Sep
25

A gubmint shutdown and you

Joni Mitchell’s Big Yellow Taxi provides today’s lede…and for good reason. The handful of elected House members on the verge of shutting down the entire government claim no one will notice when the Feds are furloughed.

Ha.

Here’s a very brief list…

  • Most inspections of hazardous waste sites and drinking water and chemical facilities would stop.

  • CMS will furlough non-essential workers, potentially delaying MSA processing

  • OSHA will shut down all but critical operations
  • FEMA has begun rationing its money, pausing about $1.5 billion in longer-term recovery projects to ensure it has enough cash on hand in the event of a major, deadly crisis

  • Workplace safety inspections would be reduced or, if the shutdown persists, potentially stop

  • New applications for Social Security will be delayed, affecting some claim settlement negotiations
  • In past shutdowns the E-Verify system (for employers to verify work status/eligibility) wasn’t operating, likely limiting new hiring
  • Major infrastructure projects would stop
  • The Community Health Center Fund (CHFC), which sends federal funding to health centers – could be halted, among others…patients would have to seek care elsewhere, further increasing the burden on hospitals.
  • Enrollment in clinical trials would be delayed or postponed
  • Grants for new clinical research would halt
  • Funding for Federal courts runs out October 13 (although some may be able to continue operating)
  • 10,000 kids would lose access to HeadStart  – and thousands of others would also lose daycare, impacting parents’ ability to work.

sources here, here, and here.

What does this mean for you?

After you’ve burned the place down, where will you live?


Sep
22

Leaving Las Vegas

Quick takeaways from National Work Comp…

Don’t know what total attendance was, but seemed somewhat less than in pre-COVID years. Exhibit hall corridors were pretty empty despite sessions located around the exhibits.

Newest thing du jour – AI...sessions on AI, vendors promoting various applications, attendees mentioning AI in conversations about claims, data interpretation, claim intake, you name it.

Nurse triage – just…stop. Far too many are touting nurse triage – almost all without a clue as to what exactly this is, why they want to do it, what a “nurse” is, and how this will improve things. More on this in a future post, but for now:

  • define nurse – do you need an RN? APRN? LPN? nursing assistant?
  • what expertise/training/experience does this “nurse” need? orthopedics? emergency medicine? trauma? behavioral health?
  • okay, so a new RN is on the phone with a person…exactly what value does this add? Be specific.
  • more to come.

Events – by all reports myMatrixx’ get together was really well attended...I didn’t get to any others as they were past my east-coast bedtime. I do miss the myMatrixx transportation services from years past :( (mM is a consulting client)

There was a beach party outside my window that prevented a lot of us form getting to sleep before 11. Mandalay Bay staff was far less than helpful, told me this was on me as I should have checked the event calendar before booking my room (WTF!) and offered to send housekeeping up with a couple earplugs…I will NEVER stay there again.

Optum’s dog party was a big hit – great idea, really smart marketing, and good buzz generator.

Provocative session addressed anxiety, suicide and depression – more on that later. Sobering and much needed. Really respect the speakers for sharing their views and personal experiences. Yvonne Guibert – you are an inspiration.  

Booth staff – STOP pitching your stuff. JUST STOP. Until you have a decent sense for what the person in front of you needs, wants, is challenged by, don’t say anything other than a one-sentence line about the service/product your company delivers. 

have an excellent weekend.


Sep
18

Vegas starts…

The annual gathering of the work comp tribes begins today – I’m reprising a post from a couple years ago on lessons I’ve learned…

1.  Realize you can’t be everywhere and do everything. Prioritize.

2.  Leave time for last-minute meetings and the inevitable chance encounters with old friends and colleagues.

3.  Unless you have a photographic memory, use your smartphone to take voice notes from each meeting – right after you’re done – or write down key points immediately.  Otherwise they’ll all run together and you’ll never remember what you committed to.

4.  Introduce yourself to a dozen people you’ve never met.  This business is all about relationships and networking, and no better place to do that than this conference.

5.  Wear comfortable shoes, get your exercise in, and be professional and polished.  It’s a long three days, and you’re always ‘on’.

Finally, in these day of YouTube, phone cameras, Twitter, Instachat and SnapGram, what you do is public knowledge.  That slick dance move or intense conversation with a private equity exec just might re-appear – to your dismay.

And beware the white man’s overbite!!!


Sep
11

Medical inflation in work comp…

Isn’t a problem. In most states. Today.

That is the headline takeaway from WCRI’s presentation last week…

First a few key factors.

  • Drug spend is a much lower percentage of total medical today than it was a decade ago. I’m quite confident total drug spend in WC today is 40% lower than it was 15 years ago.
    • That equals a reduction of about $2 billion.
  • Facility costs continue to be the main driver of what inflation there is. Inpatient (IP) and outpatient (OP) hospital inflation averaged 2.5% annually from 2012 to 2022;
  • Facilities account for 53% of total medical spend – 26% of which is OP; 9% is ASCs (Ambulatory Surgical Centers)

The details…

the best way to think about medical spend is per claim…this accounts for changes in claim volume (which is driven by injury rate and total employment).

