Category: Workers Comp

Aug
15

Healthcare reform implications for workers’ comp, Part 1

Posted by Joe Paduda on Tuesday, August 15th, 2017 | Comments

With Congressional efforts to repeal/replace/revise ACA behind us for now, it’s time to consider what all this means for workers’ comp.

First up – Medicaid expansion

Currently 32 states have expanded Medicaid; 19 have not. Expect more states to consider expanding Medicaid as the combination of Federal dollars and struggling hospitals makes a compelling case for state adoption.

In addition, the Trump Administration may well allow states more flexibility in expanding Medicaid, and this will likely lead to more states opting in. For example, Arkansas has applied for permission to add coverage to a more limited population…other states will almost certainly follow suit.

Other states, including Texas, are facing the dual realities that their poorer citizens’ health status is declining, and hospital financials are deteriorating as well.

A couple data points illustrate the linkage between Work Comp and Medicaid…

63% of Medicaid recipients have at least one family member working full time. This varies among states, from 77% in Colorado to 51% in Rhode Island. 15% have a part time worker. Only 19% of recipients’ familes have no one working.

Many employers (e.g. those with <50 FTEs) that

  • don’t provide health insurance &/or
  • aren’t required to provide health insurance under ACA
  • &/or have a lot of part time workers who don’t qualify for employer-sponsored health insurance

recommend workers who qualify sign up for Medicaid.

The potential implications for claiming behavior are apparent.

We all know workers comp premiums are driven by employment. Most credible studies indicate Medicaid expansion increased employment in states that expanded Medicaid.

More employment = more payroll = more workers’ comp premium and more claims (NOT higher frequency, which is a percentage and not a raw number)

There’s also implications for disability filings…A just-published study found “a 3-4 percent reduction in the number of people receiving supplemental security income… in states that expanded Medicaid.”

What does this mean for you?

The work comp industry dodged a bullet when Congress didn’t repeal ACA. However, watch carefully as other efforts to de-fund and otherwise cut back on Medicaid are ongoing.

 

Aug
8

Tuesday catch-up

Posted by Joe Paduda on Tuesday, August 8th, 2017 | Comments

Lots happening this August – clearly not everyone is on holiday.

One personal note – I joined the Board of Commonwealth Care Alliance, a not-for-profit healthplan serving Medicaid and dual-eligible clients in Massachusetts. CCA takes care of the toughest population in the country; the poor, disabled, elderly, homeless, and chronically ill, and they do it very, very well. There’s a lot to be done, and I’m honored to help these amazing people.

An excellent piece by Brian Klepper exposes the reality of the commercial health insurance industry – the more care costs, the more insurers make. While I would take issue with Brian’s over-generalization about how insurers make money (a percentage of healthcare costs), the implications are vast – a medical-industrial complex now consumes a sixth of our GDP.

This is part of what’s crushing middle class America, squeezing out dollars for infrastructure, education, and innovation, and enriching a few while impoverishing many.

One who just got his virtual head handed to him is Martin Shkreli, the arrogant horse’s ass who bought a tiny drug company and jacked up the price of their drug by 5000%. He was convicted on various fraud charges unrelated to the price increase.

The real lesson here is how easy it was for Shkreli to do what many others have done – make huge profits off our for-profit healthcare system. Most just do it very quietly.

Lemonade is launching in New Jersey.

This is a very, very big deal, with insurance about as different from traditional insurance as you can get.

  • Lemonade sells homeowners and renters insurance in four states and has licenses in 9 more
  • It is a Certified B-Corp – underwriting profits are donated to nonprofits picked by policyholders.
  • It makes its money from a flat 20% fee
  • Premiums belong to the insured, not the insurer. Any unclaimed or unpaid funds are returned at the end of the year at the Giveback.
  • 10% of Lemonade’s 2016 revenue went to 14 different not-for-profits

Scoff or smirk if you will – these guys and others like them will become a major force in property and casualty insurance.

Including workers’ comp…

Workers’ comp

First up, a bit more intel on the OneCall – Spreemo “deal” following up on last week’s post…Most of Spreemo’s employees will move to OCCM, with just a handful staying behind at Spreemo. It’s not clear what Spreemo will be doing in the future, but the company’s unlikely to deliver the kind of returns owner Pamplona envisioned when they invested a couple years back.

