The state with one of the lowest fee schedules has been experiencing rapidly rising medical costs. The result of this trend has been that Massachusetts, long known for its draconian fee schedule, has seen total claims costs increase 10% from 2000-2002, after a period when costs were only going up 5.5% per year on average. The data come from the Workers’ Comp Research Institute, one of the preeminent analytical bodies in the WC world.
According to “Insurance Journal”,
“The major cost drivers of growth in the most recent year were continuing double-digit growth in medical costs per claim and very rapid growth in benefit delivery expenses per claim

The State Compensation Insurance Fund of California is the nation’s largest workers’ comp insurer, and by a significant margin. The Fund has experienced tremendous growth in the last few years, driven by the exit or demise of several competing carriers, and the reluctance on the part of many carriers to write business in California around the turn of the millennium.
As the insurer of last resort, SCIF found itself writing thousands of policies when other carriers pulled out or tightened underwriting guidelines.
Peter Rousmaniere, a good friend and incisive expert on the workers’ comp industry, has written a highly readable, and quite damning, report on the Fund that appears in Risk and Insurance. I highly recommend it.

While AIG is publicly wrestling with the big issues of what to do about ex-Chair Hank Greenberg, questionable financial transactions, and its plummeting stock price, it also has a few managed care and claims functions that need to be addressed.
Tops among these is the fallout from consolidation of medical bill processing (for workers comp) from the individual claims offices to two central locations in Georgia and Kansas. While the move has been completed, there appear to be significant issues related to bill processing accuracy and timeliness that have yet to be resolved.
Some of this is to be expected, as moving operations, starting new offices and hiring new staff is bound to create a learning curve. However, it appears that the learning curve is quite a bit longer than providers or regulators are willing to tolerate. A/R issues abound, and sources indicate the centers are inundated with calls from providers seeking information about long-overdue bills. Early reports were that there were problems with the new bill review system’s (implemented last summer) impact on productivity; this is getting better as staff learn the system and fixes are implemented.
AIG has never been known for its claims-paying speed or investments in technology, preferring to focus on underwriting and creativity in identification and exploitation of business niches. It has been the best in the business at the tasks it has chosen to pursue, but will need to direct some of its considerable talent to the basics of bill processing if it is to achieve even average status in that critical area.
What does this mean for you?
Plan transitions carefully, as the old saw goes, “if you don’t have time to do it right in the first place, what makes you think you’ll have time to fix it later”.

Coventry Healthcare’s acquisition of FirstHealth (closed 1/28/05) was viewed with some concern by FirstHealth’s workers comp payer customers. Several of Coventry’s key management staff came from organizations that had divested workers comp managed care SBUs, causing speculation (on this blog as well as among present FH customers) about the future of WC at Coventry.
Indications now point to a commitment to the WC business for at least the near and mid-term. Sources indicate Coventry senior management has met with some of FH’s key customers to discuss past issues, get input on future directions, and assure customers of Coventry’s commitment to the business. While this last point (assurance) may be viewed with skepticism, Coventry’s moves appear to indicate it is more than a platitude. These include
–Coventry’s search for a senior leader for the FH WC business, which will be separated from the group health business (now directed by Skip Creasy). They are looking for the right person with the right blend of credibility, understanding of the WC industry, and insights necessary to move the WC business forward.
–seeking input from present customers on general and specific topics ranging from candidates for the top job, to bill review technology, to gaps in systems, operations, customer service, and network coverage
–early indications the company is rethinking the acquisition and expansion strategy implemented by the old management staff.
–some evidence of increased flexibility in regards to customer requests for specialty managed care carve-outs and the like.
Perhaps most notably, Coventry’s decision to lop off the top managers at First Health sent a clear notice that big changes were to come.
I believe that is good news for present customers, as well as the rest of the market. A reinvigorated First Health may actually bring new approaches, new ideas, and a more flexible attitude to the industry, all of which are desperately needed.

The Workers’ Comp Research Institute has just published the latest edition of CompScope, their annual report on trends and comparisons across 12 states.
CompScope is used by regulators, managed care firms, and WC payers to assess the market environment in individual states. Some of HSA’s clients use this publication when determining market strategy, as it provides an objective comparison of key markets for comp.
WCRI also publishes their Anatomy reports, which are more detailed analyses of the medical and other aspects of WC claims in individual states. The Anatomy report has proven to be quite useful for claims execs and managed care professionals in the business.
WCRI charges for both publications.
Yes, I’m a fan of WCRI, but have no other affiliation.

Notes on some of the goings on in the WC managed care world.
Concentra has laid off the IT staff in Minnesota (effective 3/31) responsible for maintaining both the “Advancer” case management system (acquired in the purchase of NHR) and the company’s “datamart”. Evidently Concentra is switching maintenance of the system to their Dallas IT staff, and will be transitioning to a flat file format for reporting purposes.
Tom Cox, an executive in the company’s network operations, will be leaving the company sometime this summer. Cox has been with the company and their predecessor organizations since the early nineties.
Coventry’s First Health continues their search for an executive to lead their WC business line. The position is located in Illinois, and the company is looking both within and outside the WC world.
One of the new boss’ first steps may well be to mend fences with the company’s larger clients. First Health has been known for their somewhat-heavy-handed approach to customer relations; while this had diminished over the latter part of 2004, recent indications are they are back to their old tricks. More than one customer has been ‘surprised’ by First Health’s recent demands or inflexibility in contract re-negotiations, systems enhancements, or customer-specific requirements.
The company recently landed Fireman’s Fund as a network and bill review client. FFIC left Fair Isaac after a somewhat troubled relationship.

HSA has completed the second annual survey of prescription drug management in WC. Here are the (very brief) highlights…
–overall trend rate was 12% (2004 over 2003)
–WC Rx costs nationally estimated at $3.4 billion in 2004
–party “most responsible for prescription drug costs” – respondents overwhelmingly voted for the treating physician, a significant change over last year.
–Third Party Billers considered to be a problem by all but 2 respondents, and most payers want their PBMs to deal with the TPBs
–utilization considered to be much more significant issue than unit price
The full survey will be available this month.