Category: Workers Comp

Sep
3

Is UnitedHealthcare going to stay in the workers’ comp services business?

Posted by Joe Paduda on Thursday, September 3rd, 2015 | Comments

I don’t see why not.

Those who don’t track these things that closely likely don’t know that UHG is in the work comp services business.  Back in the spring, the company’s Optum subsidiary purchased PBM Catamaran, who had just bought work comp PBM/network/bill review firm Healthcare Solutions.

Catamaran (now OptumRx) has substantial share in the workers’ comp PBM space, with total Rx revenues likely in the $650 -$750 million range, spread among its network rental business, PBM Cypress Care, Ohio BWC services and other governmental work. Adding Healthcare Solutions’ other services pushes total work comp revenues closer to the billion dollar mark.

While that may sound like a lot, recall UHG’s 2015 revenues are projected to be $143 billion.  It is possible, indeed likely, that there’s more work comp business in that figure; when companies get to the size and complexity of UHG, it’s pretty hard to precisely identify sources of revenue.

Historically, UHG has been in and out of the work comp business several times.  Back in the early nineties, the company tried to be a risk-taker in the Florida work comp market.  That did not work out very well, and the company abandoned the space after losing a bunch of money. At various times, UHG also owned a technology business focused on bill review (Power-Trak) and two work comp services businesses; MetraComp (a former employer) and Focus.  Power-Trak was sold to Mitchell; the others were also sold almost a decade ago.

One could well look at UHG’s history and draw the conclusion that UHG may choose to dispose of their current work comp business; while that would be consistent, it would also ignore several key differences between then and now.

First, UHG management has changed.  Most of the senior folks who decided to exit work comp are gone or in very different roles.

Second, the health plan world of today is fundamentally very, very different from the world of 2006. ACA has dramatically altered the landscape and will continue to do so. There is far more regulatory risk for health plans these days; with the expanded influence of CMS and federal regulators, decisions made in DC (or more accurately suburban Maryland) have far-reaching consequences for health plans.

In contrast, work comp regulatory risk, while significant, is limited to what individual states do.  If one state makes a change, it has zero impact on the others, thereby minimizing regulatory risk.

There are a number of other nice things about UHG’s work comp business:

  • it’s a fee business, without insurance risk
  • margins are pretty healthy; a lot higher than group/governmental programs
  • it has scale; when all the dollars are combined it’s a substantial player
  • minimal investment is required as the businesses are mature and operating pretty successfully with experienced management and solid brands

While I know the folks at Healthcare Solutions and Catamaran (both are members of CompPharma, a work comp PBM consortium of which I am president), I have no inside information about UHG’s or HCS’ plans, company strategy, or current integration efforts.

I do know that the benefits of keeping this business far outweigh the benefits of disposing of it.

One last consideration. I find it revealing that UHG announced it’s pending acquisition of Catamaran just days after Catamaran revealed the purchase of Healthcare Solutions. It is hard to believe the Healthcare Solutions deal would have happened if UHG didn’t want to be in the work comp services business.

 

Aug
25

I don’t get Examworks

Posted by Joe Paduda on Tuesday, August 25th, 2015 | Comments

More accurately, I do understand their business, what I don’t understand is how the company’s stock can trade in the mid-thirties.

And that’s because I do understand the market, their services, and the growth or lack thereof, and I just don’t see the upside investors obviously are banking on. Their stock price makes sense for a high-growth business in a sector with a lot of upside.

That is not how I would describe the IME/peer/MSA business.

EXAM’s primary business is providing Independent Medical Exams to insurance companies – mostly workers comp, some auto, some disability.  Mostly domestic, some in other English-speaking countries.

In their latest earnings call, Chairman Richard Perlman’s comments were totally confusing; here’s a sample (thanks SeekingAlpha):

Starting with the U.S. our largest market, reported revenues grew 12.6% and organic growth was 4.3% compared to the prior year quarter. The organic growth rate was negatively impacted by sales mix with volumes increasing by approximately 10%. National accounts contributed roughly 40% of the growth and the balance coming from singles and doubles. I think it is important to comment on the U.S. growth in greater detail.

The impressive results in the U.S. during 2013 and 2014 reflect a unique confluence of events that resulted from what we believe is an unsustainable sales trajectory [emphasis added] on a quarter-to-quarter basis. The timing of new accounts wins, the initiations of rollouts, the velocity of compliance coupled with the consequential impact of our national account wins and the smaller amount of top competitors allow us the opportunity to have outsized growth for seven quarters in a row. This was a perfect storm.

