Sep
29

Spitzer subpeonas St Paul/Travelers

Eliot Spitzer, New York Attorney General and terror of the insurance industry, has just subpeona’d insurer St Paul Travelers for documents and information related to workers compensation. No further details were immediately available either from the AG or St Paul Travelers.
The company is one of the largest WC insurers and administrators in the nation, ranked #4 or 5, depending on criteria used.


Sep
27

Concentra’s investor briefing

Concentra Inc.’s presentation at the Bank of America Investor Conference earlier this month focused on their continued growth, focus on workers comp, and impact of the acquisitions of Beech Street and Occupational Health and Rehab.
Here are some of the highligts from the presentation and comments on same.
Revenues for 2005 are projected to be $1.1 billion, with EBITDA of $156 million and operating cash flow of $101 million. Revenues are growing organically about 5% per year, while operating cash flow is down from $114 million in 2003 to $98 in 2004 to $101 in 2005.
Workers comp is by far their largest market, driving 70% of revenues. The Beech deal will certainly help diversify Concentra’s revenue base, as Beech is a strong mid-tier group health PPO. Beech’s provider contracts will also be compared to the Concentra contracts to identify the ones with the best rates. This, coupled with the greater buying power brought by Beech, may help Concentra drive better deals with some providers.
Of Concentra’s three distinct business units, by far the highest margin business is network services, with a margin of 31%, followed by the clinic business’ 14% margin. The care management sector, which is primarily field and telephonic case management, was hurt by declining revenues and price compression and returned 6%.
Of note, the clinics saw same store revenues up 6.6% on a 5% increase in visits. This at a time when the WC injury rate has been declining by about 4%.
Thomas made the point several times that after the completion of the OH+R deal, Concentra’s clinics will see one of of every ten workers’ comp injuries for initial care. While that sounds impressive, and is impressive, it is important to note that the clinics only see the routine injuries, and most of the dollars that are spent on WC medical go to the more complex cases that are treated by specialists.
The Beech Street and OH+R acquisitions were expensive at $210 million +. The Beech deal adds significantly to Concentra’s group health product offering. while OH+R will add 26 clinics after 8 existing clinics are closed.
Both Thomas and Kiraly repeated their assertion that Concentra is the industry leader in the WC managed care business, and is a full service integrated services provider. From a sheer numbers perspective, they are correct. However, other entities are leaders in segments of the WC business. For example, Coventry’s First Health is by far the leader in the WC PPO sector. MedRisk is the industry leader in management of physical medicine; and PMSI in pharmacy management.
Thomas noted that because Concentra manages all aspects of the claim, it therefore impacts more claims dollars than other competitors. Not exactly. Intracorp has case management, networks, bill review, peer review, and access to specialty managed care. So do Genex and CorVel. Concentra’s out of network bill negotiation entity (Concentra Payment Services) may well be the industry leader in non-network bill processing, but a host of competitors are now in this space.
While Concentra is not a public company, rumors have been rampant for years of their desire to become one. That, coupled with the large amount of debt outstanding, is evidently the reason for their continued participation in these road shows.


Sep
21

First Health search for work comp executive

Sources indicate Coventry is still seeking a leader for the workers compensation business at First Health, although they have assigned the task to an outside search firm after their internal recruiters came up empty.
Spencer Stuart’s Chicago office is handling the search. Spencer is an interesting choice as the firm is not known as a major player in staffing for the managed care, health insurance, or HMO sectors. They are using their own internal resources, bolstered by a list from Coventry of individuals that have been vetted and found wanting. While this may help reduce the number of false negatives Spencer encounters, the firm may also encounter difficulty filling the slot if Coventry allows First Health’s present customers to weigh in on the decision.
Several sources have indicated that Coventry has asked present customers their opinions of previous candidates, and these opinions have had an impact on the company’s selection process.
In any event, given the significant profit contribution of the work comp business (11% of Coventry’s net comes from work comp) this is a key hire. And the fact that they have been looking since February with no apparent success demonstrates the difficulty inherent in finding a candidate who understands the HMO industry, knows workers comp, has a solid reputation among First Health customers, and can lead a customer-service-challenged company forward.
What does this mean for you?
Either very little or quite a lot.


