review their reports – aggregate reports that is – across their patient population. This will tell you two things; the entity’s overall “results,” how they think about outcomes, and what metrics they use.
2. Ask a lot of questions, such as:
   1. Who selected these metrics, and what is their relevant experience, education and training?
   2. Why did you choose those metrics?
   3. Explain each metric, how it is helpful, its limitations, and the research you conducted to elect that metric.
   4. What other metrics did you consider? Why didn’t/don’t you use them?
   5. What is the statistical validity of your data?
   6. How do our results compare to the rest of your customers?
      1. Why are they similar/different?
   7. What would you like to include but didn’t, and why not?
   8. How are other customers using this information?
   9. How are you using this information?
   10. How do you see your outcomes measures evolving in the future?

Be prepared to be underwhelmed…and do NOT allow your vendor to provide case-specific reports or findings instead of aggregate data.

Vendors love to cite specific cases, which a)distracts you from their overall impact and b) is way more interesting as it is “real” and not just a bunch of numbers and statistics.

That’s NOT to say those specific case notes/treatment records aren’t helpful..in fact the next step – once you’ve decided the vendor produces good “outcomes” – is to find out how they do that.

And that is where and when case notes/treatment records can be quite useful…they show HOW the vendor delivers the outcomes.

So how do we know if outcomes are “good”, that is, if injured workers are being treated appropriately and employers/taxpayers are well served?

Enter an industry bugaboo – comparisons to meaningless/wrong/misleading “benchmarks.”

That, dear reader, is the subject of the next post.

What does this mean for you?

The mistake most work comp payers make is skipping the first – and by far the most important step – evaluating vendor performance based on REAL outcomes.

and for the first time in forever I’m not there…apologies to my friends at WCRI; a Board meeting conflicted with this year’s annual meeting.

Good news is the estimable Stuart Colburn Esq. provided an excellent summary of the session on climate change’s impact on workers’ compensation at WorkCompCentral (subscription required). LWCC’s Jill Leonard and Jeff Rush at CJPIA.

 courtesy WCRI

[btw I’m eagerly awaiting news that several colleagues, long climate change deniers, have “evolved” their thinking to acknowledge the reality that is human-caused climate change.]

Stuart also reported on Dr Olesya Fomenko’s research into medical inflation, noting there’s been a steep rise in facility prices (no surprise to regular readers of this blog…a few relevant posts are here).

All told, hospital inpatient outpatient and ambulatory facility centers account for over half (!!!) of work comp medical spend. These costs have also been growing almost three times faster than physician expenses.

Think about that – facilities – which do what physicians tell them to do – are increasing their prices three times faster than physician services.  Docs admit patients, order treatments/surgeries/PT/medications/rehab, write return to work orders…they are directly and solely responsible for the medical care your injured workers get and their return to work.

Yet you are allowing hospitals and ASCs to charge you and your employer customers more and more every year, while refusing to significantly increase what you are paying the people who actually care for those injured workers. 

In word, this is dumb.

What does this mean for you?

Do. Your. Job. 

It’s just a couple weeks before WCRI’s annual meeting…in Phoenix’ warm and sunny clime. Register here – and do it now as this always fills up.

Unlike other events, attendees are mostly senior management leaders and the like; lots of expertise and experience all in one place makes for a very productive couple of days…

I caught up with WCRI’s John Ruser PhD and Andrew Kenneally to get their take on some of the topics…

MCM – Dr Autor – The implementation of the Biden administration’s IRA, infrastructure, CHIPS and other legislation is ramping up; where does Dr Autor see the direct and indirect impacts of this legislation on workforce, employment, and compensation?
JR – Dr Autor is a great speaker, and has won prestigious awards including one of the top prizes in labor economics, the Sherwin Rosen award. He is going to take a longer-run view, discussing the evolution of work.  Dr Autor will be talking about how tech and AI will affect the future of work and the way work is done.  One question to be addressed: “is tech substituting for (replacing) or supplementing workers?”

MCM – The medical inflation topic is top of mind for many…what will Dr Fomenko and Dr Yang be addressing?
They will be building on work they’ve done in the past on the design of fee schedules and WCRI’s own price indices to show how inflation manifests itself and how system features can serve to control medical inflation. The focus will be on medical payments, provider prices and the impact of fee schedules.

MCM – Very happy to see climate change on the agenda; what drove WCRI’s decision to give this topic the stage?
JR – Clearly we are seeing the impacts of climate change in the form of stronger storms, hurricanes and rainfall, these and others are affecting workers comp. This session is a no brainer as the direct impacts are pretty obvious.

MCM – Physical Medicine is has been somewhat of a concern for payers as costs are trending slightly upward along with utilization. What are some of the drivers of this increase?
JR – Drs Wang and Mueller will look across states and at factors that are associated with the extended use of physical medicine beyond guideline “limits”. They will identify some factors that are associated with extended physical medicine; some obvious like severity and others less so – such as whether there are multiple providers of physical medicine services and issues around coordination of those services.

JR -Finally, we are really pleased at the mix of our own research and panel discussions with a diverse group of stakeholders (unions, providers and employers, regulators and insurers), all of whom bring deep expertise to the discussion.

and here’s why.

Work comp payers actually care about the patients recovery, return to functionality, ability, and productivity. Work comp HAS to…screwing up recovery = huge financial penalties in the form of claims that last forever, really costly settlements, and migraine-level headaches for all involved.

Whereas in group/individual health, Medicare and Medicaid (mostly), functionality is – at best, and then only rarely – an afterthought.

side note – if you think about it, how dumb is it that 99% of healthcare payers don’t really care whether the $4.2 trillion they spend on healthcare actually improves lives, helps patients stay active, supports functionality, and helps us live the lives we want to live?

answer – dumb as a box of rocks

WCRI’s latest in a never-ending stream of excellent research brought me back to this...researchers examined patient-reported functional outcomes after low-back pain, a far-too-common and sometimes really problematic diagnosis. [report is free to WCRI members and a nominal cost to non-members].

The research compared WC outcomes to those of other payers…and:

• included patients covered by all types of payers,
• totaled some 2.4 million patients (!),
• covered almost 1.3 million PT/OT episodes of care, and
• used patient-reported functional status specific to the low back pain issue (as captured by FOTO).

The researchers obviously put a LOT of thought into selecting the measure…they describe the process and rationale in detail in the report (ppg. 15 – 19).

credit WCRI

While it is important indeed to consider that workers’ comp patients’ reported functional improvements were not as high as some other payers – and we  need to understand why – that’s secondary to the fact that work comp’s primary focus – return to functionality – is way different from other payers’.

With extremely rare exceptions, no other payers focus on functionality, and almost none do across all patients with all conditions.

Kudos to Sebastian Negrusa, Vennela Thumula, Randall Lea, and Te-Chun Liu for their excellent work.

What does this mean for you?

Work comp gets beat up a lot…this is why – in one extremely important way -workers’ comp is superior to all other payers.