We believe that we are currently in a period of normal long-term growth which we feel is a pause before the next wave of the positive events I just described. [emphasis added] This is consistent with our repeated guidance of mid to high single-digit sustainable growth in the U.S. for the longer-term.

After puzzling thru those several paragraphs, I still have no idea what he is talking about.  It appears that some big wins, new client rollouts, less competition made for solid growth, but that isn’t going to continue..until it happens again (the “next wave”).

Or, not…?

In the earnings call management cited financials based on “adjusted EBITDA”, a metric foreign to and not understood by most accountants or analysts. Management said this metric amounted to 17.4% of total revenue for the quarter – a rather hefty margin indeed.

A few other items of interest.  CEO Jim Price claimed the Medicare Set Aside Market is $300 to $400 million [!!], with the 30 largest payers only accounting for 30% [!!] of that volume. And while organic growth (same business growth) increased 4.3% in the US, the number of services increased 10%.

It looks like the mix of business changed, with lower-cost services taking a larger slice of the services delivered by Examworks.

So, here’s what’s got me stumped.  My best estimate indicates the US IME and peer review market is less than $2 billion.  Likely a lot less. So, if Exam currently has $450 million in US revenue, how much more can it grow?  And what will that growth cost?

Some growth will be organic – that is, more revenue from the same customers.  But, as almost all payers refuse to single-source their IME and peer business, each additional dollar of revenue is going to be a tougher win than the previous additional dollar of revenue.

Acquisitions are still on tap, and management believes they will be able to pay about the same for new deals as they have historically – 5x earnings.

I don’t think so.  Prices have gone up rather substantially of late, driven by both strategic and financial buyers.  I’d expect prices to be in the mid-to-upper single digits (as a multiple of earnings)…and that’s at the bottom end.

Next, maintaining, much less improving margins (management expects they will get somewhat better in future quarters) depends on lowering cost of goods sold and increasing prices.  At least in the US, the latest quarter shows the price for their average service fell.  I’d expect that to continue, or perhaps level out.  Winning national accounts requires very competitive pricing, as well as, in many cases, payment of “management” or “administrative” fees to the payer customer.

Then there’s the cost end of things.  This is a pretty simple business with relatively low administrative expense and not much opportunity to reduce that expense. While Examworks may try to reduce payment (the biggest component of their cost of goods sold) to IME and Peer Review docs, those docs can just refuse to go along.  As claims adjusters and attorneys on both sides have very definite preferences for docs, those docs do have some pricing power – and if those physicians aren’t in an IME company’s network, than that IME company likely won’t get that adjuster/attorney’s referral.

Finally, workers comp claims volumes across the country continue to decline.  We are in a long-term structural decline of 2-4% every year.  That means there are fewer claims that need IMEs or peer review.

Over the longer term, I expect auto claims involving IMEs to decline markedly as well.  My sense is there aren’t all that many (compared to work comp), and the reduction in bodily injury claims that will result from more vehicle automation bodes well for passengers and pedestrians – but not for auto IME vendors.

All that said, I have no idea why or how equity investors value a stock at a certain level; long ago I came to the realization that I have zero ability to pick stocks.  Then again, a lot of supposedly professional investors do a lousy job despite getting paid to do just that.

What does this mean for you?

It doesn’t mean much to me, as I don’t own the stock nor have any financial position of any kind it it.  You?

Aug
21

Why have generic drug prices increased?

Posted by Joe Paduda on Friday, August 21st, 2015 | Comments

Over the last couple of years, generic prices increased rather substantially, spurring Congress to open an investigation after reports indicated retail pharmacy generic prices increased 37% over three months.  Congress is a bit late to the party, as it appears prices may be stabilizing after a rather dramatic run-up; more on that in a minute.

Generics make up about 80% of all drugs dispensed in the real world, and a slightly higher percentage in workers comp.

Usually, generic prices for specific drugs decrease over time.  The “usual pattern” changed about two years ago, when a popular and generally accurate price measure showed median generic prices were essentially flat over a twelve-month period ending in July 2014.  

More tellingly, the same assessment showed the average price increase for drugs that went up in price was almost twice as much as the average decrease for drugs with prices that dropped.

Of course, there’s a lot of variation among and between drugs.  Workers comp generic prices jumped from as much as 19% across the board according to TPA Broadspire.  And the largest work comp PBM, Helios, reported generic prices increased 10% in their most recent drug trend report.