Sep
21

Medical cost inflation in workers comp

The cost of workplace injuries in the US topped $50 billion in 2003, despite a 6.3% drop in the injury rate. These results continue a long-running trend of declining frequency that is more than offset by medical inflation.
The often-asked question is how can this be? If the number of injuries is dropping, how can total costs be increasing? While it appears that the severity of injuries may be increasing, that is actually a proxy for medical costs (the workers’ comp research firms equate severity with higher medical expense). The culprit is medical inflation, and more specifically increased utilization of medical services.
There are fee schedules in about half the states (most of the larger ones) that do a pretty good job of constraining price increases. With rates pegged to Medicare’s fee schedule, prices for most physician and outpatient services are under control. Unfortunately, that’s only part of the problem – the other two drivers are the percentage of claims that have a particular type of medical expense, and the volume of services per claim.
As an example, physical therapy occurs in about 26% of cases with lost time. However, given there are few treatment guidelines that are helpful in managing PT, and the propensity for therapists to overutilize, PT costs appear to be growing significantly. Without objective clinical guidelines to ensure the volume and specific treatment modalities are appropriate, work comp payers are essentially unable to constrain the delivery of PT.
The result – a recent analysis conducted by my firm, Health Strategy Associates, showed that over 55% of lost time cases treated at a national occupational medicine company had PT services. Sure, the price per service was low, and the average number of visits was quite low, but there is no doubt many of the patients receiving PT did not need it.
The work comp market is recognizing the extent and cost of the problem; MedRisk, a firm that specializes in managing physical medicine in workers comp has seen explosive growth, and now manages PT on a national basis for carriers and TPAs including Liberty Mutual, Zurich, ACE, Sedgwick, Gallagher-Bassett, and Amerisafe. (MedRisk is a consulting client.)
And physical therapy is but one example of a medical service that is a key driver of medical inflation. With work comp medical expenses trending up at double-digit rates, payers are finally beginning to adopt intelligent strategies that are specific to the key drivers of inflation.
What does this mean for you?
If you are a work comp payer and have yet to adopt a “specialty managed care strategy”, your medical inflation rates are likely higher than your competitors’. If you don’t get costs under control, you will not be a payer much longer.


Sep
14

Medicare physician reimbursement cuts

The latest news from Washington indicates the cut in Medicare reimbursement scheduled to go into effect on 1/1/06 may actually occur. The reduction of 4.3% is a hot topic amongst physicians, many of whom are claiming they will not continue to treat Medicare patients if the cuts go through.
Two of the key Senators on the Finance Committee (which has jurisdiction over CMS) have stated their desire to rescind the cuts. According to Congressional Quarterly, “Sen. Max Baucus (D-Mont.) said he and Senate Finance Committee Chair Chuck Grassley (R-Iowa) are “not going to let those cuts go into effect this year”.
The fate of the proposed fee reduction will not just affect Medicare. Many group health and HMO reimbursement arrangements as well as states’ workers compensation fee schedules are based on Medicare.
Yet more evidence that when CMS gets a chill, the rest of the health care payers catch a cold.
What does this mean for you?
Keep an eye on Congress’ actions, or lack thereof, on this reduction. Regardless of the action taken or not, it will affect health care payers’ bottom lines.


Sep
13

Aetna Workers Comp leader search

Aetna’s workers comp managed care entity (Aetna Workers’ Compensation Advantage, or AWCA) is looking internally for a new leader to replace recently departed Robyn Walsh. Walsh retired from Aetna recently, joining several other senior execs in taking advantage of the vesting and retirement plan.
Sources indicate that Aetna’s search is concentrating on internal staff. While this is admirable, it is also somewhat curious. Aetna got out of the workers compensation business several years ago when it sold its P&C business to the Travelers. With one or two exceptions, most of the AWCA staff have very limited WC experience. Industry knowledge is critical in workers comp, both to build a credible product and to speak credibly to potential customers.
With the very limited success enjoyed by AWCA to date, I wonder if their internal push is more out of necessity than desire. It is indeed difficult to see how this venture has been able to survive as long as it has with one customer in a single state. Perhaps Aetna does not believe it will be able to attract outside talent, and therefore is concentrating its search internally.
On the other hand, given Coventry’s lack of success in finding a leader for its First Health WC subsidiary, perhaps Aetna is just being smart. Perhaps.
Other sources indicate Aetna made several runs at a workers comp pharmacy benefit management firm earlier this year.
This is another head scratcher. Most WC PBMs are independent; buyers do not see much synergy between regular medical networks and PBMs; and given the dollars on the table, there would have been better, more strategic places for Aetna to invest.
What does this mean for you?
Keep an eye on Aetna, and if you are interested in contracting with them, make sure you are contractually protected if they exit the business.


