Jul
16

Drug testing explained – part 2

Yesterday’s post about testing work comp patients for opioids struck several nerves; perhaps the most sensitive involves frustration on the part of payers unhappy about paying for tests prescribed by docs who don’t read the results.

That and the outrageous prices charged – and paid – in some states by some labs/physicians.

In addition to several public commenters, I heard from two medical directors yesterday about docs who order tests and never take action when the results are “inconsistent” with expectations.  Over the last few weeks I’ve have had similar conversations with pharmacy directors at two large state funds.  Simply put, these folks are happy to promote best practices, but do NOT want to pay for tests that are never read.

What’s a payer to do?

First, watch the coding and reimbursement very carefully; your medical bill review function may be able to help identify inappropriate coding and/or coding that looks to be primarily reimbursement-driven.

Second, direct away from those providers engaged in unacceptable billing practices.  Yes, I understand you cannot force claimants to use or not use specific providers in some states.  I also know payers can encourage/recommend/channel/suggest/educate claimants about specific providers; Express Scripts had some solid results by educating patients about physician dispensing, and their lessons learned can inform your approach.

Third, make the high billers’ lives difficult by doing everything possible to reduce reimbursement; require medical necessity statements, require evidence that the test was actually done, reduce reimbursement by whatever legal means necessary.  I’ve talked to a couple payers who have successfully battled physician dispensers using this tactic; one roundtabled the issue with adjusters who came up with several very creative and effective ways to make life extremely difficult for companies billing for physician-dispensed drugs.

And the adjusters really enjoyed it…

For docs who don’t read the tests they have ordered, an outreach program wherein a test with aberrant findings triggers a case manager contact with the treating physician is in place at several payers.  While this – like everything else in workers’ comp – is no panacea, it does alert the treating doc that there’s a problem.

There is also technology available and currently in use that can determine if a document emailed to a recipient is opened.

Worst case, the payer can use this information if the claim goes to litigation, and/or to seek a change in physician, and/or to demonstrate culpability on the part of the physician if the patient has an adverse event.

What does this mean for you?

Drug tests are a tool; used correctly they can be very helpful.  But tests that are bought and never used are a waste of money. And using the wrong test is like trying to tighten a bolt with a hammer.


Jul
15

Drug testing (partially) explained

Once more we will delve into the minutiae of an issue…this time into testing patients who are prescribed opioids to ascertain if they are taking the prescribed medications, and if there is evidence they are consuming other licit and/or illicit drugs.

(full disclosure – Millennium Health, the largest toxicology testing company, is a consulting client)

All guidelines suggest/encourage/require testing of patients prescribed opioids.  

There are two types of urine drug tests – qualitative, where a cup test simply indicates if a drug is or is not present, and quantitative, which is much more accurate and must be done in a lab.

I’m surprised at the continued use of qualitative tests as they are notoriously unreliable; research indicates the cup test failed to show benzodiazepines were present for 28% of specimens, and cocaine for fully half of specimens evaluated – and false negatives and positives for other drugs are much higher than one would expect.  These “false negatives” are obviously misleading; the usefulness of cup tests is further compromised by how easy they are to fool. (there are about a gazillion web pages that provide info on passing a cup test…)

Say you are prescribed Oxycontin, but haven’t been taking the pills.  You’re scheduled for an office visit, have sold your pills, and don’t want to get caught.  You can rent pills to pass a pill count, and if you’re asked to pee in a cup, you can shave one of the pills into the cup, thereby adding the chemicals that will show you are compliant.
Voila!  you’re clean!

Except, if your sample gets sent to a lab for quantitative testing.  It is much harder to fool good lab testing because the testing equipment:

  • uses much lower cutoff levels for drugs, thereby finding more positives than cups do;
  • tests for metabolites – the chemicals created by your body after it processes the drugs: metabolites show you’ve actually taken the drug
  • checks for certain chemical markers that can indicate if the urine is fake or from another person (or, in some cases, another animal)

There’s much more to this; warning, if you start looking around on the web, you’ll find some incredible stories and myths and tales about folks allegedly passing tests; great for entertainment but very easy to become mesmerized for hours.