So, what’s going on and why?

First, let’s stipulate that drug “price” is a very complicated term.  “price” is supposed to be what one pays for one unit of a service, or in this case, a good.

Things are a lot less clear in the world of drugs; there are many different pricing methodologies and definitions, all with pluses and minuses.  For our purposes, we’ll look at two generally-accepted metrics – AWP and NADAC.

AWP – known as “average wholesale price” or perhaps more accurately “ain’t what’s paid” is the price the drug’s manufacturer reports to the national drug price compendia – Medispan et al.  There is no auditing, no validation, no way to determine if an AWP actually reflects reality – and in many cases it doesn’t.

AWP is the basis for workers’ comp drug fee schedules in those states that have fee schedules.

NADAC is the national average drug acquisition cost, and is seen as a more accurate reflection of the real price buyers pay.

A shortage of some key drugs is a major contributor. Tetracycline and acetaminophen/ codeine drugs are among those in short supply; prices for tetracycline have exploded, up 7400% to 17,000% from 7/2103 to 7/2014.

There are anecdotal reports of shortages of chemicals needed to manufacture some drugs as well.

Some very old drugs have very few manufacturers.  Investors, seeing this as an opportunity, have snapped up companies making these drugs, consolidated the manufacturing, and gained pricing power.

Another reason for generic price inflation is a lack of competition among manufacturers.  The FDA has to approve new generics, and of late they’ve been quite backed up in their approval process for new generics.   In addition, there are reports that the FDA is loathe to approve many offshore drug manufacturers.  While this is in all likelihood due to significant concerns over processes and safety and other manufacturing and consumer protection issues, if many Indian manufacturers are not able to sell into the US, price competition suffers.

There’s also been significant consolidation among generic manufacturers, leading to fewer companies making specific drugs.  In turn, that means buyers have less success pitting one manufacturer against others.

Finally, my sense is drug manufacturers are raising prices for a simple reason – because they can.  With more Americans now covered by health insurance, there is a bigger market of buyers less concerned about price than they were before they had coverage.  And, there’s pent-up demand as people who needed but weren’t taking drugs now have access to those medications.

Recent price increases are no surprise to those who saw the same thing happen after Medicare Part D implementation; when seniors got their drug cards, the drug industry got a windfall.

Where next?

Of late, price increases have moderated significantly; about half of the generics increased in price (averaging 5.3%).  For those that declined in cost, the drop was almost the same at 5.1%.

I’d expect generic drug price inflation to continue to moderate; the FDA has committed to decreasing the approval backlog and new manufacturers will almost certainly see an opportunity, thereby adding suppliers.

Aug
19

Drug formularies and workers’ comp

Posted by Joe Paduda on Wednesday, August 19th, 2015 | Comments

There’s a LOT of activity around the country related to drug formularies.  Four states (OH OK TX and WA) have implemented formularies and at least 4 more are considering doing so (CA, ME, MT, TN). (AR was scheduled to do so this year but pulled back)

The “Why?” is obvious; the proliferation of opioids, inappropriate prescribing of other drugs (Soma(r)), exploding volume of compounding, and rampant off-label use of drugs is seen as a major problem in work comp.

The “What”, as in, what formulary to use, is demonstrably not obvious.

There are (roughly speaking) three varieties of formularies;

  • Open – pretty much any drug is available to anyone
  • Closed – a binary, or yes/no formulary that is drug-centric
  • Disease state/Condition-specific – formulary based on the underlying diagnosis and disease state (e.g. acute v chronic)

The closed formulary has some advantages – it is very simple and easy to understand, and from a regulatory perspective, administer and evaluate.

The closed formulary also has some rather significant issues.

  1. it starts with the drug, not the patient’s medical condition.  This strikes me as backwards; guidelines should ALWAYS begin with the diagnosis.
  2. problems arise when “Y” drugs are dispensed, paid by the PBM, then the payer determines the drug is for an unrelated condition. Think antihypertensives, insulin replacements or asthma meds.
  3. it does not differentiate between acute and chronic stages of a disease or condition; treatment can be quite different for these different stages.

What does this mean for you?

While the closed formulary is easy to explain, it’s a lot tougher to manage on the back end for payers, PBMs, and prescribers alike.

And, while I’m no clinician, allowing antihypertensives and duragesic patches without a prior auth no matter the diagnosis, while requiring a PA for benadryl does seem problematic. 

