Jan

Fact checking – North Dakota style

Posted by Joe Paduda on Tuesday, January 12th, 2010 | Comments

It appears I’ve upset at least one of the good folk of North Dakota.
In an article published yesterday in WorkCompCentral about the prosecution of former North Dakota state workers compensation boss Sandy Blunt (subscription required), Bill Kidd quoted prosecutor Cynthia Feland:
“In an e-mail reply [presumably to Kidd’s query], Feland said that “I find it unfortunate that the authors [yours truly and Peter Rousmaniere of Risk and Insurance] have chosen to print information without checking their facts.”
“A transcript of the trial is available and if they would have reviewed it, it would have been obvious that the information they received and used to write their stories and base their opinions was inaccurate,” Feland wrote.”
I’m assuming Feland was referring to this comment in a post from last year; “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.”
That’s a big assumption, as her comments could have referred to any of the other posts I’ve written about the Blunt case, but as the possible withholding of exculpatory evidence is the most egregious of the prosecutor’s actions, I’ll focus on it.
Ms Feland made an assumption of her own in her note to Kidd; in fact I have read the relevant parts of the transcript, and searched the entire transcript for any mention of the memo in question. Couldn’t find any reference to it anywhere. Now, I’m certainly no attorney, so it’s possible I didn’t look for the right words. So I’ve asked Ms Feland to tell me exactly where the memo is mentioned in the transcript, when it was placed into evidence, and/or any other official documentation that it was shared with Blunt before or during the trial.
I’ll keep you posted.

Jan

Sixth Annual Survey of Prescription Drug Management in Workers Compensation

Posted by Joe Paduda on Monday, January 11th, 2010 | Comments

The decrease in the workers comp drug cost inflation rate that persisted for five years appears to be over. According to HSA’s Sixth Annual Survey of Prescription Drug Management in Workers Compensation, the five-year ‘decrease in the rate of drug cost increase’ is over, as drug costs across the industry were up 7.5% in 2008, compared to 7.7% the year before.
Workers comp payers, including large and mid-tier insurers and TPAs, are increasingly knowledgeable about drug costs, utilization, drug management approaches and programs, and cost drivers. However, while some are quite sophisticated, a few continue to exhibit little understanding of this cost area; unsurprisingly these are the payers with the highest drug cost inflation rates.
In contrast to prior years, the drug cost inflation rate tended to be lower at smaller payers than their larger competitors, as smaller payers seem to be ‘faster to market’ with utilization controls, adjuster education, and data sharing with their PBM partners.
Once again, utilization is seen as the key driver, with respondents citing over-prescribing, over-use of pain medications, and physician prescribing patterns as key reasons for cost increases.
The recent URAC initiative to ‘certify’ work comp PBMs met with mixed reviews; twice as many respondents considered URAC certification ‘not important at all’ as viewed it as ‘extremely important’.
To combat cost inflation, savvy payers are increasing their investment in data mining and analytics, adopting step therapy programs, enforcing mandatory generics, and calling on their PBMs to provide clinical support for drug management. Payers are more knowledgeable about and ‘on top of’ their drug cost and utilization data, with most having ready access to generic fill rates, generic efficiency, network penetration, price changes, and other summary information. First fill capture statistics are also more widely captured, as payers seek to gain control over drug usage as early in the claim cycle as possible.
Continuing a five year trend, no one PBM has established a dominant position in the market as the leading PBM. However, PBMs are all rated much higher than Third Party Billers.
In partnership with the good people at WorkCompCentral, I’ll be providing an overview of the most recent findings from the in a webinar scheduled for Tuesday, January 12 from 1:00 – 2:00 pm eastern. The cost for the webinar is $149.
Webinar registrants will receive a copy of the Survey results, to register click here and enter the code ‘Hsarx’.
The public version of the Survey will be released on Monday, January 18. If you would like a copy, email info AT healthstrategyassoc DOT com. Seminar participants will receive a separate, detailed version of the Survey.