I recently reviewed data from a very large sample, specifically looking for data about cup results vs lab (quantitative) results.  The analysis was rather disturbing…Cup tests missed:

  • 45% of opiates (cup reported no opiates, lab reported opiates)
  • 44% of benzodiazepines
  • 28% of marijuana

Cup tests also indicate drugs are present when the lab tests show they are not, false positives occurred in:

  • 27% of reported opiates
  • 69% of antidepressants
  • 100% of PCP

What does this mean for you?

Be very careful about basing decisions on cup tests – even if they show there aren’t any anomalies or “unexpected” results.


Jul
7

Is work comp still in investors’ sights?

After dozens of acquisitions, mergers, and buyouts over the last four years, there have been relatively few transactions of late.

This isn’t due to lack of interest on the part of investors, anything but.

No, private equity companies and big companies alike are still on the lookout for potential deals, scouting for assets that

  • are under-resourced,
  • have promising technology or business models or exemplary management,
  • can drive more revenue to specialty firms and/or suppliers, and/or
  • dominate increasingly narrow niches.

No, it isn’t lack of interest, but a combination of factors that have led to the seeming-slowdown in activity. Here are a few that come to mind…

  • fewer assets (companies) to buy.  With all the deals done over the last few years, there just aren’t as many companies in the space.
  • the assets that are left are bigger.  Private equity firms typically focus on specific segments – with one of the criteria being size.  As the supplier industry has consolidated, there are far fewer midsize companies around for the PE firms that specialize in that niche to pursue.
  • prices are really high.  A few years ago, a multiple of 7 times EBITDA (sometimes equated with cash flow) was considered good.  Now, that’s laughable. Two closely related issues here; 1) sellers focus on deals with really high multiples (10x for Genex, a case management company!!), know their baby is much more beautiful, and want more; and 2) PE firms – the smart ones – don’t want to overpay.
  • the more potential buyers understand work comp, the more they “get” the underlying growth issues.  The total work comp market is likely shrinking. Frequency continues its long-term structural decline.  The employment market is changing, and that change will accelerate over the next decade.  Unless an asset has a proven management team, is winning market share and growing organically (by selling more business, not acquiring other businesses) and has the “sustainable competitive advantage” the structural headwinds are tough to overcome.

That said, there are a couple niches that look promising.  

Work comp pharmacy is one; margins remain steady; the PBM industry has really upped its clinical and operational game; there’s still considerable growth opportunity within existing customers; and many PBMs have very solid management teams.

Small  companies that focus on a narrow niche are enjoying a lot of success, taking advantage of the failure by some of the now-huge service vendors to deliver even basic customer service.  MegaCorp’s strategy, dictated by its owners’ theoretical ideas about how combining this service with that vendor and this other distribution channel will allow them to get all of the ancillary business from every payer means it isn’t paying much attention (often, almost NO attention) to basic customer service.

With priority now given to growth and debt service and cost cutting, MegaCorp is ignoring such niceties as billing correctly, returning phone calls, providing updates on services, reporting outcomes, and integrating their various disparate operations, services, distribution channels and other acquisitions.

The result is the promise of an integrated service provider continues to be two years away, as it has been for the last decade.  Into the service gap have stepped entrepreneurs, many refugees from acquired companies, who get it.  They built their predecessor companies on service, high-touch, dedication to their clients and a deep understanding of what works and why and how.

They are building the next batch of companies that, even now, are attracting the interest of investors.

Expect there to be continued activity at the highest end of the market, and watch for investments by savvy firms helping fund these small companies as they look to grow their businesses. 

 


Jul
2

Thursday catch-up

Hope you, your family and friends have a terrific Fourth of July; we will be celebrating at home in upstate New York and watching the American women take on Japan in the World Cup Final.

The brief update on what’s happened this week and last.

The economy

A sizable increase in employment in June – 223,000 new jobs were added.  About 1.2 million jobs have been created so far this year. (edit – quoted May’s figure in an earlier version; apologies for my confusion)

The unemployment rate dropped to 5.3% from May’s 5.5%, but the labor force participation rate also decreased, driven by lower participation among teens and younger men.