Aug
12

Integrated services vs Choice – how do you want to buy work comp medical management services?

Posted by Joe Paduda on Wednesday, August 12th, 2015 | Comments

A prominent issue for many work comp payer execs is the continued consolidation in the medical management space; as the big get huge, there are fewer and fewer choices for payers to turn to.

The big, multi-product/multi-service companies tout the benefits of buying everything from them; cheaper, better coordination among various services, easier for adjusters, easier to connect IT systems.

Their competitors offering one or a couple different services have a different view.  Their position is a narrow, “hedgehog” focus allows them to be the best-in-breed.  Because they  only do one or two things, they are really, really good at those one or two things.

That’s the vendor viewpoint – but what about buyers?

My sense is buyers generally come down on the “choice” side.  That is, they don’t want to get everything – or even just one service – exclusively from one vendor.  Not that they don’t see the benefits of single-sourcing services – they clearly understand the potential for lower administrative burdens, less hassle for all their staff, fewer IT connections, and perhaps lower pricing.

As one of my coaches told me years ago, “son, you’ve got potential.  That means you haven’t done anything yet.”

Therein lies the issue – or more accurately, one of the core issues with the integrated/comprehensive approach.

To date, it just hasn’t delivered lower costs, lower hassle, better outcomes.

But even if it does, many payers will be leery of single-sourcing.  The concerns include:

  • complacency on the part of the vendor
  • difficult to break up and move the business
  • lack of control over referral processes
  • desire to give front-line staff control over specific service decisions e.g. IME
  • potentially mis-matched priorities and incentives

Each of these deserves its own post, but you get the drift – in one word, payers don’t like to lose “control”.  That happened years ago when Coventry bought Concentra, and payers have not forgotten what that felt like.

I spoke with a very experienced, very knowledgeable work comp executive recently; she said it well: “we tried the integrated approach years ago, and we saw how well that worked…it didn’t.”

What does this mean for you?

That’s not to say a work comp services company can’t deliver on the promises of integrated, comprehensive services. Like all young athletes, they do have “potential“.

Jul
28

Maryland’s innovative approach to hospital care – and implications for work comp

Posted by Joe Paduda on Tuesday, July 28th, 2015 | Comments

Maryland has long been a leader in intelligent approaches to managing the cost of health care.  The state has had one of the few effective Certificate of Need programs limiting the medical arms race and employs an all-payer fee schedule for facility care.

In partnership with CMS, Maryland will be shifting payment to hospitals from fee-for-service to an outcomes-based reimbursement scheme.

According to Health Affairs;

a Maryland hospital is no longer paid on a per-admission basis but instead receives a global payment based on the number of Maryland beneficiaries cared for by the hospital. Patients and payers are still charged on the basis of services provided, but overall growth of per capita hospital payments by all payers is limited to 3.58 percent by diagnosis related groups, and the Medicare-specific growth rate will be held to 0.5 percent less than the annual national average. [emphasis added]

Couple quick observations;

a) this doesn’t address physician reimbursement, and as docs are the ones who are ordering the care, that should be addressed.  However, as more and more docs are employed by facilities, that may not be as much of an issue as it was historically.  Also, the authors of th HA piece have other recommendations re addressing this issue that make sense.

b) reimbursement for care delivered to patients not covered by the new scheme will likely remain fee-for-service.  This creates a potential conflict that may hamper development of more effective treatment protocols and pathways. More troubling, different financial terms may incent providers to think differently about care based on who’s paying.  While it may be unlikely docs will change their treatment patterns based on what they get paid, the folks that do the billing will almost certainly take payor status into consideration.

What does this mean for workers’ comp?

  • It’s not just about Maryland; while this is more systemic and organized, we can learn a lot by observing what happens in the Old Line State.
  • a fundamental shift in medical care is occurring, one that will have a dramatic impact on how patients are evaluated and monitored and incentivized to pursue health, what care is delivered via what method (telemedicine, care extenders, wearable technology).  This will dramatically affect workers’ comp – patients will be healthier but the bifurcated payment system will cause headaches.
  • Some providers will seek to gain as much revenue as possible from non-core payers such as worker’s comp.  Revenue maximization efforts will become more sophisticated, targeted, and effective.
Jul
24

Consolidation in the real world – implications for workers’ comp

Posted by Joe Paduda on Friday, July 24th, 2015 | Comments

There’s been a lot of mergers and acquisitions in the work comp arena, and certainly more to come.