A while back NCCI published a piece on an injured worker’s catastrophic injury. Leaving aside the poor decision that led to the injury, what’s interesting to me is how the work comp insurer approached the injury – a potential amputation. While the article doesn’t get into this, my sense is if the worker had been hurt off the job, his health insurer would NOT have gone the extra mile to try to save his leg. However, because future earnings and disability are critical to work comp, his insurer – Nationwide – was very motivated to do whatever it could to keep him whole.

The estimable Ed Bernacki MD PhD and colleagues published a paper (thanks David Deitz MD PhD for the heads up) that concludes:

Occupational injury claimants 40 years of age and older with unilateral knee and shoulder symptoms ascribed to a work event tend to have bilateral age-related MRI changes. Age-related disorders should be distinguished from acute injury.

In English, we older folks have age-related problems that aren’t caused by our jobs…

 

 

Aug
7

California’s work comp formulary

Posted by Joe Paduda on Monday, August 7th, 2017 | Comments

California’s work comp pharmacy formulary process is moving ahead, but I have grave concerns in two areas – timing and cost.  (these are my personal concerns and are not intended to represent the views of CompPharma, LLC.)

First, timing.

The rules writing process is ongoing, while the formulary is slated to be implemented January 1, 2018. 

The rules aren’t even finalized yet, and it’s August.

That’s less than five months away.  Five months for PBMs, payers, prescribers, patients and pharmacies to make massive changes to processes, internal formularies, IT systems, contracts, call scripts, and a thousand other things.

Next, cost.

I’ve talked with regulators, PBMs, payers, employers, about this issue, and tried to re-engage w regulators, without a whole lot of any success.

Regulators have told me that the drastic cut to the fee schedule won’t be a problem because:

a) Payers can pay for clinical and program management costs separately
Well, no.
Unbundling pharmacy management services is a non-starter. Most payers don’t have the ability to do pharmacy management inhouse, so they rely on their PBMs. Regardless the payers would have to figure out what should cost how much, and how to charge their employer customers for clinical and program management services. Payers don’t have any way to do this without massive IT changes plus re-doing their internal cost-allocation processes, and/or re-negotiating contracts and policy terms.

b) Payers can just pay above the fee schedule
Again, highly unlikely.
Most payers can and/or will NOT pay above fee schedule. Many TPAs and insurers are precluded from doing so in their contracts with employers, and most would have to re-program IT, reporting, and bill review systems. Plus, many employers just flat-out refuse to pay above fee schedule.

Now there’s a new formulary in the offing, one that will demand even more from PBMs. There remains much uncertainty around implementation details while the implementation date draws ever closer. Setting aside the very real problems inherent in unbundling clinical and program management services, there’s no way PBMs, payers, and pharmacies could plan for and implement all the things they’d need to do to implement an unbundled or above-fee-schedule pricing methodology by January 1.

The bigger issue is this – California employers’ drug costs have declined for several years, opioid and compound usage is down significantly, and the drastic cuts to the fee schedule plus increased costs to implement and manage the formulary are going to:

  • make it harder for all parties to implement the formulary; and
  • make pharmacy management a huge money-loser. 

I don’t understand the logic here.

PBMs have been instrumental in cutting opioid usage in California every year for the last five years, investing huge sums in work that dramatically increases patient safety, reduces employers’ costs, but actually reduces PBM revenues and profits. 

Now, regulators want to further cut PBM revenues while adding a LOT more work to pharmacy management…

That’s not to say the formulary in and of itself isn’t a potential positive.

From Alex Swedlow…

This formulary is an important step forward.  The legislative intent was to increase quality of care and lower the high cost of drugs and the huge frictional costs associated with managing those drugs.

The formulary and regs that link prescriptions to the standard of care (MTUS) will raise quality of care.  The exempt, special fill and perioperative drug lists will reduce some of the dispute resolution costs.  UR is supposed to be for low frequency, high cost treatment like inpatient services, less so for high frequency low cost care such as pharmacy.  That said, those who seek to exploit the new rules and regulations have the incentive and creativity to do so. 

Solution:

  1. Delay the implementation of the formulary and related changes for at least six months after the rules and regs are finalized.
  2. Significantly increase the drug fee schedule.

