Okay, the easy ones are done.  Now it’s on to the tough, out-of-nowhere predictions, the ones that make – or more likely break, any reputation as a prognosticator.

6. Aetna will not sell its work comp business.  Even though some really smart folks (and people I respect) in the PE world think otherwise, I just don’t see it happening. I should have bet David Donn…(see comments section in the link).

7.  Someone is going to buy Stratacare.  OK, I know this appears to conflict with my earlier statement that the deal flow is going to slow down, but it really doesn’t.  There’ve been, what, a gazillion deals in work comp services this year?  So half-a-gazillion is less, right?

Anyways, Coventry needs a bill review platform (but I don’t think they’ll buy S-care).  Methinks it will be Mitchell; their new owners could consolidate a LOT of the work comp bill review business.  While that may appear to be a market-dominating move, don’t discount Medata and MCMC.  Agile, quick, and aggressive, these companies are taking share at the expense of the big boys – and will continue to if the “boys” become “boy”.

8.  Frequency will level off – somewhat.  Except for the recession-driven increase a few years back, claim frequency has steadily declined, averaging 2-4 percentage points per year.  With employment up, the economy improving, and manufacturing, logistics, construction, health care and energy all strengthening I’d expect frequency’s perennial decline to end, or at least moderate quite a bit.

9.  Guidelines are going to get a lot more attention – and more regulatory support.  I’m doubling down on last year’s prediction that guideline usage would grow; with the release of ACOEM’s drug formulary, Minnesota’s adoption of back surgery guidelines, the great work of PCORI, and Medata’s analysis of the impact of guidelines on cost the pressure on regulators to add more science to the art of work comp medical care is growing daily.

10.  The train wreck that is senior management at the North Dakota State Fund will continue to demonstrate the perils of politically-driven leadership.  After sacking one of the best senior execs in the industry on BS charges, WSI has:

• blown $17 million on a failed IT project (remember this is for the NoDak State Fund, we’re not talking a top five insurer/TPA here);
• allowed senior executives to hire and manage relatives, in direct violation of the State ethics code;
• printed up ID cards with the wrong phone number, one that rang thru to a call service staffed by “red hot babes” (and this was done by one of the senior exec’s family members on staff at WSI)
• screwed around with a claimant’s file, deleting a nurse’s note that supported the claimant’s request for benefits
• pressured their own medical director to change his medical opinions.

Under state law, an audit is supposed to be conducted right about now.  Haven’t heard what firm will be conducting the audit, but if past history is any guide, expect a whitewash. We can expect continued screwups as the far-in-over-their-heads “leadership” of WSI makes a mockery of management.

The tragedy here is there are a lot of very capable, competent, and diligent folks at WSI, working every day to do the right thing.  They and the workers of NoDak deserve far better leadership.

There you have it.  One more day to go for this “business” year, and then it’s off for a couple weeks.

Proving once again that I’m not smart enough to leave well enough alone, it’s time for my annual predictions for the coming year. I’m putting on my Carnac costume, examining tea leaves, and stopped by the butcher to get ready for some haruspicating – that’s analyzing sheep entrails (and yep, that’s a legitimate future forecasting technique)…

So here’s what’s going to happen in 2014. I hope.

1. Overall, the work comp insurance market will be steady.  Employment is slowly picking up, manufacturing and construction are doing ok, and premium rates are level to a bit higher.  This will mean more business for TPAs, slightly higher premiums for employers (and insurance companies), and more focus on loss prevention and risk management.

2.  More consolidation in the TPA market is on the horizon.  Expect some of the mid-tier TPAs to grow via acquisition, and there may be a deal involving one of the larger ones as well.

3.  Medical trend – on a paid, not incurred basis – will increase by at least a couple of points.  The ongoing problem of facility costs, coupled with cost-shifting and a lack of focus on (real) medical management on the part of most payers will be the drivers.

4.  Deal activity for mid-sized to large transactions in the work comp services sector will taper off.  There’s one more big transaction in process, but after that gets done there just aren’t that many big companies left to sell.  Expect to see a couple transactions but nothing like we’ve seen in 2013.

5.  At least one – and likely more – insurers will discover the real impact of opioids on their claims costs, and the impact will affect their reserves, rating, and/or financial stability.  As of now, few carriers have split out the cost of claims with and without opioids, and when they do, they are in for a (financial) shock.

More tomorrow!

It’s that time of year – I get to revisit my predictions for 2013, an often-humbling experience for someone who spends far too much time out on the bleeding edge. So, here goes.

1. Vendor consolidation – I said “we ain’t seen nothing yet…Expect several of the larger players to join forces/be acquired/become platform companies that PE firms use to build large, diverse providers.
   A resounding yes.  First OneCall’s string of deals, KKR’s acquisition of Mitchell, then the blockbuster OneCall/Align move, then Progressive/PMSI, with at least one more big one in progress today.
2. Higher medical costs driven by facilities.
   Yes – especially in California as health system consolidation continues. We are also seeing it in other states as physician practices are bought up by hospitals, who can then bill for facility fees on top of physician charges.  Many payers are seeing double-digit trend rates.
3. Continued ignorance of opioids’ impact on long-term costs and outcomes, coupled with inaction by most payers.
   I’d give this a partial yes.  The opioid survey we just completed revealed that many payers are actively involved in opioid management, although those programs are typically disjointed and not integrated.  However, very few payers, if any, have estimated the long term cost of opioids.  Most don’t separate out claimants prescribed opioids from those that aren’t, lumping all claimants with the same diagnosis together.  Once they start separating out (for example) back claims with and without opioids, there will be an “oh crap” moment followed by a lot of finger-pointing.
4. Aetna will keep – and grow – their workers’ comp service business

   Well, it isn’t growing, but they are keeping it.  Aetna has been the bridesmaid on a couple of deals, as they are looking to expand via acquisition as well as incremental sales.  And no, the departures of Rob Gelb and David Young do NOT mean mother Aetna wants to dump the business.
   

5. Physician dispensing of repackaged drugs – we’ll see higher prices in some states and much more physician dispensing in many.
   
   Oh heck yes.  WCRI’s latest reports indicate costs are up, and so is volume in many states.  My best guess is the industry – employers, taxpayers, insurers – are paying over a billion dollars more than necessary due to the plundering profiteers in the physician dispensing business.Okay, that was the first five.  Five more tomorrow – hopefully I’ll break even…