In which I publicly fess up to miscalls and things I actually got right.

Each year I make predictions about what the work comp world will do in the coming dozen months. Here’s how that went in 2019… (spoiler alert..the ball was a bit cloudy last January…)

1. The work comp insurance market will harden – a little.

Nope. The seemingly endless soft market continues – and there’s nothing on the horizon to indicate it’s going to end.

2.  A very big external event/issue/mess will affect the economy – and thus workers’ comp

Nope. Despite more launches by “Rocket Man”, a bunch of trade wars, tariffs that continue to crush agriculture, increasing catastrophes due to global warming, softening economies in Asia and Europe, and an impeachment, the economy continues on autopilot.  Sure, one could argue that these and other crises would be a huge story in any other year, but the sheer size and number of daily crises has killed our ability to consider anything short of a collision with the moon as newsworthy.

3. There will be significantly fewer M&A deals in work comp services – and those deals will be either pretty small or really big

Yes.

The Sedgwick/York deal and the OneCall creditor takeover were the big ones. Not much else of size or significance happened…

4. Facility costs will be the new focus for payers and service companies

This is a push; it’s starting to happen – but not fast enough. Every other payer is fighting back, but far too many work comp insurers and TPAs aren’t paying attention.

5.  New business models for Pharmacy Benefit Management will gain traction

Yes – transparent pricing is gaining traction, driven in part by the Ohio BWC/Optum litigation and what we’ve learned from it.

6.  The “advocacy” claims model will gain a lot more traction,

Among the self-insured employers I’ve been talking with, the answer is yes. While different names are used, there’s definitely a push to get away from the “you’re a claimant” approach and move to a “how can we help”? ethos.

7.  “Opt-Out” will not gain traction.

True that.

8.   Service companies that deliver best-in-class customer service – and build that into their branding messaging – will win. 

Yes. MedRisk has won the PT wars by delivering stellar service (btw the people in the office pictures on their site are real actual humans who work at MedRisk), PBM service leader myMatrixx is landing new customers (EMC, Koch, Qual-Lynx), HomeCare Connect is as well (Zenith Insurance, Great American, Broadspire, Chubb, State of North Carolina). (MedRisk and myMatrixx are HSA consulting clients)

9. More success in reducing long-term opioid usage by more payers.

Yes – but lots more progress is needed.

10. Payers will implement business models and processes using Artificial Intelligence  

Yes – Ohio BWC’s work on using AI to code incoming work comp claims looks to be an impressive success. The Hartford is using AI to identify claims for intervention, and legal departments are using AI to scan documents for key words to support discovery and legal issues.

So, 7 right, 2 wrong, 1 a push.  To be fair, the two I got wrong are big ones.

Coming up, predictions for 2020.

The House of Representatives just passed landmark legislation intended to reduce the cost of drugs for seniors.

The bill won’t go anywhere, because the Senate won’t consider it – and if it does, President Trump has said he will veto it (despite campaign promises to reduce drug costs).

Unfortunately, a bill advanced by Republican Senator Chuck Grassley that would cap Medicare drug price increases will be opposed by Senate Majority Leader McConnell (R).

Given the public’s focus on healthcare, and seniors’ voting power and high level of interest in drug prices, the lack of GOP support is puzzling.  It appears the main objection is reducing what you pay for drugs may result in the development of 8-15 fewer drugs. Over the next decade.

If the House bill became law, Medicare would save $345 billion over six years.

So, seniors would pay less for drugs, taxpayers would save hundreds of billions of dollars, and we may not get one new drug per year.

Only in a government ruled by pharma lobbying would this make sense.

What does this mean for you?

Once again, big business wins, and you lose.

 

 

 

Every year a quarter-million of us are killed by medical error.

That makes medical errors the third leading cause of death in the US.

Medical errors kill more of us than motor vehicle accidents, firearms, AND opioid overdoses – added together.

Efforts to fix this problem are woefully under-funded, poorly co-ordinated, and often ignored by stakeholders. That’s likely due to poor reporting and tabulation of medical errors and the repercussions thereof.