What does this mean for you?

Adding a lot of complexity to the drug approval and delivery process while continuing to slash reimbursement will lead to unintended and potentially adverse consequences.

 

Note – I’m president of CompPharma, a trade group for work comp PBMs, but fee schedule changes and the like have no financial impact on CompPharma or me personally.

 

Aug
3

Random news from workers’ comp services

Posted by Joe Paduda on Thursday, August 3rd, 2017 | Comments

Couple quick items from the never-boring world of workers’ comp services…

First up, OneCall is kinda/sorta taking over Spreemo’s workers’ comp imaging business. Not sure how to characterize the “deal”, but it sounds like OCCM is just going to handle the operations, and isn’t paying Spreemo. While Spreemo had done a credible job entering the imaging market, establishing a brand image and gaining some traction, there have been reports of provider payment challenges of late.  The continuing price pressure from lowered fee schedules has made the imaging business less attractive as well.

Not sure what Spreemo is going to be doing going forward, as more than one customer told me they were pretty disappointed to hear about the transaction in the form of a press release. Whether this does lasting damage to the brand they so carefully built is the go-forward question.

Looks like Express Scripts paid $250 million or, perhaps, $375 million for myMatrixx. That’s what I get from reading ESI’s latest 10Q.

The $250 million figure comes from financials on pages 10 and 36.

The additional $125 million (+/-) comes from this on page 42…

On May 17, 2017, we issued 2.0 million shares of our common stock in connection with an acquisition. We issued shares in reliance upon the exemption contained in Section 4(a)(2) of the Securities Act of 1933, as amended, as a transaction not involving a public offering.

Here’s hoping the price was cash AND stock; Phil Walls, Artemis Emslie, Steve McDonald Craig Rollins and crew built a very good PBM and deserve ample rewards.

Finally, the man behind the OneCall and Genex deals is leaving Apax Partners.  Buddy Gumina is departing for places unknown. While Genex has done pretty well under Peter Madeja’s able leadership, OCCM continues to struggle – and is highly unlikely to generate any kind of a return to Apax (OCCM was one of, if not the, largest single Apax investment).

Sources indicate OCCM’s financials are pretty stagnant, with quarterly earnings flat, debt still in the $1.9 billion range, and gross leverage in the 8 – 9x range. The company has spent a ton of cash on systems changes intended to fix some of the customer service issues that plagued OCCM; final implementation is scheduled for 2018. There are some reports that service is picking up a bit, altho that is spotty.

What does this mean for you?

Good investments pay off.  Bad investments don’t.

Aug
1

Work comp is fading, and that’s a big loss.

Posted by Joe Paduda on Tuesday, August 1st, 2017 | Comments

Hold on, because this isn’t going to end up where you think it is.

The comp insurance business is shrinking. Insurers are increasingly outsourcing claims function to TPAs, and TPAs are looking to move more claim-related activities in-house to capture more of a shrinking pie.

Sure, carriers including AmTrust and the Berkshire companies are growing by leaps and bounds, but most others are moving in the opposite direction. And yes, our friends in California have seen earned premiums increase – and as the largest state by far we can’t ignore that. However, insurer profits have remained solid while rates while the last two years have seen frequency drop – the first time this has happened since the Bush Recession.

Margins are very healthy, markets are competitive, and the business remains solidly profitable.

Over the last 22 years, only one saw a material increase in claim frequency.

After 2 years of essentially flat trend rates, 2016 saw a 5 percent jump in claim severity.

Work comp premiums have been flat since 2015 as decreasing claims costs and insurer discounts have balanced out higher payrolls. Overall, it looks like more employers have seen their premium rates decrease than increase.

Those aren’t just a jumble of unrelated facts and figures, rather a combination of causes and effects, all leading to an inescapable conclusion – industrial accidents and illnesses are less common than they used to be, and more common then they are going to be.

Implications abound.

Here’s a major one.  More insurers appear to be looking to outsource claims, generating growth and jobs in the TPA industry which is one of the few sectors that’s seeing this.

The service sector has consolidated rapidly with two huge PBMs dominating the pharmacy space; physical medicine owned by two other firms (one of which, MedRisk, is a client); Genex increasing it’s position as the largest case management provider, imaging already the domain of OneCall, and three bill review tech firms where once there were six. Other examples abound, all driven by the inevitabilities of a mature industry.