Jan

Trends in Work Comp drug management

Posted by Joe Paduda on Thursday, January 7th, 2010 | Comments

The five year downward trend in drug cost inflation appears to be over, driven by excessive utilization, pain management, and price increases on a couple key drugs. But not all payers are experiencing increased costs; some actually saw costs decline in 2008, due to strong clinical management, a solid understanding of underlying cost drivers, and a willingness to engage with treating physicians.
Those are among the findings of the Sixth Annual Survey of Prescription Drug Management in Workers Comp, completed late last year.
In partnership with the good people at WorkCompCentral, I’ll be providing an overview of the most recent findings from the in a webinar scheduled for Tuesday, January 12 from 1:00 – 2:00 pm eastern. The cost for the webinar is $149.
Webinar registrants will receive a copy of the Survey results, to register click here and enter the code ‘Hsarx’.

Jan

If this could happen to him, it could happen to you

Posted by Joe Paduda on Wednesday, January 6th, 2010 | Comments

Sandy Blunt was the victim of prosecutorial misconduct on the part of a North Dakota state prosecutor, accused and convicted of ‘crimes’ that the prosecutor knew – in advance – were not crimes.
That’s the conclusion of an article authored by Peter Rousmaniere in today’s Risk and Insurance magazine.
Here’s an excerpt from Rousmaniere’s article:
“

In late 2006, state prosecutor Cynthia Feland began to investigate Blunt. In April 2007, she charged him with criminal misapplication of entrusted property. Virtually all of the evidence was trivial, such as the $320 the fund spent on lunches at an employee summit and others sums for gift certificates, flowers and small employee bonuses.
Blunt was also charged with misusing an employee’s license plate number in trying to identify who had leaked WSI’s payroll data to reporters.
Blunt, no stranger to public bureaucracies, responded that this spending was normal even for public enterprises and consistent with prior WSI practices. He also said that neither he nor his advisors knew the expenses were illegal.
In August 2007 a district court threw the case out as lacking merit. The prosecutor won a reversal from the North Dakota Supreme Court. In December 2007, the state fund board, under political pressure, terminated Blunt.
Blunt’s criminal trial took place in December 2008. Feland, lacking a respectable case, tarted up the criminal count with three more heavier-looking allegations, one of which the judge threw one out (claiming that Blunt had improperly awarded a grant to a volunteer firefighter association).
The two remaining new charges dealt with Blunt’s handling of an employee he had recruited, then forced out. Supposedly, Blunt had allowed the departing employee to earn his unused sick leave and also did not seek repayment of relocation expenses incurred when the person came onboard.
After Blunt was convicted, it came to light that neither the prosecutor nor the state auditor’s office had disclosed in discovery or in court testimony a state auditor’s memo that exonerated Blunt of error relating to the forced-out employee. [emphasis added]”

You read that correctly. Blunt was not only convicted on the basis of charges that the prosecutor knew were not criminal, but the prosecutor failed to provide that information to Blunt before the trial, a clear violation of the law.
Blunt’s case is currently on appeal, and he is waiting to hear on a decision from the North Dakota Supreme Court. If and when, the Court does the right thing and throws out his conviction, Blunt should sue the prosecutor and her accomplices for every dime they have and ever will have. Their behavior was that egregious.
What the state of North Dakota has done to Sandy Blunt is reprehensible.
What does this mean for you?
If this could happen to a person as above-board and completely honest as Sandy Blunt, it could happen to you.

Jan

What does the future hold for IntraCorp?