It is stunning indeed that a $3.4 billion industry whose sole focus is to preserve and protect our health kills a quarter million people a year – and we didn’t know this until a few weeks ago.

What’s even more disturbing is this story has been all but ignored by mainstream media.

What does this mean for you?

Ask questions, demand answers, be forceful, and don’t accept platitudes. And hold doctors, hospitals, and caregivers accountable.

That’s the question many have asked when told a handful of California physicians file most of the UR and IMR requests. Who are the 122 docs who file 44% of IMR disputes?  The ten physicians responsible for 9.5%? And what are the results of those filings?

Normally when regulators institute UR and associated appeals processes, there are a lot of UR appeal requests in the first few months, after which the volume drops off dramatically.  As providers learn the guidelines and understand the process, they change their practice patterns to comply with those guidelines.

This has been the pattern for decades, ever since UR started with hospital pre-auths in California in the early 1980’s.

Workers’ comp is no different, as the same trend occurred when Texas implemented guidelines and UR, and other states as well. For those wondering how this could be, a few reasons are provided below, courtesy CWCI…

Things are certainly different in California, where the volume of UR filings and IMR appeals actually increased by about 30% in the years since adoption. This makes no sense, as 9 out of 10 times a doc files an IMR appeal, that appeal is rejected. This adds millions of dollars to employers’ and taxpayers’ costs, extends disability, and slows down the patients’ recovery process. [of course, most of these UR/IMR requests are filed by applicant attorneys, based on the treatments are prescribed by physicians)

(chart courtesy CWCI)

 

Till now, the top offenders, the docs who don’t want to comply with evidence-based treatment guidelines, the ones who slow down the recovery process by continually requesting inappropriate drugs, unnecessary surgeries, unneeded injections and unproven therapies have been able to hide behind a wall of anonymity.

That’s over; SB 537 is why you’re about to find out who these bad actors are.

Specifically, Section 3, 138.8 requires DWC report individual providers’ UR and IMR filings and the results thereof.

From the Senate Analysis of the bill:

Recent research from the California Workers’ Compensation Institute suggests that medical disputes in the workers’ compensation system are not widespread: rather, they are uniquely concentrated among a few providers. For example, in 2015-16, the top 1% of providers who filed IMR requests (97 providers) filed twice as many requests as the bottom 90% of providers (approximately 40,000 providers). [emphasis added]

the strict protections on the use of individually identifiable information means that it is likely illegal for the DWC to reach out to these providers and find out why there is such a concentration of medical disputes among such a small provider group. SB 537 will address this concern by implementing the same data reporting requirements as are in the federal Medicare system.

DWC is tasked to do this on or before January 1, 2024; sources indicate DWC will likely publish data well before that date.

And when it does, we’ll know the name of the PM&R doc in northern California who filed IMR requests resulting in 2,800 IMR letters and 4,441 Medical Decisions. Oh, and 85% of those appeals were rejected. For those keeping score at home, that’s 11 letters per working day.

What does this mean for you?

Employers and insurers, make darn sure your MPN is on top of this.

 

 

 

Yesterday we dove into Haven, the healthcare company formed by Amazon/JPMorgan/Berkshire Hathaway.  Today, we discuss the potential implications for workers’ comp.

Based on what we know so far, there are two ways Haven might impact workers’ comp.

Before Haven can affect WC, it has to become a viable entity of some significant size. Some skeptics don’t see that happening, citing the Byzantine complexity of the US healthcare (non)system, the size and scale of the medical-industrial-financial complex, and the bewildering maze of laws and regulations.

Those are excellent points; I’d suggest critics may be making assumptions that aren’t necessarily appropriate. Haven may well create a “de novo” healthcare delivery and financing system, leveraging the employee population, intellectual capital, technology, financial capabilities, and buying power of its owners.

If Haven becomes the healthcare delivery platform for the hundreds of thousands employed by its three owners, those employers would likely use that platform for occupational injuries and illnesses. That would enable seamless integration of care, reduce the risks inherent in the siloing of care between comp and group health, and likely upgrade non-occ disability management as well.