Yes, smaller companies, innovators, and new entrants can and are doing well, but these are by far the exception rather than the rule. Fact is, external factors and technology are rapidly shrinking workers’ comp.

I’m more than a bit frustrated by this.

I see work comp as one answer to the mess that is health care. We actually care about, and work to restore, functionality, an “outcome” that few in the group health, Medicaid, or Medicare world grasp.

What we do – when we do it right, which is all too uncommon – is what they should do – deliver care that gets the patient healthy again – defined as able to do what they did before, if not do it better.

Those pinheads in DC are arguing over insurance – which is NOT the problem.

They should be talking about why our nation’s healthcare is so crappy, and why healthcare we all pay for, and get, and that our loved ones get, doesn’t work a hell of a lot better than it does today.

 

Jul
28

What will Aetna do with Coventry Workers’ Comp?

Posted by Joe Paduda on Friday, July 28th, 2017 | Comments

That’s a question that’s been around for years, but one that’s being asked more and more these days.

One clue could be – but probably isn’t – Aetna CEO Mark Bertolini’s evolving view of the purpose of health insurance and healthplans.

Bertolini’s personal brushes with mortality (a horrific skiing accident and his son’s cancer diagnosis) have fundamentally changed how he sees the role of health insurance. Unlike other insurance executives, he is pushing Aetna to deliver health defined as “a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity,”

That’s what we do in workers’ comp, admittedly not all that well some times, but that’s our goal – prevent accidents and illnesses, get people healthy and functional if they do get hurt, and keep them that way.

I agree with Bertolini’s perspective.

That being the case, CWCS seems like a valuable asset indeed with exactly the right people, technology, business models, and intellectual property Bertolini needs to transform Aetna.

The question is, does Bertolini understand what he has, or will Aetna continue to treat CWCS as a purely financial asset?…a tiny part of a huge healthcare company valued not for its potential impact on the company as a whole, but for the dollars it delivers to the bottom line.

Rumors persist that CWCS is on the block, rumors without solid evidence behind them. As the work comp services industry continues to consolidate, CWCS’ name will continue to come up in conversations whenever investors are contemplating the next big deal. While it is indeed possible Aetna will entertain offers for CWCS, the division’s value (as a financial asset) has likely decreased over the past few years.  CWCS’ core asset, it’s provider network, is not the dominant force it once was, the bill review business has dropped off, and under-investment throughout the division has hampered innovation.

What does this mean for you?

Sometimes exactly what you need is right in front of you.

Jul
26

How much does employer misclassification cost you?

Posted by Joe Paduda on Wednesday, July 26th, 2017 | Comments

“Independent contractors” who are told what to wear, when they’ll work, what they’ll do, and how they’ll do it are NOT independent contractors.

At least, not under the law.

But a lot of employers are skirting the law, and some are committing outright fraud. The good news is some states are starting make major progress.

WorkCompCentral’s Todd Foster has a great investigative piece in this morning’s edition detailing the progress made in North Carolina by the Industrial Commission.

This isn’t pennies, folks – this fraud cost North Carolina and the US $467 million just in lost tax revenue.

It also

  • reduced workers’ comp premiums,
  • hurt local hospitals and healthcare providers who had to provide care to injured workers with no insurance,
  • likely bankrupted workers who weren’t able to work due to their injuries and were billed for medical care, and
  • drove up costs for the legitimate businesses in NC who weren’t committing fraud.

According to investigative reporting by the McClatchy news organization,

if the level of misclassification found on 64 government-backed housing developments extends to the construction industry as a whole in North Carolina, the state and federal government are losing $467 million a year in taxes. That’s roughly the size of the budget shortfall legislators initially faced this year as they tried to find ways to give raises to public-school teachers.

The construction industry is rife with this practice, unscrupulous contractors underbidding responsible competitors by avoiding workers’ comp premiums, taxes, and labor regulations. The McClatchy investigation found construction misclassification happens on up to 40% of job sites.; the worst states tend to be in the South, where legislation has stalled in several legislative sessions.

There have been some efforts both nationally and in individual states to address this crime, but reports are it is still rampant – on smaller projects and even on federal worksites, municipal projects, huge construction sites including highways, sewer plants, schools and airports.