This morning’s employment report shows an economy that is adding jobs in construction, retail and business services.

While wages were essentially flat in June, over the last twelve months employers have been (slightly) increasing wages in an effort to land and keep good workers – work comp folks can expect more premium dollars, and likely more injuries as newly-employed workers tend to get hurt more often experienced employees.

Overall, the report is good news; more workers making more money means they spend more – a virtuous cycle.  BUT there are some economic headwinds. The strong US dollar is hurting exports which isn’t good for manufacturing.

The ACE – Chubb deal

Looks like “Hank Junior” is following in Hank Sr.’s footsteps; with the acquisition of perhaps the most respected brand in the P&C business, ACE becomes one of the largest insurers in the industry with a diverse portfolio of insurance lines, complementary distribution, and very strong management and culture in Chubb.

Notably, the new company will take the Chubb name.

There’s a LOT of press out there on this deal, most authored by folks with a lot more insight than I have.  My take is this is a smart deal for ACE; IF they don’t screw up Chubb and thereby damage a highly-regarded brand.  Evan Greenberg et al are too smart to do that; they didn’t pay a 30% premium for Chubb without clearly understanding why the company is worth it.

Healthcare reform

Lots of information out there re who’s newly insured, what they are paying, and related matters.

There are more uninsured men than women, and they have more problems accessing and paying for care.

There’s been a lot of talk about premium increases for next year – and that’s caused a lot of confusion. The latest data suggests that people with the most common plan – the lowest cost silver – won’t see those big price jumps. KFF reports a survey of the benchmark plans in 11 cities indicates an average premium increase of 4.4%.

The range is wide, from a 16.2% jump in Portland OR to a 10.1% decrease in neighboring Seattle (go figure).

BUT – there have been some big jumps in some markets, and pricing is all over the place.  Some plans have filed for increases north of 20%. Expect the marketplace to reward those plans that have held the line – and expect those plans to have narrow networks and hefty financial penalties for out of network care…

The reason there’s been so much talk about big price jumps is healthplans planning on raising premiums more than 10% have to report that to regulators early on; that generates a lot of buzz. Obviously, that buzz doesn’t take into consideration the plans that are NOT planning on big price jumps.

Much more on this in future posts.

There are a couple of really interesting work comp research reports that came out this week; I’ll be reading them on the plane back from Seattle today and report back to you, dear reader, next week.

Enjoy the weekend, and cheer for our women on Sunday!


Jul
1

Why is Genex buying more case management?

Yesterday Genex announced it acquired yet another case management firm; Integrated Care Management of Alpharetta GA and their 150 employees broaden Genex’ CM coverage in about 20 states.

This comes on the heels of the MHayes purchase. According to sources familiar with the deal, the Maryland-based firm reportedly commanded a pretty high multiple; congratulations to Melinda Hayes on that news.

While there were no details on price or cash/stock mix for the ICM transaction, the timing likely had everything to do with last week’s announcement that Genex increased their borrowing capability by almost $80 million.

The announcement, dated June 22, noted “Net proceeds from the offering will be used to fund acquisitions.”

ICM’s revenues will push Genex’ top line well above $400 million, and further consolidate its position as the dominant case management firm in work comp (with footholds in other insurance niches).

That said, the debt to earnings ratio will now exceed 7.5x, a level Moody’s considers “aggressive for the firm’s rating category…” The rating agency doesn’t seem too worried, as they expect the ratio to improve due to organic growth and higher EBITDA (earnings before interest, taxes, depreciation and amortization).

I’m puzzled by the “organic growth” expectation.  Case management, especially field case management, is declining for two reasons; work comp claim frequency continues to drop 2 – 4% a year, a decline that is structural, long-term, and seemingly-inevitable. And payers’ use of field case management continues to decline, with most preferring telephonic and using field only for a relatively-narrowly-defined group of claims. While Genex does a LOT of telephonic CM, TCM is fairly easy to internalize (altho some states regulatory requirements make it feasible only for payers with significant volume).