Posted by Joe Paduda on Tuesday, January 5th, 2010 | Comments

CIGNA has a new CEO, David Cordani, who is planning on growing the company internationally.
Which may, or may not, have implications for CIGNA’s IntraCorp subsidiary.
IntraCorp, the managed care subsidiary of insurance company CIGNA, was perhaps one of the first ‘managed care’ firms, and certainly was the first major work comp managed care company. In business for almost forty years, the company evolved from a field case management vendor to a supplier of bill review, networks, case management, physician peer review, and ancillary service to the work comp market.
While it is still one of the larger case management vendors, IntraCorp lost considerable business over the last decade as ESIS and other large clients moved their bill review business elsewhere, claims frequency declined (reducing the need for case management and UR), and competitors aggressively pursued IntraCorp’s core case management, UR, and peer review business.
Although several investors reportedly inquired about the possibility of buying IntraCorp from CIGNA, former CEO Ed Hanway reportedly refused to consider a sale. Hanway’s lack of interest may have been driven at least in part by IntraCorp’s contribution to CIGNA’s corporate overhead. While CIGNA could have sold the subsidiary any number of times, by doing so it would have to find some other entity to absorb overhead expenses on an ongoing basis, a move that would have led to changes in financial reporting and expense allocation.
Now that Hanway has retired, Cordani may revisit the question. With his stated desire to expand CIGNA internationally, the new CEO is going to have to find capital to fund that growth. While IntraCorp is no longer the preeminent company in the work comp managed care space it has a strong brand, good management, and a wealth of data that could be used for any number of purposes (picking good docs, identifying appropriate patterns of care based on diagnoses…).
That and the renewed interest on the part of private equity firms in the comp managed care business may be a confluence of factors that results in CIGNA revisiting the long-term role of IntraCorp.
What does this mean for you?
More change (possibly) in the what’s becoming an increasingly dynamic business equals more opportunity.

Jan

Health insurance and workers comp claim frequency

Posted by Joe Paduda on Monday, January 4th, 2010 | Comments

A recent dialogue on the LinkedIn WC group got me to dive back into the question of what, if any, influence does the presence of health insurance have on work comp claim frequency? The data aren’t conclusive, but the answer appears to be ‘There is a trend, but not in the direction you’d think.’
Commonly accepted thinking holds that workers without health insurance will claim off the job injuries under work comp so the medical bills get paid. (That’s what I thought too.) Turns out that the opposite appears to be the case; workers who have health insurance are more likely to file WC claims than those who don’t.
It isn’t quite that straightforward, so don’t just read this and take it at face value; there are significant complicating factors.
The seminal study on the health insurance: WC claims relationship was done by RAND and published in 2005 . If anything, it appears to indicate that workers with health insurance are more likely to file WC claims, however the driver is not the presence of health insurance but rather the nature of the employer.
From the study abstract:

…uninsured and more vulnerable workers are less likely to file claims than the insured. We study this relationship and find that it emerges as the result of employer characteristics. Workers at firms who offer health insurance to employees are more likely to file workers’ compensation claims: the characteristics of the firm are more important than the insurance status of workers themselves; [emphasis added] moreover, even repeat injury sufferers are more likely to file during episodes in which their employer offers health insurance. This suggests that the workplace environment and employer incentives may have a significant impact on the utilization of the workers’ compensation system.

Key highlights from the study itself:
– injured workers without health insurance are about 15% less likely to file a WC claim than workers with health insurance
– workers in firms that offer health insurance are twenty-one points more likely to file a claim than those in firms that don’t offer health insurance
RAND’s conclusion that the workplace environment is the key factor affecting claim rates and frequency was supported by several recent reports indicating injured low wage workers are particularly unlikely to file work comp claims. One of the more intriguing studies was done under the auspices of the National Employment Law Project which focused on the problems faced by low-wage workers when they are injured on the job. The study looked at a population that accounts for fifteen percent of all workers in just three cities; Chicago, New York, and Los Angeles. Extrapolating the numbers out in just those three cities indicates that 75,446 workers comp injuries were not reported.
Nationally, that works out to about a million claims unreported.
The study reported 92% of low-wage workers don’t file work comp claims for injuries that require medical attention.
Fully half of the workers with on the job injuries “experienced an illegal employer reaction”, including firing the worker, calling immigration authorities, or telling the worker not to file a comp claim.
What does this mean for you?
With health reform with some form of mandate looking increasingly likely, some, steeped in conventional wisdom, will expect claims frequency to decline. Others will expect it to increase now that more workers will have coverage.
The latter group’s view will be more correct than the former’s; or more accurately ‘less wrong’. Bad employers will remain bad employers regardless of whether or not they offer health insurance, therefore, after the mandate is in place, injury reporting behavior may increase somewhat but probably not by much.
(kudos to Mark Walls for starting and managing the LinkedIn group)

Dec

Workers comp managed care – predictions for 2010

Posted by Joe Paduda on Thursday, December 31st, 2009 | Comments

You’d think I’d learn not to make public predictions that may come back to haunt me, providing ammunition for folks who think I don’t know diddly.
But I subscribe to Teddy Roosevelt’s philosophy” “The only man who never makes mistakes is the man who never does anything.”
Here, in no logical order, are what I believe will happen in the work comp managed care world in 2010.