A lot more information is here.

What does this mean for you?

If you are a work comp insurer, service company, TPA, construction worker or legitimate contractor, you’re getting screwed by these crooks.

Jul
21

Innovation in work comp – part 2

Posted by Joe Paduda on Friday, July 21st, 2017 | Comments

Yes, there is some “innovation” in workers’ comp – but none that’s “disruptive.”

Not yet.

and it’s because too many of us are like the hitter below.

After yesterday’s post, I received a slew of emails from folks detailing their innovative approaches/systems/applications, some of which are noted below. I much appreciate this.

That said, I would suggest that while to the folks involved their efforts may seem innovative, that innovation is limited to a pretty narrow segment of the work comp world. What is missing is disruptive innovation – game changing, real disruption.

Think smartphones – they’ve totally changed how we communicate, drive, get information, use telecommunications.

Here is an example of what I see as truly significant innovation.  Next week I’ll be digging into a couple more.

Tele…

Make no mistake, the combination of broadband, smartphones, and new programming languages will disrupt how healthcare is delivered, managed, and reimbursed. For workers’ comp, this goes well beyond telemedicine – doctor visits enabled by the internet. Here are just a few ways “telepresence” will be used in workers’ comp,,,

  • Tele-triage, with the triage nurse interviewing the patient, observing the accident site, and using professional judgment enhanced by artificial intelligence to recommend next steps
  • Follow-up doctor visits delivered via telemedicine, enabling script re-fills, monitoring of functionality improvement, and eliminating travel and out-of-work time and expense
  • “Tele-presence” case management – think a hybrid between telephonic and field, without the windshield time but with the real nurse-to-patient-to-provider-to-employer face-to-face interaction.

And all interactions are recorded, stored, indexed, and available to all parties instantly. Adjusters get notified instantly of potential issues, don’t have to wait for email downloads, or wonder if an “office visit” happened, or try to figure out on their own if the patient is “compliant”.

Think about this – workers’ comp is a declining industry – injury rates have dropped about 60% over the last 25 years – and will continue to drop. Whether you’re a bill review company, case management firm, occupational medicine provider, or TPA, you’re going to be fighting over a slice of a smaller and smaller pie.

A provider network can get into the care delivery business, gaining top line revenue by actually providing “office visits.”

A case management firm can deliver more value and gain revenue – with higher margins, across a broader spectrum of services. Directing patients to specific (affiliated or contracted) providers, documenting same, and actually providing that initial physician’s evaluation via telemedicine. More revenue, stronger ties to customers, and better margins.

A peer review firm can do face-to-face meetings between the peer reviewer and treating physician/patient/provider, gaining a better understanding of the issue, while documenting same for the claims handler’s use.

A catastrophic case can be routed to a physician expert in the diagnosis, who can provide insight into optimal treatment plans, evaluate the medical condition, and assist the local provider to ensure the right care is provided – immediately.

What’s standing in the way of widespread use of tele- in workers’ comp is what we talked about yesterday – our culture.

Fear of innovation; obsessive focus on “proof” something works before implementing it widely; complacency; deep-rooted comfort with the status-quo, all are why work comp is adopting tele- much more slowly than group health.

What does this mean for you?

If you never take the bat off your shoulder, you may earn a walk – but you’ll never get a hit and you will strike out a lot.

 

Jul
20

Innovation in workers’ comp doesn’t exist

Posted by Joe Paduda on Thursday, July 20th, 2017 | Comments

REAL innovation in workers’ comp is rare indeed – which is completely understandable, and unfortunate indeed.  As the rest of the world embraces automation, artificial intelligence, and disruptive technology, we rely on old approaches, systems, processes and tools that are relics of the pre-internet days.

Yes, only in work comp would our version of the Mad Men be able to fit in seamlessly if dropped into today’s workplace.

Sure there are many differences, but these are from outside work comp; after they figured out push-button phones and men got their heads smacked for harassing women, it would be business pretty much as usual, albeit with flat screens instead of typewriters and paper files.

Innovation does exist – I’ll cite a couple examples tomorrow, examples notable as much for their rarity as for their potential impact.