Moreover, payers continue to seek ways to capture more and more services internally; they don’t like to vend claims services they can do themselves, thereby adding revenue, increasing efficiency, and better integrating process. Think York’s acquisition of Wellcomp, Sedgwick’s ongoing efforts to acquire a wide variety of claim service vendors, GB and MedInsight, the Hartford handling MSAs with internal staff.

Methinks there is one primary reason for the growth-by-acquisition strategy – case managers may well be expected to drive business to One Call Care Management.

And one secondary – organic growth (despite Moody’s optimism) just isn’t happening.

Genex is owned by Apax, the private equity firm that also owns One Call Care Management.  One Call provides imaging, physical therapy, DME/home health, transportation/translation, dental and other services to the work comp industry, a portfolio of services that accounts for about a quarter of total workers comp medical spend.  Genex’ 1800 +/- case managers would be a great mechanism to recommend/refer/direct business to OCCM whenever and wherever possible.

From an ownership perspective, this makes perfect sense.  At some point Apax will sell these assets, and combining them – the service provider and the referral driver – into one entity makes the whole greater than the sum of the parts.

Of course, this assumes Genex et al provide exemplary customer service, meet the needs of current customers, resolve any issues quickly and to the satisfaction of clients…

A cautionary note for ICM employees; study any new paperwork very carefully, and look closely at any non-compete agreements.  You want to be sure you know what you are signing. 

What does this mean for you?

Who controls your referrals?


Jun
29

Work comp drug trends; Coventry’s report

Coventry’s work comp PBM – First Script – released their drug trend review last week; they’ve taken a bit of a different tack than other PBMs, choosing to report broadly across all scripts while differentiating between “managed” (in-network retail/mail and contracted physician and clinic dispensed) and unmanaged scripts.  Note that Coventry reports on compounds separately.

The report is replete with infographics used to highlight cost trends, workflows and decision processes, charts and graphs which make it quite readable; specific data points and issues are easily located and understood.  Overall, the report is well laid-out and professionally done; as with other recent efforts (including CompPharma’s most recent PBM in WC Survey) drug trend reports have benefited greatly from the expertise of graphic designers.

Physician- and clinic-dispensed medications accounted for 5.1% of spend; retail/mail for about 69% of spend. Opioid dollars totaled about a third of total managed drug dollars.

Key cost drivers include an AWP increase of almost 10% across all drugs. That price increase was somewhat offset by a 5 percent decrease in utilization (7.4% for narcotics) which resulted in an overall cost-per-claim increase of 7.3%.

A key finding is a major increase in generic utilization and spending (mirrored by CompPharma’s soon-to-be-released 2015 report).  Generic spend was up a whopping 19.3% while single source brand spend dropped by 9%; generic forms of Cymbalta and Lidoderm helped drive generic utilization up over 5 percent.

Coventry reported a 4.1% decrease in short-acting (SA) narcotic script volume; long-acting dropped by 3.2%. Vicodin, the #1 prescribed drug, saw utilization drop almost 8%. Unfortunately higher AWP pricing for several common SA narcotics more than offset that decrease in units, driving overall SA narcotic spend up 8 points.

There are helpful statistics on utilization by drug class by age of claim; changes in specific drug spend and utilization year over year, details on what drugs saw the biggest changes in volume and price, charts illustrating various correlations between claim age and pharmacy, and details on compound utilization.

Notably, Terocin(c), a compound, accounts for more unmanaged spend than any other drug; the growth in all topical medications is quite remarkable. In total, compounds accounted for 7.7% of managed spend and 28.1% of unmanaged spend.

Coventry’s report is data-rich, and this is particularly illuminating in their in-depth analysis of compounds.  Trends in utilization and spend by state, claimant usage, and in-network v out-of-network are analyzed in depth.

What does this mean for you?

Compounds are growing rapidly, efforts to control narcotic utilization are bearing fruit, and generic price inflation remains problematic.


Jun
26

King v Burwell – implications for workers’ comp

 

The Supreme Court decision against the plaintiffs in King v Burwell marks the end of the significant legal challenges to the PPACA.