Leaving out COVID’s impact (see end note for details) medical costs have barely budged for more than a decade…up a paltry 2 percent per year. 

However…Facility costs are a big problem for all payers…exacerbated by massive consolidation in health systems which allows them to charge “facility fees” for services rendered in physicians offices and clinics. (what a scam…)

Work comp specifically…

National averages don’t mean much if you operate in states like Florida or Wisconsin, where poor controls on workers comp medical billing enable providers to hoover dollars out of employers’ and taxpayers’ pocket.

Of note, drug costs would likely be several hundred million dollars lower if it weren’t for the profiteers enabling physician dispensing.

What does this mean for you?

All costs are local…which means all cost management approaches must be as well.

COVID…medical costs for claims during COVID were down 10% – decreases in utilization and price drove this with utilization the main driver. Not surprising…during COVID no one wanted to go to any healthcare facility for anything not essential.

This was totally predictable...


Sep
8

Good news Friday…Build America, Buy America

You may not have heard of the Build America, Buy America Act…here’s why it is good news indeed for US manufacturing and construction – and employment.

BABA lays out requirements for US content in federally funded infrastructure projects, requirements that specify how much Made in the USA content is needed to qualify for Federal funding.  

BABA impacts at a minimum,

  • the structures, facilities, and equipment for roads, highways, and bridges;
  • public transportation;
  • dams, ports, harbors, and other maritime facilities;
  • intercity passenger and freight railroads;
  • freight and intermodal facilities; airports;
  • water systems, including drinking water and wastewater systems;
  • electrical transmission facilities and systems;
  • utilities;
  • broadband infrastructure; and buildings and real property; and
  • structures, facilities, and equipment that generate, transport, and distribute energy including EV charging.

All iron and steel must be produced in the US…all manufactured products must have at least 55% minimum Made in the USA content, all construction materials must be “produced in the US” AND manufacturing processes must take place within the US.

per capita funding

Building trades welcomed the new guidance, with Nevada, West Virginia, Mississippi,  Louisiana, Wyoming and Tennessee among the states that will benefit  from new hiring and vastly improved: 

  • roads,
  • bridges, 
  • wildfire protection, 
  • electricity transmission, and
  • broadband.

Check out your state’s funding here.

What does this mean for you?

Better roads, schools, broadband; more good jobs; and more workers’ comp premiums and claims. 


Sep
7

Mergers, acquisitions, and reasons therefore

M&A activity in the world of workers’ comp services has been somewhat quiet of late, although there’s been some under-the-radar activity that – taken together – shows consolidation continues.

That’s no surprise…workers’ comp is a classic mature industry with all the attributes thereof. Scale is key, margins are tight, cost-cutting is constant, and funds for innovation scarce.

Here’s a quick roundup of recent activity from various sources…

Sedgwick is rumored to be doing a re-capitalization, another word for current investors cashing out a chunk of their equity. In my view TPAs are one of the very   few workers’ comp service sectors that have growth opportunity, so terms may be favorable. However, interest rates are still a drag (recaps almost always involve taking on a lot of debt) and of late private equity (PE) investors seem really hesitant to close on deals.

Of note, WC is just one of the insurance lines handled by the giant TPA – those other lines are in rough shape (more on that in a future post). I don’t know whether P&C carriers will be more or less interested in outsourcing work to TPAs for non-WC lines, but those calculations will undoubtedly weigh on potential investors’ enthusiasm for a Sedgwick transaction.

Ametros inhabits another sector that could be quite promising – handling funds from claims settlements. One of the extremely few companies that really gets marketing (which is NOT sales support or writing proposals), Ametros is rumored to be in the final stages of a sale/recap. While I like the company and the sector, reality is major growth is really dependent on what CMS does – or doesn’t do – re Medicare Set-Asides. CMS’ continued lack of a coherent, consistent, and clear policy on if/when MSAs are required for what lines of insurance is nonsensical, frustrating, and a disservice to we taxpayers.

Enlyte/Mitchell/Genex just completed the acquisition of Therapy Direct, a rather small PT management firm. Expect TD to be fully absorbed into Enlyte subsidiary Apricus with most functions assumed by Apricus’ current staff. Unfortunately, that’s just the way these things work; Enlyte gets a few more millions of revenue and reduces costs by cutting expenses. Classic mature industry growth…buying revenue to grow top-line. 

Lastly, any potential transactions for One Call are likely on hold pending resolution or conclusion of various legal issues involving current investors; word is some are suing others.

There are a couple others in various stages…will wait and see if things progress or not.

What does this mean for you?

In a highly mature industry, it’s

Scale. Efficiency. Differentiation. Service. 