What’s deeply troubling for an industry struggling to adapt and evolve, we have a culture that values stability, safety, and tradition and actively avoids anything that seems even remotely risky.  I’ve spoken with many executives, risk managers, front-line staff and brokers who decry the lack of innovation in workers’ comp – yet they are often the very reason innovation doesn’t happen.

Some will argue that they do innovate – and in a couple instances they may be right. But those are rare indeed, as most in workers’ comp conflate “innovation” with incremental improvement.

Everyone wants to be the second – or even better, the third – to try something.  They want someone else to do it first, to figure out what works and what doesn’t, to take the risk. God forbid they ask permission to try something that turns out to not work as well as it was supposed to, or doesn’t work at all.

What our industry is missing is that people and companies learn far more from failures than from successes.  Just like sports teams take lessons from defeats to change what they do, to adapt and evolve, industries and companies get better faster when they screw up.

One of our daughters works for a huge tech firm; her account is a giant application provider. They just invested well over ten million dollars on a new system/technology that may or may not work. The approach seems to be – “we have to try it, if it fails, we’ll learn a  lot, and if it works, we’re way ahead of the competition…”

Can you imagine anyone in workers’ comp doing this?

Maybe once – then they’d get fired.

Because we don’t understand the difference between “failing” and “failure”.

I see this happen all over workers’ comp.  Giant insurers and TPAs force their vendors to develop systems, programs, technology, knowing that they have no risk because if it fails, the TPA/insurer is fine. What they miss is the real, and long-lasting damage they do to their “vendors” – and every other vendor.  Far too often, suppliers build systems and technology at the behest of payers, only to be told “we need you to tweak this and change that…oh and can you integrate with this other system…uh, let’s think about a pilot…jeez, just doesn’t seem to be exactly what we need…let’s put it on the backburner for now…”

Vendors have been burned so many times many are (quietly) refusing to do anything new or different, because they’re going to get screwed.

I’m not solely blaming big payers – this is industry wide, due to the pervasive culture that prizes stability and safety over innovation and insight. 

That’s great for today, but the implications are frightening indeed.

The worker-employer relationship is fundamentally changing.

Where work happens is rapidly changing.

What workers “do” is changing even faster.

And here we sit, waiting for the other guy/gal to try something so we don’t “fail”.

What does this mean for you?

  1.  This is a primary reason our industry attracts few A players.
  2.  Change will be forced on us from outside if we don’t change first – and we will NOT like it.
  3. This industry is incredibly vulnerable to disruption from outside forces.
Jul
19

Workers’ comp update

Posted by Joe Paduda on Wednesday, July 19th, 2017 | Comments

now that repeal and replace is dead, we can figure out what we missed while contemplating healthcare armageddon.

Workers’ comp

WCRI’s been publishing a flurry of great reports on injured worker outcomes, physician dispensing, opioids, and hospital costs. Sign up for a free webinar on outcomes here.

Coventry’s out with the second part of their work comp Drug Trends Report – download it here. This part deals with the differences between managed and unmanaged pharmacy.  Good video intro by Nikki Wilson too...

HealtheSystems is rumored to be looking to split the company in two, selling off the PBM and keeping the Ancillary Benefit Network business. With myMatrixx setting yet another high point for valuation recently, we’ll have to see if PBM prices remain stratospheric or drop a little closer to earth.

Given the myMatrixx – Express Scripts transaction had a ton of strategic benefit for the acquirer, a similar valuation for Healthe might be a tad optimistic. In addition, a very sizable chunk of the PBM business comes from one payer – the Travelers – a “customer concentration” issue that will give some pause.

BTW, I’m hearing optimism from many work comp pharma buyers about the “new” myMatrixx-ESI combination.  Guarded, but optimistic.

Medicare

Are you seeing an uptick in Commercial Repayment Center (CRC) demands coming from the Coordination of Benefits & Recovery Program? (COB&R)? A couple clients have mentioned this to me..the concern seems to be CMS is revisiting MSAs and looking for additional funds (I am likely not phrasing this correctly…Rafael, please clarify/correct!)

Physicians work for others…

About 2/3rds of younger physicians are employed.   Overall, less than half of practicing physicians have an ownership stake in their practice.

Finally, here’s a really interesting snapshot of price variation in a wide variety of healthcare markets…