1. Acquisitions will accelerate.
We’ve seen an upsurge in the number of deals of late, with FairPay and One Call Medical the two biggest and most recent. I’d expect this to continue; Bunch may be next to go, but ownership’s demand for a 9x + multiple isn’t likely to fly. If they manage their expectations and get a bit more realistic, it could happen.
2. Coventry (the big Coventry, not the WC entity) will be acquired.
OK, I predicted this last year and was wrong (or more generously premature). But now that the health reform picture has cleared up, credit markets are (somewhat) functional again, and stock prices of other healthplan companies are up, I’d expect Wise et al to sell their company, perhaps to United HealthGroup.
As to what happens to the WC group if it does get bought, that’s worthy of another post – and some deep thinking by big WC payers tightly tied to Coventry WC.
3. The basis for WC Drug fee schedules will start to move away from AWP.
This is a ‘gimme’; AWP is disappearing in early 2011, leaving regulators and legislators little choice. The big question is obvious – what replaces AWP, and how will the ‘new’ fee schedules compare to current ones.
I do know regulators in several states are already deep into this, and are looking at multiple options. Where they end up will have a dramatic impact on WC drug costs (NOT just prices, but TOTAL cost), payers, and PBMs.
Lots more to come.

4. (Some/Many) WC physician fee schedules will change significantly
Congress is very likely to change the Medicare physician fee schedule, which is the basis (to a greater or lesser degree) of all WC physician fee schedules except California’s (which may adopt a Medicare-based fee schedule). When that happens, some state fee schedules will change immediately, some will probably not change at all, and others will go thru a process that may well result in modifications.
5. The WC insurance market will harden, bringing more business to case management, UR, bill review, and network vendors.
As the economy recovers and the jobs picture brightens, hiring will pick up and so will the raw number of injuries as well as frequency. That, along with rising medical expense, is the ‘cost-side’ driver. The ‘supply side’ of insurance is somewhat cloudier, as there still appears to be excess capacity; Fitch and others believe the fundamentals point to an extended hard market well into 2011, and there’s still a lot of capital sloshing around looking for a home. All that said, the current hard market has been around far longer than most, and when things can’t continue they won’t.
6. The rise of the Medical Director
Several large payers are re-visiting the role of medical management, examining medical costs in detail from multiple angles. What they will, and some are, finding is a need for better medical management of claims. A lot better.
The stuff that passes for ‘medical management’ in work comp is mostly driven not by a desire to better manage medical care, but a need for revenue – medical management programs have become a revenue and margin generator, a role that has come to supersede their original purpose.
As medical costs rise despite payers’ ‘investments’ in managed care, more payers are revisiting the role and results of their programs, and some are finding there’s precious little ‘medical management’ going on; outdated guidelines, bill review driven by throughput rather than accuracy, networks constructed to deliver phantom savings, case management that is more highly paid secretarial work than anything else. Payers are turning increasingly to their medical directors for more guidance; the M.D.s can be forgiven if they respond grumpily, as many have been all but ignored for years. That’s going to change, and is changing fast. I’d expect to see the ‘market’ for assertive, data-driven Medical Directors heat up considerably in 2010.
7. Drug costs will return to the fore.
Drug prices are up over nine percent so far this year, on top of a 7.5% increase in costs in 2008. After five years of decreasing trend rates, the monster is back. Fortunately we know a lot more today than we did years ago about drivers, due to the great work by Swedlow et al at CWCI and the excellent analyses by NCCI. Unfortunately, there are still far too many payers choosing their PBMs on the basis of price per pill rather than drug cost per claim.
But that’s OK, as the price-driven buyers will find their costs go up, while the cost-aware will find the opposite.
8. Florida’s attempt to redo facility fee schedules will continue to plod along
The ongoing battle over the work comp hospital fee schedule in Florida continued last month, as challenges to the pending changes were filed by two hospitals, the Florida Hospital Association, and FairPay Solutions. These challenges prevent implementation of a dramatic revision to existing fees pending further action by an administrative law court. This is good news, as the changes will result in dramatically higher costs…
Here’s hoping payers get off their collective duff and get focused on this before it is too late. I’m not hopeful.