It also makes it much more difficult for a future President to undo key parts of ACA, as the Court opined that the mandate, penalty, subsidies, and other key components are set in statute and therefore cannot be modified or eliminated by administrative or executive action (I’m no attorney, so may have the wording wrong; clarifications welcomed).

Yes, there will be continued attempts by opponents to attack this or that part of PPACA. And the GOP may well pass repeal legislation if the party wins the necessary seats and the White House next year.  But I don’t think they will.

17 percent of our nation’s economy is in the health care sector, a sector that has, for the better part of a decade, totally focused on operating under PPACA.  If PPACA is overturned, the stuff will hit the fan, and the overturners will be blamed.  Politicians don’t like blame, and while the hard core right may rail, their Representatives and Senators will keep focused on the swing voters who decide elections.

Okay, so much for my amateur political punditry.

What does this mean for workers’ compensation?

Not much.  In fact, I can’t discern any meaningful impact other than “business as usual.”

That doesn’t mean ACA hasn’t impacted work comp, however so far the data is rather inconclusive.  I’ll post on that early next week – spoiler alert – the evidence to date indicates there has NOT been a problem for claimant access to care.


Jun
23

Liberty Mutual is NOT exiting workers’ comp

The headline of an article at WorkCompCentral this morning is “Liberty Mutual to Exit Workers’ Compensation.”  That headline is misleading.

UPDATE

WCC revised the headline; it now reads “Liberty Mutual backing away from workers compensation”

While there’s no question the formerly-largest-writer-of-workers’ comp insurance has dramatically cut back, lopping off about a third of its WC premium, it remains the fourth-largest writer, continuing to seek new business in some markets and hold on to existing accounts in many.

Yes, it sold Summit; and its WC business in Argentina; and paid Berkshire to take over several billion dollars in WC legacy claims. Yes the executive ranks are no longer the exclusive domain of former Liberty WC claims handlers and sales folks – far from it.  Yes, personal lines is the future of the company.

None of those changes, dramatic as they are, nor all of those changes together, mean Liberty’s dumping WC entirely.

But what if mother Liberty does bid farewell to work comp?

The WCC article contained a passage that – in my view – is inaccurate at best.

There is worry that Liberty Mutual’s dropping out of workers’ compensation could lead to higher costs for employers and result in companies making cutbacks to injury benefits or challenge claims submitted by workers, Ishida Sengupta, director of workers’ compensation at the National Academy of Social Insurance, told the Globe.

“I certainly think it doesn’t bode well,” Sengupta said.

That is totally nonsensical – companies CANNOT make “cutbacks to injury benefits.”  This is workers’ comp, and benefits are statutorily determined.

In addition, there’s no logical reason the fourth largest WC insurer’s decision to exit work comp would lead to higher cost to employers or encourage those employers to challenge claims.  I’m really surprised that someone from NASI (an organization in which I am a member) said that – if they did.

BTW I asked Liberty’s press people to comment early this am; they haven’t done so as of 4 pm.

 

 


Jun
19

My favorite day of the year

This year Father’s Day and the Summer Solstice fall on the same day – making for a very long day here in upstate NY with lots of daylight so I can loll around while being waited on (well, maybe not that last part).

While I was busy inundating your inbox with posts on the profitability – or lack thereof – of workers’ comp, a bunch of other stuff happened.

Another shot in the subrogation/third party liability battle was fired by Kentucky’s Medicaid program.  According to WorkCompCentral’s Ben Miller, hundreds of letters have been sent to work comp insurers in an attempt to ascertain if specific individuals’ medical care is due to a work comp injury.  The rationale is clear; Medicaid doesn’t want to pay for medical care it doesn’t have to.  As a taxpayer I completely support this.  Where it could get really sticky involves settled claims; if the work comp insurer/employer has settled the claim, my assumption (always dangerous) is the settlement requires the claimant to use those funds to pay for injury-related medical care.