 

 


Sep
1

Good news Friday – and implications for workers’ comp

Inflation. Employment. Manufacturing jobs. Wages.

All are in waaaaay better shape than they were a couple years ago.

What’s downright weird is how gloomy many are…in the face of pretty good news on many fronts. So let’s start the weekend off with what’s REALLY going on…

Inflation dropped to 3% – a third of what it was in June of 2022…when it was 9% –  “we’ve made a lot of progress [reducing inflation] without much pain. And I think that’s what’s critical so far.” says Stephen Juneau, an economist at Bank of America Merrill Lynch.

Employment  – there are one and a half jobs open for each unemployed worker which a) means there is NO recession and b) employers are in better shape than they were 18 months ago when there were more than 2 jobs per unemployed worker.

US manufacturing is roaring back...construction of new factories is at an all-time high and companies are adding over 400,000 new manufacturing jobs this year.

Wages are also going up – adjusted for inflation annual median household income was up over $3,000 over the last three years.

What does this mean for you?

Things are going pretty darn well.

As for the implications for work comp…this from a post in August.

Hundreds of billions of dollars is flowing into infrastructure, investment that has already created ninety thousand jobs in:

  • construction,
  • transportation improvements,
  • highway, bridge and road maintenance and replacement, and
  • heavy industry.

And many more jobs are on the way. (check out where this is happening here).

These are very well-paid, high-frequency and high-severity jobs.

This means premiums will increase as will claims and claims costs. And this will continue for years.

 


Aug
30

Medicare drug price negotiations – implications abound!

Medicare will negotiate drug prices, Big pharma’s really upset…AARP is really happy…what’s the REAL story?

Briefly…One of the key parts of the Inflation Reduction Act authorized Medicare to negotiate drug prices for 10 medications. Those 10 meds have been identified, and the howls of protest from big pharma are deafeningbut our profits!!!!!

chart credit arsTechnica

(Pharma is the most profitable sector in the economy with a gross profit margin double that of non-pharma companies)

Implications

for taxpayers, Congressional Budget Office (CBO) reports taxpayers will save $160 billion by reducing how much Medicare pays for drugs

for millions of Medicare recipients, drug prices and out of pocket expenses for those 10 drugs will drop by thousands of dollars…seniors currently pay up to $6,497 in out-of-pocket costs per year for these meds.

(due to the Inflation Reduction Act, starting in 2025 Medicare beneficiaries’ annual out of pocket drug costs will be capped at $2000)

for payers, the picture is pretty very complicated...netting it out, “these steps would lead to a higher MFP [maximum fair price] and less or no impact on the drug’s…commercial net prices [after rebates]…” [emphasis added]

lest you feel sorry for big pharma, you should know that the ten medications are “older drugs and drugs that have really been blockbusters in the Medicare program. So the companies that have made these products have really reaped handsome profits from those drugs for many years, before they’re even eligible for negotiation.” cite

oh, and about Pharma’s complaint that this will hamper innovation, experts disagree…overall changes to Medicare’s Part D drug program “will probably have a positive impact on drug innovation, especially in areas that address the unmet health needs of high-cost Medicare beneficiaries”


Aug
18

Long COVID is real, “social inflation” is not.

Didn’t post this week…was in Chicago for the annual father-son trip to watch the Sox play the Cubs…very fun time!

While I was relaxing in the stands, shockingly the world continued turning…

WCRI’s report on long COVID’s impact on work comp was release, examining claims with an average of 18 months post-infection…my takeaways  include:

  • one out of 19 COVID claims developed long COVID
  • medical costs average less than $30k
  • temporary disability benefits run a bit above 20 weeks
  • Long COVID’s impact on workers’ comp is pretty minimal

Risk and Insurance weighed in on “social inflation”, a not-well-defined term insurance folks use to characterize their not-very-well-founded belief that society is driving up casualty claim costs.  VERY briefly, insurance execs complain that high jury awards to claimants are driving up insurance costs…however there’s precious little real research supporting that view. 

This from Ken Klein’s presentation to NAIC in 2022…

What does this mean for you?

Stop catastrophizing until you can prove something exists.

Start catastrophizing when the data is convincing. 

 

 


Aug
10

We are all Hawaiians

The disaster in Maui is one of the most awful things I’ve ever seen. An entire town of 12,000 is gone, burned to the ground by a horrific firestorm.

At last 36 are dead, while countless others survived only because they jumped into the ocean to avoid being burned to death.

Here’s how we should think about this.

Of all the places in the US, no one ever thought Maui, a tourist paradise, would ever be in the news for a devastating wildfire. If it can happen in Maui, it can happen in Ohio, or New Jersey, or your home town.

Think it can’t?

So did residents of Lahaina.

What does this mean for you?

Prepare. Now. Not tomorrow, not next week, not as a 2024 goal.  Now.

Here’s a detailed discussion along with a list of what to do.

note – I am on Threads – joe_paduda