The workers comp PPO is dead. Well, dying. The era of large, national PPOs delivering a single generic discount-based model is coming to a close. Payers are finding that their medical costs are still going up; their managed care fees are climbing; and their customers are increasingly questioning their business models, fees, and outcomes.
Liberty Mutual, ESIS, the Hartford , Zenith and California’s State Insurance Fund are among the major workers compensation insurers and TPAs that are making significant changes to their provider networks, strategies, and partners. By the end of 2006, the comp PPO vendor landscape will have significantly shifted, with the dominant players (First Health, Focus, CorVel) losing share to regionals, specialty firms, and a couple of relatively new entrants including Aetna.
While that evolution will be good for the industry, it is neither far enough or fast enough for my liking. Here’s what the payers should be doing.
BTW, this subject is too big for a single post, so I’m breaking it down into a series…

Continue reading Workers Comp PPOs are dead

The NCPDP meeting in Phoenix last week was more than just a few days sunning, golfing and dining. For those occupying the narrow-but-deep workers compensation niche, it was quite instructive. For example…
Kroger continues its anti-PBM stance; refusing to contract with any PBMs for workers compensation, instead choosing to send all their comp scripts to a third party biller. And as long as workers comp payers allow or enable their injured workers to get their scripts filled at Kroger stores, this problem will continue. Why? Because Kroger does not believe any comp payer can influence their comp script volume.
WorkingRx may be in trouble. The Albertson’s deal will likely result in WorkingRx losing its marquee customer (Albertson’s owns Sav-on and Osco’s, which are being sold to CVS), and therefore much of its clout with comp payers. This being the case, several PBMs and payers are scratching their heads over recent announcements that some comp PBMs are doing deals with WorkingRx…
Walgreen’s will not contract with any workers comp PBM or insurer for less than AWP-10%. That’s their public stance, and it appears to be consistent with their private contract negotiations as well.
Meanwhile, several payers have been in conversations with Third Party Solutions in a quest to find some way for payers, PBMs, and third party billers to work together. So far, TPS has been more “reasonable” than the other third party biller(s), but the inherent conflicts in business models and motivations are proving to be rather difficult to overcome.
A follow up from the ScripNet – WorkingRx court case – the transcript contains a potentially significant statement by WorkingRx’s attorney. When questioned by the judge abouit the surcharge placed on each script by WorkingRx, the lawyer admitted that WorkingRx’s right to reimbursement (and I’m paraphrasing here) was not any different from that of the retail pharmacies, and thus any surcharge was not reimburseable.
Finally, in a completely unrelated note, there is news out of California that legislative efforts to address the really significant issue of drug repackaging appear to be progressing.
And that’s today’s potpourri of drug talk.

California’s workers comp rate roller-coaster looks to be poised to make another steep drop. The combination of the national decrease in claims frequency and the impact of reforms have led to drastic decreases in comp rates, with more likely on the way.
While some of the changes in frequency, or the number of claims per 100 FTEs are due to increased emphasis on safety, a change in the mix of occupations, drug testing programs, safer autos, and a decline in injury-heavy industries such as manufacturing, there are two other external factors that are likely major influences.
According to Workers Comp Executive, “because of the reforms there are fewer incentives to move claims into the workers’ comp system.” Interpretation – it is more difficult to get an injury classified as a workers comp claim, thereby reducing the number of claims. For those not intimately familiar with CA comp history, for a while there it was pretty easy to get almost anything classifed as an occupational injury, including a stress claim and/or psych issue if it could be related to employment. The new laws have made this much more difficult.
A hidden issue has been brought to our attention by Peter Rousmaniere, who notes that “many (undocumented workers) in this study do not file, even for disabling injury” under workers comp. (Peter also points us to a really interesting study done by RAND on the influence of group health insurance coverage on workers comp injury filing behavior – but that’s for another post).
So, how many undocumented workers are there, and what jobs do they hold? Again, kudos to Peter for his research and analysis – his assessment is that 19.5% of workers in laboror and unskilled jobs are “illegals” (my quotes). This is one of the highest rates in the country.
Will their propensity to not file WC claims change? Certainly one of the biggest obstacles to filing will be removed if the undocumented worker legislation pending in Washington becomes law. If this does happen, there may be a sudden surge of claims.
What does this mean for you?
For WC insurers and employers – good news. But remember the glory days of the mid-nineties, when open rating led to a crash in comp costs, followed by a very painful shakeout that left the largest carrier (Golden Eagle) insolvent, created huge stresses on the State Fund, and drove many carriers either out of business or to the brink.
This can’t, and won’t, last.