Efforts to deliver 24 hour care have fizzled as the opportunities inherent in integration couldn’t outweigh the legal, regulatory, cultural and political realities. It’s possible that Haven could eliminate much of these obstacles by starting fresh.

So that’s the big change.

More likely – and much sooner, is the potential for Haven/Amazon to provide drugs, supplies, and DME to work comp patients.  The companies’ push into pharmaceutical manufacturing and distribution, and distribution of medical devices and supplies means it has the supply piece in place; next step is building the distribution channels/pipes into work comp payers.

The total work comp drug/supply business is likely less than $6 billion, a relative pittance compared to the half-trillion plus dollars in revenue the three partners will enjoy this year. And, once those pipes are built, Haven will figure out how to generate more revenue.

If anyone can do this it’s Haven/Amazon.

What does this mean for you?

Service providers need to double down on service and be that indispensable partner. 

 

 

 

 

These giant powerhouses are working together to do something big in healthcare.  Haven, the name for the organization set up by the giant retailer, insurer/diversified company, and financial services firm will initially be focused on employees of those three companies. Later, they will “share [its] innovations and solutions to help others.”

Haven was introduced almost two years ago, albeit without that appellation.  Since then, it has been pretty quiet, at least as far as announcements of major innovations. (The company’s COO resigned after a year citing the Philly-to-Boston commute.)

There are plenty of skeptics, most citing the enormous complexity of healthcare, the Gordian knot of regulations, the lack of interconnection, perverse incentives – including for-profit stakeholders, and consumer expectations as all making it more likely that United Healthcare could build a successful commercial bank than JP Morgan will “fix healthcare.”

That’s fair, except Haven hasn’t focused on “fixing healthcare”, but rather fixing healthcare for the folks who work for the three owners.

What we know today – it looks like Haven will initially focus on drugs and virtual health.

Haven will operate on a non-profit basis.

Amazon had just over $41 Billion of cash on hand as of June 30. That hoard plus its distribution capabilities, existing customers and attractive stock make it a very capable acquirer.

Amazon is already selling prescriptions in Japan and distributing medical supplies in the US.

The company is building new product lines, and buying expertise, experience, and already-successful businesses. From FoxBusiness:

> Amazon [is launching] an exclusive line of 60 over-the-counter healthcare products, called Basic Care

> Amazon buys online pharmacy PillPack for $1 billion placing the online giant squarely against drugstore chains, drug distributors and pharmacy benefit managers.

> Amazon files for a patent for Alexa, its virtual assistant, which would detect when a user is sick and recommend and sell medications.

> Aurohealth, a maker of generic pharmaceuticals, teams up with Amazon for an exclusive over-the-counter pharmaceuticals brand called Primary Health.

The common thread is medications – manufacture the drugs, encourage adherence, enable distribution.

Last month, Amazon’s Seattle-based employees were introduce to Amazon Care, which boils down to a pretty sophisticated virtual/tele-health platform using a local medical provider group. That ensures employee health records stay with their healthcare provider, and aren’t “owned” or handled by the employer.

Don’t expect that to last…from Huron:

Amazon recently established a stealth lab, called 1492, that focuses on healthcare technology. While little is known about the products being created, speculation is that the retailer is developing tools to mine data from electronic health records, new telemedicine technologies and healthcare applications for its existing products.

I would expect Amazon to do much of its building thru buying; there are a lot of great companies out there innovating different parts of healthcare and buying gets a footprint, talent, and experience that would take too long and cost too much to build.

What does this mean for you?

Nothing yet.  That will change. 

Homorrow, Haven and workers’ comp.

Back from a week’s holiday with my wonderful wife in France; Paris, Mont St Michel and Normandy.  A few not-surprising impressions…

• it’s awfully hard to find a bad meal in France
• public transit is really, really good
• what is “old” here in the States…isn’t in Europe
• you can find a bar to watch the Eagles game
• a day touring Normandy makes me even more grateful there wasn’t a war for my mini-generation
• France’s fashion industry must be targeting you risk managers and safety professionals!