Aug
31

Florida’s Workers Comp physician fees

In another sign that meaningful reform initiatives do work, the National Council on Compensation Insurance (NCCI) filed rates for Florida that represent a 4.5% decrease; making the total filed decrease since 2003 22.1%.
These decreases were due to lower medical and indemnity expenses. Think about that – physicians’ fees went up, and medical expenses and total claims costs went down.
That alone drives a major hole in the sales pitch of the large PPO networks, who base their “value” on the discounts they get from providers. Discounts do not drive savings on claims, they drive savings on individual bills. And do nothing to address utilization or frequency.
Back to the results – Florida’s reforms were comprehensive, intelligent, and quite effective. Enacted in SB50A, they included drastic limitations on IMEs, changes to attorney compensation, revised indemnity determination and compensation for injured workers, and most significantly, higher fees for doctors.
While all the moving parts make it quite difficult to assign “effectiveness” to one part of the reforms, it is quite clear that the significant increase in the fee schedule for physicians, coupled with a sharp decrease in the (very rich) hospital fee schedule had two primary effects.
1. More physicians, and evidently more good physicians, are now participating in the WC system. This is a remarkable turnaround, and results from an increase in fees from 83% of Medicare (!) to 114% for primary care docs and 140% for certain specialists.
2. Hospitals have renegotiated their managed care contracts, in many cases decreasing discounts or eliminating them altogether. In turn, this has caused “deep discount” PPOs who make a large part of their income from hospital deals to de-emphasize the state. This de-emphasis means they are spending less time and energy in FL seeking discounts from other providers. My bet is this has, and will, positively impact utilization, as providers’ need to drive utilization to replace lost fees is diminished. A bit of a stretch


Aug
30

Ohio’s Work Comp Scandal – fallout continues

While we were paying attention to the mess uncovered by the Broward County School Board’s workers comp audit , Ohio’s workers comp scandal moved into new territory. A report from a panel appointed by Gov. Bob Taft (R) to review the mess in Ohio noted serious problems with oversight, financial controls, policies and procedures, and outside influences.
The Ohio Bureau of Workers’ Compensation writes all the WC insurance in the state, and its investments, which are reserves for payment of future claims, are overseen by a five member panel, none of whom have any investment expertise. Yikes.
Wait, it gets better.
The governor’s former chief of staff was convicted of failing to report several vacations at a home owned by a top campaign contributor, Tom Noe. Small potatoes? Not really – Noe was the guy who invested $50 million of BWC’s funds in rare coins, some of which were “lost in the mail”.
Taft has not escaped unscathed. According to the Akron Beacon-Journal, “Questions about Noe’s investment of state money led to a scandal that culminated in Gov. Bob Taft’s conviction last week on charges he was treated to numerous golf outings he failed to report, including two with Noe.”
And, this won’t end here. Noe, Taft’s former political ally, is contending that Taft knew about the coin investments way before the scandal hit the news. Taft denies this, claiming he first found out about them in news reports after the fact. Here’s the take from an Ohio TV station:
“In other developments Saturday, the Toledo-area coin dealer who managed the workers’ comp bureau investments in rare coins continued to push for Ohio Governor Bob Taft to retract statements in which he accused Tom Noe of concealing his involvement in the investments. Noe’s lawyer sent a news release that contended at least 16 members of Taft’s senior staff, as well as numerous other officials, knew about the arrangement. He also contends Noe and Taft spoke of the fund in a locker room at Inverness Club in Toledo during a May 13, 2001, golf outing.”
In addition, Federal officials informed the Ohio Attorney General that commissions charged by the BWC’s so-called investment advisers were much too high. However, Attorney General Petro evidently sat on the news, which came after the SEC tried for 16 months to get the BWC to take action. While it is unclear if there are or were any political links between Petro and the investors, given the smell emanating from the entire mess, it is certainly interesting that Petro did not take prompt action.
It looks like the governor’s office was treating the state’s workers comp insurer and its assets as their private playground, investing in wine, coins, and other highly questionable “assets”. So far, their efforts have cost the state over $300 million in losses.
Remember, these funds are set aside for workers who are injured, to cover their medical expenses and lost wages.
As much as I want to move on from this, it’s the proverbial train wreck; you just have to keep looking.