The Louisiana Workers Compensation Corp has a new leader; long-time CEO Steve Cavanaugh has left to take a position with a new workers comp start up in Dallas. Cavanaugh’s replacement will be LWCC’s current COO, Kristen Wall.
This is more than the usual transition – Cavanaugh headed up LWCC and was indirectly responsible for the innovative work the company did in provider network management, an approach that has proven to deliver results significantly better than industry standards.
LWCC’s results were driven in large part by their use of a relatively small network of occupational medicine physicians, chosen for their expertise in disability management and demonstrated outcomes. While some of the physicians provided care at a discount, all received a payment of around $250 to manage each case.
Cavanaugh did not provide any details on his new venture; the fact that his new firm hired someone with his track record bodes well for their results.

This is at best tangential to managed care, but I just can’t stop watching the Tom Noe train wreck.
Noe’s trial date for allegedly laundering money to fund the Bush campaign will be set shortly, and it may well fall during the campaigning season, bringing tears to the eyes of his former colleagues in the Ohio GOP. Noe, a source of much fodder for this and other blogs due to his criminal mismanagement of Ohio’s workers compensation funds, is now a pariah in his own party.

Continue reading Noe’s non-WC problems

The decline in lost time injuries has been an ongoing, and welcome, phenomena here in the US for over fifteen years. Now news comes that our friends in the Great White North have also seen a substantial drop in lost time injuries (known in Canada as time-loss injuries). Since 1994, there has been a 23% decline to an all-time low of 340,500 in 2004.
And total injury rates have also declined in several provinces, with Alberta reporting a very slight increase that may be related to a jump in employment in the oil-rich province. Provincial Workers Comp Board officials credit workplace , improvements, better communications about safety, and financial incentives for the improvements.
Canadian employers pay WC premiums directly. Thus, they are financially motivated to keep injuries, and therefore costs, low.

It looks like Duke Cunningham was not the only public official with a documented list used to apportion public dollars. The former CFO of Ohio’s workers comp Fund (known as the Bureau of Workers Comp) Terence Gasper, allegedly used a handwritten list to determine how much of the Bureau’s investment business was going to specific investment firms. The 25 to 30 firms that made the list received upwards of $100,000 each, with the most fortunate enriched by three-quarters of a million dollars.
The question now is, if this list existed (and it appears it did), why was it set up and did anyone at the BWC receive any kickbacks or payments for business steered to specific firms?
According to one colorful witness (probably a big Sopranos fan), interviewed after his/her testimony before the grand jury investigating the matter, “Somebody was getting greased‘Somebody’s gonna fry. Actually, a few somebodies are gonna fry
It looks like our old acquaintance Tommy Noe may be one of the “somebodies”; one witness identified Noe as someone who would not have received $50 million to invest on BWC’s behalf unless he was “pushed from above”.
Gasper’s alleged conduct was not limited to Cunningham-esque lists; he also authorized investments into a hedge fund (“MDL”) without informing his bosses. Hedge funds can deliver great results, as well as huge losses, and this is the only instance I am aware of where such a volatile vehicle has been used to invest workers compensation reserves. Unfortunately for policyholders in Ohio, MDL proved to be much more adept at losing money than making it, to the tune of some $215 million.
MDL was fortunate in that an employee was the daughter of a BWC Oversight Commission member, George Forbes. Forbes resigned his post when this information became public knowledge.
What does this mean for you?
If you are an employer in Ohio, higher WC premiums.

An audit by Ohio’s Bureau of Workers Compensation has revealed that Tom Noe and an associate owe the Bureau over $13 million. And, one of Tom Noe’s partners in the rare coin business has pleaded not guilty to seven felony counts related to alleged thefts from Ohio’s state workers compensation fund. The miscreant, Timothy LaPointe, was escorted from the courtroom in handcuffs before being fingerprinted and released on bond. LaPointe is accused of corrupt activity and six counts of tampering records, proving yet again that cover-ups are always a bad idea.
Meanwhile, more details on Noe’s transgressions are coming out every day. The latest scoop is Noe spent the State’s funds lavishly on house improvements, entertainment, golf outings, and collectibles such as political pins.
The Toledo Blade has an in-depth review of the Noe case, including a follow-the-money section that is quite interesting. Notably (no pun intended), Noe was appointed to his post as a fund manager for Ohio’s BWC despite the fact that he was not qualified; he did not file adequate financial records; and the Bureau allowed Noe’s lawyers to write the agreement between Noe and BWC.