But the activity in our little corner is minor indeed compared to what’s happening in the “real world” – group health, Medicaid, and Medicare. Make no mistake, these transactions will affect work comp.

You’ve probably heard of some of the activity among payers;

When these deals are completed, there will be three giant health insurers; United, Anthem, and Aetna.  All will have major operations in the Health Exchanges, Medicaid, Medicare, and employer-sponsored health insurance. Anthem, which owns many Blues plans, will have more local dominance in specific markets while Aetna and UHG are bigger players in the employer marketplace.

What you may not be tracking is the provider consolidation – which is equally frantic.  Just a few examples from the last few months:

The ongoing seesaw of market power is playing out nationally and locally – but the local scene is much more relevant for workers comp payers.  Local health systems negotiate with these big payers, with both sides coming to the table from positions of strength.  If Aetna wants coverage in southeastern PA, UPenn-Lancaster must be in their network.  For UHC to compete for employer and/or exchange business in New Jersey, they’ve got to have access to facilities and docs controlled by the two entities listed above.

The bruising battle over access, rates, and exclusivity is what’s driving the move to narrow networks. Health plans have to deliver more patients to specific health systems or those systems will not negotiate on price.

The best way to ensure increased patient volume is to make a deal exclusive – and we will see more and more narrowing of networks as competition heats up among the big three health insurers.

What does this mean for workers comp?

Work comp is incidental to Medicaid/Medicare/group/Exchange business. Health systems are going to get squeezed in these deals. Health plan execs will look to several reimbursement sources to make up margins; out-of-network care being most important but workers comp will be considered quite attractive as well. Comp is quite profitable, particularly as it drives orthopedic and ancillary revenue, services which have traditionally high margins for hospitals.

The other consideration is the care that is delivered via a health system or facility is billed under a hospital fee schedule. And, there can be a facility charge in addition to the physician fee. 

The net is work comp will be seen as a great source of very profitable patients.

Jul
23

It’s another done deal in work comp services…

Posted by Joe Paduda on Thursday, July 23rd, 2015 | Comments

Another deal is official; One Call Care Management has announced its acquisition of MedFocus.  This had been rumored for some weeks, OCCM has been notifying their clients it is now official.  This knocks out another potential imagining vendor, further consolidating One Call’s stranglehold on the market.

MedFocus has about $50 million in revenue, reportedly divided equally between work comp and non-occ payers.

Let’s talk for just a minute about this.

OneCall historically has had a dominant position in this sector, built on great customer service and a relentless focus on “leakage”. The last involved many processes including getting their payer customers to provide OneCall with data about ALL imaging billing, data OneCall used to recruit new centers, identify gaps in coverage, and work with payers to get their field folks to direct claimants to use OneCall’s scheduling process (and thereby capture the bill).

The number of competitors has dropped over the years; truth be told OneCall’s imaging business really hasn’t had a competitor worthy of the name for over a decade.    There’s also Spreemo, but it is pretty small as well, and a couple others that are owned by payers or are relatively small product lines for bigger managed care businesses.  MedRisk, a consulting client, owns a very small imaging company too.

OneCall is unique in the work comp services business in that it is by far the dominant player; in no other sector does one vendor have even half of the market, a position OneCall surpassed a loooong time ago.  They’ve gotten there by doing, by most accounts, a very good job historically.

Continuing to deliver will be key to continued dominance.

What does this mean for you?

Depends…do you like choice?

Jul
22

Work comp services: the wholesale sale and the retail sale

Posted by Joe Paduda on Wednesday, July 22nd, 2015 | Comments

There’s a lot of confusion on the part of some execs new to the work comp space about what it takes to generate revenue from work comp payers. I’ll leave aside the obvious answers such as: build a great product or service; deliver great customer service; find an unmet need and meet it; build relationships and value them and the like.

No, this is about the wholesale sale vs the retail sale.

RFPs come out from TPAs and insurers requesting all manner of services, requiring all kinds of assurances and guarantees and specific service agreements, along with a price that would render many a vendor bankrupt (alert – slight exaggeration).  After all the proposal wordsmithing and presenting and negotiating and schmoozing and conceding and guaranteeing is done, the successful vendor thinks they are going to get all the ancillary/IME/network/case management/etc. business from MultiHuge InsCo (MHIC); accountants start projecting revenues and profits, sales reps commissions, and owners earnings multiples.