OK, here’s what I missed while marveling at all things French.

WCRI’s annual conference is back in Boston March 5 and 6. It sells out every year, so sign up here.

More less-well-off folks in states that haven’t expanded Medicaid are going to die. Patricia Powers is a minister living in non-expansion Missouri across the river from Illinois, which did expand Medicaid. If she’d lived a few miles further east, her breast cancer would likely have been diagnosed much earlier.

NCCI opined on the impact of a recession on workers’ comp. Key takeaways –

• frequency drops off sharply at the beginning of a recession, then bounces up as things start to improve
• as there are fewer people working in manufacturing or construction these days, actual injury counts likely won’t decline as much as they did in past recessions.

(I wrote on this a couple weeks ago, noting past recessions have had a couple other characteristics not discussed in NCCI’s piece.)

In DC, a bill to reduce drug spending is progressing thru the House. Among other measures, it would require the Feds negotiate prices on 35+ drugs with manufacturers. (I would encourage readers to focus on the actual components of the bill and not get caught up in critics/supporters’ use of inflammatory language.)

Key takeaway – it would reduce Medicare costs by $345 billion over the next six years (that sound you hear is taxpayers clapping…)

Other key takeaway – the public is really focused on drug prices.

Non-medical use of opioids will cost our economy about $200 billion this year.

The finding came from the Society of Actuaries’ report (available here). Almost half of the costs are from health care expenses and lost productivity, issues that are key concerns for workers’ comp.

Have any work comp insurers sued the opioid industry?

What does this mean for you?

Drug pricing and opioid litigation should have a major impact on workers’ comp. Note emphasis on “should”.

Off to Paris for a week with my lovely bride…will be studiously avoiding anything resembling work  till we return Thursday.

Most excellent flight over on Delta.

I’m  sure the world will get along just fine till then!

Late this afternoon Standard and Poor’s downgraded One Call from CCC to CC.  According to S&P:

An obligation rated ‘CC’ is currently highly vulnerable to nonpayment. The ‘CC’ rating is used when a default has not yet occurred but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.

S&P also stated:

We are placing the ratings on CreditWatch Negative as One Call may not make its interest payment on its second-lien notes during the 30-day grace period.

There is an overall rating (referenced above) and individual ratings on specific bonds. Readers will recall that One Call has three levels of debt; the most senior is rated CCC, while second lien (the most junior) is rated at C.  S&P does not rate the middle level aka the 1.5.

From S&P;

We lowered our debt ratings to ‘C’ from ‘CC’ on One Call’s second-lien notes due 2024 and senior unsecured notes due 2021, and placed the ratings on CreditWatch Negative. The recovery ratings on these debt issues are ‘0’, indicating our expectation for negligible recovery (0%) in the event of a payment default.

S&P on the senior debt’s CCC rating:

In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitments on the obligation.

We will know by Halloween what the future holds for One Call – likely before then.  It is unlikely One Call is currently in compliance with its debt covenants.

From my June 26 post:

The issue at hand is a “7x first lien leverage covenant” which kicks into action when the company draws down its revolver debt by 20%.  According to a DebtWire article, OCCM had a “razor-thin” margin at 6.9x as of March 31.

I do NOT know what those specific covenants are, however in my experience debt holders put covenants into contracts so the debt holders can take control – partial or total – of a company that is at risk of defaulting on its debt.

Debtwire also indicated OCCM had drawn down $50 million of the $56.6 million revolver.

Allow me to translate into language we non-financial wizards understand.

Among other debt instruments – bonds etc – OCCM has “revolving” debt, which is kind of like a line of credit. The company can borrow from it and pay it back as cash flows dictate.

The “7x” is calculated by dividing the total long-term debt – which was reported to be $1.375 billion on March 31 – by cash flow (adjusted EBITDA) – which was $200 million over the 12 months preceding March 31.

So, as of March 31 OCCM had drawn down its revolver by way more than 20%, but had kept its revenue-to-debt ratio just below 7, which prevented the covenants from kicking in.

Things have deteriorated since then.