9. TPAs will continue to try to make up lost margin by internalizing managed care services
This is an easy one, as it simply acknowledges a continuation of a current trend. As employers have abandoned self-insurance, TPAs have struggled to compete, with many forced to slash claims admin fees to hold on to business. They’ve got to get the dollars to keep the doors open from somewhere, and that ‘somewhere’ is increasingly their managed care department. What started out as demands for commissions and fees from managed care vendors has evolved into TPAs increasingly internalizing those functions.
This isn’t ‘good’ or ‘bad’, it is simply an industry dealing with a market reality. Employers who complain should be ready to pay higher admin fees…
I welcome your predictions.

Dec

Last year’s work comp managed care predictions

Posted by Joe Paduda on Tuesday, December 29th, 2009 | Comments

One year ago – against my better judgment – I made eight predictions about what would happen in the work comp managed care world. Here’s how I did.
1. Coventry will be acquired.
Well, that’s a helluva way to start out. Needless to say, that didn’t happen. I did note that it would happen after the credit markets loosened “enough for potential acquirers to feel a little more comfortable”; that is just starting to happen, but we’ve a ways to go.
What I didn’t factor in was the huge uncertainty surrounding health reform, and the impact of reform on health plans. My sense is this uncertainty will continue well into 2010 as healthplans and investors therein try to figure out what all this means.
Coventry is still an attractive target, although the recent surge in its stock price makes it a pricier deal…
2. Aetna’s work comp network business will slowly dissipate.
That prognostication worked out a bit better. AWCA network customers continue to struggle with lousy data quality in some jurisdictions, network expansion isn’t progressing as quickly or well as forecast, and payers indicate the effect of discounts is deteriorating. Without a ‘champion’ at mother Aetna, with several key staff moving on to other opportunities, and with revenues totaling well under one-tenth of one percent of Aetna’s total sales, look for that ‘dissipation’ to continue.
3. Corvel’s transition to a TPA with managed care services will accelerate.
According to their latest earnings report, revenue growth for the quarter was “reflective of improved growth in the Enterprise Comp product line, CorVel’s integrated claims management solution for workers’ compensation claims.” The 10-Q expanded on this, stating “The increase in revenues was primarily due to an increase in patient management business, with an increase in network solutions business as well. An improvement in customer utilization of the Company’s Enterprise Comp services was the primary reason for the increase in patient management revenues. ”
CorVel added another TPA to their portfolio in 2009, acquiring Eagle Claims, a five-year old WC TPA with 62 clients based just outside Syracuse NY in February.
4. Several of the larger payers will announce their own, small physician-centric network products.
Didn’t happen, making this about the umpteenth year some of us have been waiting for the big guys (and gals) to decide the one-size-fits-all PPO model doesn’t fit.
5. – Correction- Oregon will do a do-over.
In January I said “Oregon’s new regs require comp payers to reimburse at fee schedule for those services subject to the FS. Non FS services are to be reimbursed at billed charges” and as a result the state would revise their regs.
Wrong. According to a (admittedly very small) sample, payers have dealt with this and don’t see it as problematic. And there wasn’t a ‘redo’.
6. Innovation
I predicted there wouldn’t be any. That’s a ‘true’. (can’t wait to hear protestations of disagreement from those tweaking old processes and products)
7. Specialty managed care will grow
Sure has, especially in physical therapy with the expansion of Align into some additional claims offices and clients, and SmartComp’s announcements of various deals. Meanwhile, MedRisk (HSA consulting client) continues to dominate the space, inking a deal with Coventry to provide PT EPO services in most of the states with people in them.
Imaging is also growing – the recent OneCall transaction is an indicator of the private equity industry’s interest in WC, while NextImage reflects the emergence of new competitors.
FairPay’s acquisition by Riverside is more proof.
8. Medical costs
I predicted costs would “continue to increase far faster than they should, driven by lousy managed care models poorly implemented by payers more concerned with “savings” than claims costs.”
I hate it when I’m right. Drug costs are exploding, with 2008 costs up 7.5% and prices (just one component of drug spend, the other being utilization) up almost 10 percent in 2009. Hospital costs are continuing to grow faster than expected.
NCCI’s latest figures indicate costs have moderated, but these are from 2007, and don’t reflect current results. They also don’t include California, NY, and a couple other states.
Here’s how I’d score it.
Wrong – three – Coventry, Oregon and small networks
Right – four – medical costs, specialty managed care, innovation, CorVel
Neither – Aetna – but just give it time…
Never one to leave well enough alone, I’ll be out with my predictions for 2010 in a couple days.

