I’m at the annual meeting of the Institute of WorkComp Professionals in Asheville, NC today. A very impressive group; what is notable is these folks actually do ‘get it’; they do understand that workers comp is not just a spreadsheet game, a price war, a contest to see who can squeeze the carrier the most.
These agents understand that the value they must deliver is to develop and implement long term programs, programs that attack cost drivers, that reduce injuries and speed return to work.
And those programs, and the results they provide, can’t be done on the cheap.

I had a chance to spend more time with the Medcor folks this morning at RIMS, and liked what I saw. They’ve been doing the combo first report of injury (or most of it)/nurse triage/network direction work for ten years now, and some of their nurses (all calls are answered by nurses) have logged over 5000 calls.
Because they don’t have any stake in any network, they don’t worry about increasing network penetration (a wholly misguided metric used to evaluate managed care plans) per se, but rather focus on getting claimants to the right doc. They do have the ability to send patients to specific docs based on the type of injury – but (here’s a shocker) most of their customers are not yet sophisticated enough to be able to identify those ‘right’ docs.
The value? Avoided ER admissions and reduced claim frequency.
Not an earth-changing business, but one with a lot of potential – even more if the employer is somewhat sophisticated.

Medicare Set Asides were a hot business for a couple of years with NuQuest HealthAdvocates and Gould and Lamb dominating the industry. Then Coventry entered the market thru its priority services sub, quickly moving up to the fourth spot. Coventry stumbled with its guarantee recently, losing a couple of clients (namely AIG and Macy’s).
Today the MSA business is growing but not nearly as fast as in 2006. The big jumps in volume in the sector are pretty much over; while most vendors are seeing some increases in volume, the double-digit growth of the past looks to be gone.
There are still new entrants but the show floor isn’t nearly as crowded with erstwhile MSA vendors as it was last year.
What’s next? Depends on the Feds and adoption rates in other lines of business. Expect to see MSAs become more prevalent in other P&C lines especially GL and other liability lines.

AIG is no longer using Coventry for MSAs.
AIG was quite displeased when Coventry raised prices for networks and other services. AIG has long been a loyal First Health/Coventry customer, and was one of their larger MSA customers.
The defection, and other business losses has led to a reported 60% drop in revenue for Coventry’s Priority Services unit (they handle the MSAs (Medicare Set-Asides); sources indicate Q1 2008 MSA revenue is down almost $3 million from Q12007.
Priority Services has had other problems, namely issues related to its ‘guarantee’ that CMS would accept its recommendations for Medicare Set-Aside amounts. I don’t have the details, but it appears that Coventry has not been able to deliver on what has been its key marketing message – the guarantee. Apparently this is in large part due to CMS’ unfamiliarity with state workers comp fee schedules.
The drop off in business reportedly has led to layoffs at Coventry’s Priority Services division.
The business decline comes on the heels of a Federal subpoena issued to Coventry demanding they cease any and all destruction of records related to their MSA business dating back at least three years. The subpoena has made its way to all PS employees, and may well be tied to a complaint from a couple years back alleging that PS inappropriately used Coventry’s online access to Medicare eligibility data.
The net is this – Coventry has been very aggressively working to maximize WC revenues, to sell all its services to all its customers by bundling, offering what amounts to bulk purchase deals, and in some cases requiring customers to agree to significant price increases. When you are a monopoly in one critical area (workers comp networks) you have some pretty strong leverage.
The problem arises in other areas, where Coventry does not have a monopoly, and customers, angered by their heavy-handed tactics, vote with their feet and move their business elsewhere. The workers comp buyer is tough, does not like to be hemmed into a corner, can be loyal but only if s/he believes s/he is being treated fairly, and has a long memory.
Coventry may be forgetting that their priorities must be aligned with their customers’ if they are to prosper over the long term.

As I noted yesterday, Florida is considering a change to the fee schedule that would increase work comp medical expenses by a full 20%. The change, basing reimbursement for work comp outpatient procedures on what hospitals bill Medicare, would double workers comp payers’ outpatient hospital costs. (Workers comp is already the best payer (by far) for Florida’s hospitals, with margins exceeding 55%.)
To understand why, here’s a brief background on the facility reimbursement situation in the Sunshine State. Florida’s fee schedule calls for most outpatient services to be reimbursed at 75% of ‘usual and customary’ charges; outpatient surgical services are paid at 60%. The obvious question is: what is ‘usual and customary’. Turns out that there is no agreed-upon standard in Florida, a situation that has led to numerous disputes between payers and providers. In an effort to fix this, the regulators are seeking to establish a uniform standard – albeit one that would double already-high outpatient prices.
According to an analysis done by FairPay Solutions (an HSA client), 55% of workers comp costs in FL are billed on UBs (hospital billing forms). 44% of those costs are for hospital outpatient services – or about 13% of total costs. Increasing ‘usual and customary’ costs by almost 200% (FairPay’s estimate based on FL Medicare charge and payment data) will dramatically increase medical costs.
That’s bad. But it would get worse, quickly.
Florida hospitals raise prices around 15% annually. There’s nothing to stop them from continuing this practice, and as the proposed FS change would base reimbursement on charges, not payments, they are actually incented to push prices even higher.
Expect physicians to start seeing patients in hospital exam rooms as well. Why? Reimbursement – an additional $290 for each visit.
Next we’ll consider why Medicare should never be used as the basis for WC reimbursement, and we’ll conclude by looking at two markets – Miami and Orlando, (already the poster children for excessive hospital utilization) and consider the impact of this potential change on costs in the two large markets.

There’s big trouble brewing in Florida – trouble in the form of a seemingly-innocuous workers comp fee schedule change that would increase medical expense by almost 20%.
Yes, twenty percent.
We’ll delve into the details in future posts. First, I’m going to scare the pants off you.
Florida law mandates that hospital outpatient services be paid at 60% of usual and customary charges for scheduled outpatient surgery and 75% of usual and customary charges for most other hospital outpatient services. How to establish “usual and customary” charges has bedeviled regulators.
Florida has a ‘three member panel’ that determines changes to the state’s workers comp fee schedule (as allowed and required under the state’s statutes). At the last hearing of the three member panel, the discussion focused on a proposed change to the workers’ compensation hospital outpatient fee schedule, a change that would establish a benchmark on which ‘usual and customary’ would be based.
The benchmark would be the amount hospitals charge Medicare. Not get paid by Medicare, but charge Medicare. According to testimony at that hearing, hospitals mark up their Medicare costs by 715% – they charge Medicare seven times more than it costs the hospital to provide the service.
If the proposed regulation is adopted, workers comp’s ‘usual and customary’ would be based on that 715% mark up. Running the numbers, this would result in workers comp payers paying Florida hospitals (and perhaps ASCs) 472% of what Medicare pays for outpatient services – one of the highest rates in the nation.
There are about a dozen other problems inherent in basing reimbursement on Medicare, problems that we will cover in detail this week. I’m going to be devoting significant time to this issue as it has all the aspects of a typical workers comp screw-up; regulators unsure about the nuance of reimbursement; providers seeking funds to offset increasing bad debt; workers comp payers ignorant of the impact of the potential change, and in one case actually supporting it because it will make costs more ‘predictable’.
What does this mean for you?
Well, it could be the end of the good times in Florida – a state where 60% of loss costs are due to medical.
This is a highly complex issue, but that doesn’t make it any less important. In fact, the very complexity makes it critical that workers comp payers spend the time to fully and completely understand what’s happening here – because this is not just a Florida issue, it is undoubtedly happening in other jurisdictions.