What if the claimant doesn’t have any of the settlement dollars left?  If the claimant doesn’t pay, is the work comp insurer/employer liable? Who’s going to be stuck with the bill; the claimant?  the provider? Medicaid? another insurer?

Oh boy.

A terrific article in Harvard Business Review on what private equity investors do when they buy companies notes three distinct types of “engineering”; financial, governance, and operational.  Lots of insight, data, and examples make this a must read for anyone considering a transaction, or trying to understand how PE firms work.

Activity in the oil patch is slowing down, but claims counts are not going up.  Reuters quotes a Travelers insurance exec who’s a bit surprised about this; I have a call into Travelers to see if we can get more insight into the issue, and will share whatever I learn.

The new, updated Washington Guidelines for Prescribing Opioids for Pain are out; a product of the Agency Medical Directors (AMD), the new guidelines address opioid usage for many different conditions, cover special population issues, and update and expand a variety of treatment- and risk-assessment-related topics.  With five years’ experience under its belt, the AMD have learned a lot, lessons that other jurisdictions would be well-served to consider.

Finally, for many families in Charleston – and elsewhere – this Father’s Day is anything but joyful.  If I may be so bold, I’d suggest we strive to be part of the solution.


Jun
17

Workers’ comp profitability, Part 3

We’ve seen that work comp’s “profitability” isn’t very good, whether measured (inappropriately) as operating gain or (appropriately) as return on net worth/return on equity (ROE).

Today we’ll dig deeper into the data; below is a chart provided courtesy of CWCI, it is NAIC’s 2004-2013 Profitability Report, comparing average rates of return on net worth among California and US WC, property & casualty (P&C) insurers and all industries.

2004 2005 2006 2007 2008 2009  2010 2011 2012 2013 04-13Avg
Calif WC 12.6% 14.2% 16.4% 12.1% 7.0% 4.6% 5.2% 7.4% 3.9% 3.0% 8.6%
Calif All Lines 14.8% 14.5% 17.1% 11.9% 6.0% 9.4% 9.7% 8.4% 7.4% 7.6% 10.7%
US WC 10.1% 9.6% 10.0% 9.0% 5.1% 4.2% 3.9% 6.2% 5.9% 7.2% 7.1%
US All Lines 10.0% 5.3% 14.4% 12.5% 2.4% 6.3% 8.0% 4.9% 5.8% 9.0% 7.9%
NAIC P&C 8.0% 8.3% 12.2% 9.7% 2.2% 5.7% 6.0% 3.4% 5.2% 8.0% 6.9%
Fortune All Ind 13.9% 14.9% 15.4% 15.2% 13.1% 10.5% 12.7% 14.3% 13.4% 16.6% 14.0%

First up, look at the last row, Fortune’s All Industry average is higher than the US WC results every year for the last decade.

Over the last decade, WC’s returns have been just half the All Industry average.

Next, kindly allow me to direct your attention to the bolded red numbers – California WC insurers’ return on net worth for 2013 and the national average for the same year.  Fellow WC geeks will recall 2013 was identified by ProPubica/NPR as WC insurers’ “most profitable year in over a decade, bringing in a hefty 18 percent return.”

Oh were it only so.

(We dissected PP/NPR’s interpretation of profitability yesterday)

PP/NPR’s series of “reports” on workers’ comp allege that this “hefty” return is due in large part to reductions in benefits for workers pushed by employers and insurers and “reforms” that have taken away workers’ ability to choose their doctors – among other changes.  The reporters specifically cited big problems in California, where insurers’ doctors “deny” care without seeing the patient, where benefits have been slashed and workers made to suffer due to ill-conceived “reforms”.

This is a classic example of writers looking for “facts” that support their pre-conceived bias.  NAIC’s data shows just how wrong reporters Grabell and Berkes are; if the “reforms” in California were so one-sided, so employee-unfriendly, designed to benefit insurers at the expense of injured workers, those reforms have clearly NOT delivered the intended financial results.

By way of reference, historically the target ROE for US companies is in the 12-15 percent range, making the US WC insurance industry’s 7.1% return over the last decade look shabby indeed.

Remind me again why anyone would want to be a workers comp insurer???