Dec

Drug use in workers comp – the narcotics problem

Posted by Joe Paduda on Wednesday, December 23rd, 2009 | Comments

Just in time for Christmas, the good folks at NCCI have released their study of Narcotics in Workers Compensation, providing readers with just what they want – more evidence that the workers comp industry has a long way to go to get prescription drug use under control.
Sorry to spoil your pre-holiday glee, but the news is pretty troubling. Here, according to Barry Lipton et al, are the ‘highlights’:
– Narcotics account for nearly one quarter of all workers compensation Rx costs
– The share of drug costs attributed to narcotics increases as claims age
– Narcotics are used mostly for back injuries in workers compensation
– and perhaps most troubling, the use of narcotics early in the life of claims is increasing
NCCI’s report (which uses 2007 data) comes on the heels of my firm’s Sixth Annual Survey of Prescription Drug Management in Workers Comp, which found drug cost inflation jumped top 7.5% in 2008, marking the first increase in the inflation rate in the six years the Survey has been conducted.
The ‘good news’ is that the percentage of drug dollars spent on narcotics has stayed relatively flat for the last eight years, this despite the rapid, and close to complete, penetration of PBMs into the work comp space. While that good news may not appear to reflect well on PBMs (and payers’ efforts too), NCCI found that average narcotic costs per claim stabilized several years ago after several years of rapid growth. (I’m a big believer in cost per claim as a metric, as it does away with the influence of variations in claim frequency and is thus a better way to assess drug management performance)
The net? Cost increases have flattened out, but to this non-pharmacist’s eye there appears to be a lot more narcotic spend than necessary.
There are some rather interesting geographical nuances here as well; states with above average use of narcotics include CA, OK, TX, LA, AL, SC, MA, DE, and NH, proving that it isn’t just the deep South that has a narcotics problem.
What does this mean for you?
Time to get focused and get after your drug problem. This isn’t just a drug cost issue; the extended use of narcotics is also associated with longer duration of disability and higher claims costs.
And a note of compliments to NCCI on the study – this is precisely the kind of information payers need to know.

Dec

UPDATE – OneCall Medical to be acquired

Posted by Joe Paduda on Friday, December 11th, 2009 | Comments

UPDATE
Last Friday I posted the news that One Call Medical was going to be acquired; here’s the official announcement which was published yesterday.
On Monday One Call Medical will announce the company has agreed to be acquired by Odyssey Investment Partners, a New York private equity firm. One of the larger private equity firms, Odyssey has some experience in the work comp business, purchasing York Claims several years ago from AIG and by all accounts transforming that firm from a low-end TPA to one of the up-and-comers.
The deal is the result of a process that has been proceeding for several months; as the dominant company in the work comp imaging management space, OCM was the subject of significant interest, attracting bids from several investment firms. I don’t know the parameters of the deal, but will guess OCM went for a figure well above $100 million with a valuation north of seven times EBITDA.
While the work comp market is OCM’s primary space, the company has recently made successful, if limited, forays into the group health and consumer markets. Look for OCM to expand their efforts in that sector, as there is limited growth opportunity in comp where they handle about one of every six MRI scans.
But for now comp is the revenue driver. A source close to the deal indicated OCM’s top line is in the $250 million range, and despite the decline in claims frequency, the company experienced solid growth this year.

This marks the second significant deal in the work comp space this fall; FairPay Solutions was acquired by the Riverside Companies a couple months ago. Sources indicate there is at least one more deal ‘pending’; this one looks a little more iffy.

Category: Workers Comp