A year later, only a fraction of the dearly-won revenue has appeared, and the accountants, owners, sales reps are all bewildered.

They forgot about the retail sale.

Long-term work comp services people know that the big national contract is just a “license to hunt”, that the signature is just the start of the real heavy lifting.  This involves finding out how the REAL decision makers – the front-line folks – work, what they want and don’t want, like and don’t like, how they are evaluated, assessed, and bounced, what’s important to their bosses, how their IT systems and applications and security works and interfaces/doesn’t interface with the vendor’s systems/apps/security. Sure, every vendor thinks about this and works at it, but relatively few really work it.

There can also be conflict, obvious or not, between the execs at MHIC and what is important to them, and the field folks who deal with the actual work day in and day out.  The managed care folks likely get evaluated based on network penetration, some usually not-terribly-meaningful savings metric(s), perhaps a few outcomes, and the reduction in administrative fees or costs or ALAE.

The field folks have quite a few other priorities – claim opening, reserving, case closure rates, litigation, state compliance, communications standards, documentation, diary compliance; the list is big and gets bigger every day.

For services vendors to translate that national contract to actual revenue, account management, implementation, and IT staff have to thoroughly understand the IT, claims handling, and operating environment then, usually with little support from the payer, come up with a plan to make the adjuster/case manager’s job easier by using the vendor’s services.

That’s a very heavy lift.

What does this mean for you?

Success comes from taking work off the adjuster/case manager’s desk.  

 

Jul
17

Friday’s here!

Posted by Joe Paduda on Friday, July 17th, 2015 | Comments

And you get to start the weekend early (we hope).

While you were focused on other stuff – like work – here’s what else was going on in our little world.

Fraud – two very different views.

This morning’s WorkCompWire arrived with the news that some small businesses are concerned that their employees may be contemplating workers comp fraud.  In a survey sponsored by EMPLOYERS Insurance, 13% of respondents were concerned “employees would commit workers’ compensation fraud by faking an injury or illness in order to collect benefits.”

(according to EMPLOYERS, 6% were very concerned, 7% somewhat concerned)

The other fraud-related topic comes from WorkCompCentral’s Sherri Okamoto. Ms Okamoto filed a story on the Labor Dept.’s just-published finding on employee misclassification.  In the announcement by DOL, the following statement appeared:

A worker who is economically dependent on an employer is suffered or permitted to work by the employer. Thus, applying the economic realities test in view of the expansive definition of “employ” under the Act, most workers are employees under the FLSA.

WCC’s piece noted several recent court cases, rulings, and other findings that have forced employers to pay back wages, re-classify workers as employees, and otherwise restricted businesses’ efforts to avoid identifying workers as contractors.

The implications for health and workers’ comp insurers are clear: more premiums and a larger market.

Note – DoL’s document is well worth the read as it is highly relevant to the evolving “sharing economy”.

Implementing health reform

Following up on my piece re “there is no Obamacare”, found this from Avalere Health;

the average provider networks for plans offered on the health insurance exchanges created by the Affordable Care Act (ACA) include 34 percent fewer providers than the average commercial plan offered outside the exchange.

No one should be surprised by this.  Health plans competing on exchanges MUST be price competitive; now that healthplans can’t just deny coverage, they have to compete on the basis of delivering care at the lowest possible cost (yeah, outcomes will be a factor at some point, but they really aren’t so far).  The cost of care is determined in large part by provider reimbursement and utilization of health care services, both of which are driven by the payer-provider contract.  Providers want more volume, lower administrative burdens, less uncertainty about and much speedier reimbursement – and do NOT want to share patients with every other Dr Tom, Dr Dick, and Dr Mary in their service area.

And that’s why we have narrow networks on exchanges – providers give lower prices in return for more patients and less hassle.

BTW, this is right where we were back in the heyday of group- and staff-model HMOs; they fell out of favor as members wanted more choice.  Now, those people who want choice are going to have to pay a lot more for it.

Expect to see much more “network narrowing” in the future.

Another state is going to expand Medicaid – Alaska.

Providers are getting stronger

This week’s announcement that Connecticut-based Yale-New Haven health system is acquiring another big hospital in the eastern part of the state is just one more indication that the provider world is consolidating and gaining negotiating leverage.  Both health care providers and the payer industry are consolidating, but to date it appears the providers are the ones gaining the upper hand in the battle for leverage.

See you next week