Aug
29

CHOICE Awards for Workers Compensation

I’ve been hard pressed to keep up with the blog; seven days in Florida starting at the Florida Workers Comp Institute annual conference followed by a three day audit of a managed care firm is to blame. One of the biggest events at the conference was the third annual CHOICE Awards for excellence in workers compensation.
These awards are presented to physicians who exemplify the highest standard of care and demonstrate thorough understanding of workers comp and return to work while communicating clearly and effectively with all parties in the process.
Physicians are the key to effective workers comp and other medical programs.
They diagnose the condition, assess the patient, develop the treatment plan, write the scripts, schedule the imaging, refer for surgery, deal with managed care’s questions and requests for information, monitor progress, and remove obstacles.
In workers comp, docs also identify limits and restrictions, develop return to work programs, recommend job accomodations, coordinate with employers, assess relatedness, and cajole, badger, encourage, and push injured workers back to work.
Many docs do this despite the request from insurers that they perform these services for a “discount” below their list price or fee schedule.
The unfortunate thing is the CHOICE awards are one of the few efforts by payers to publicly recognize those physicians that outperform their peers. And it is not a few docs getting a black plastic award and handshake from an insurance company exec. Over 200 nominations were received, a rigorous judging process was conducted, and all finalists were invited to the banquet. (disclosure – CHOICE is a client).
The keynote speech was given by University of Miami president and former Secretary of HHS Donna Shalala. The sit down dinner was attended by 400+. The band played for each recipient and for all the guests before and after the awards.
And the award recipients deserved all of it.
What does this mean for you?
If you have yet to figure out that physicians are the most important contributors to the success of managed care programs, get with the program.


Aug
23

Drug problems in workers comp

I spent most of Sunday and yesterday speaking at several sessions at the Florida Workers’ Comp Educational Conference in Orlando. Nothing like Orlando in August. Also on the panels were several physicians from Florida, Gerry Sander, a PharmD from Express Scripts, George Furlong of Choice Medical Management (a client), and Nancy Brennan of SRS.
Here are a few takeaways.
1. There are a relatively few physicians – my guess is less than 15% – who are problem prescribers. These are the ones who write scripts for Actiq (a narcotic that is only approved for break through cancer pain), Oxycontin in the first month of an injury, and massive doses of other opioids and narcotics. Most of the physicians in the audience were appalled at this prescribing behavior. One physician, Dr. Richard Dolsey of Miami, noted that of the many physicians in his group, and the thousands of patients seen each year, he could not recall a single script for either of these drugs.
2. Although their numbers are small, these “bad prescribing” physicians have an impact on cost that is disproportionally high – Oxycontin and similar pharmaceuticals are the most costly drugs in WC (they account for more dollars spent than any others.)
3. One of the biggest problems with these drugs is their potential for addiction. Once addicted, the addiction treatment becomes the financial and legal responsibility of the WC payer. Detox can be extremely expensive, is quite difficult, to say nothing of the human toll on the individual and their family. One of the physicians on the Sunday panel is a pain management doc – a Dr. Silverman – he recommended a relatively new detox therapy, suboxone, administered in a physician’s office that appears to work quite well with minimal side effects.
4. Physician education is seen as a long term solution or means of addressing drug costs in WC. However, I have my doubts – the entire drug spend in WC is about $3 billion this year, which is less than what drug companies spend on direct-to-consumer advertising. Significance? Hard to penetrate the consumer or physician mind when our resources are so limited.
5. That said, the industry can adopt data mining techniques to identify potentially problematic physicians, patients, or pharmacies and adopt educational approaches targeting specific problems. These should be educational and not confrontational in approach.
The gratifying thing about the two days was the dialogue, recognition of the extent of the problem, and willingness on the part of physicians and payers to address the issues.
What does this mean for you?
Drug costs are the fastest growing part of the WC medical dollar – and perhaps the hardest to address. Start by educating yourself on the problem, and realize that many physicians are doing the right thing, and only a few are problematic.
For articles specific to drugs in WC click here.