It’s time to see how my predictions for 2012 turned out, and a final warning that the annual April 1 post is less than three months away…

So here are they are…and here’s how it went…

1. Health reform will impact workers comp…network discounts will diminish…Network options will change.

DING DING.  While the impact of reform is yet to be readily apparent, the data points are trending in that direction. Among the payers I work with and from other data I’ve seen, discounts have eroded and facility costs increased as negotiating leverage has shifted.  And, with the notable exception of Aetna, there was almost no movement among major health plans – including Anthem – to start or beef up their work comp offerings.

2. M&A in comp is going to accelerate.

Well, that was easy.  With deals ranging from Coventry’s sale to Aetna to ScripNet’s to Healthcare Solutions, plus TMS to MSC, MSC to Odyssey, the Align/Smartcomp merger, sale of Injured Workers Pharmacy, plus several others, 2012 may well have been the busiest year ever in this tiny little niche.

3. Comp rates will go up.

True that.  Most states  – from California to Florida to Connecticut to Maine – saw rate increases, with rates level in few e.g. NY (hmmm, perhaps due to political reasons?) and lower in the even fewer states with significant reforms (IL).

4. Attacking opioid addiction and dependency will hit the top of many payers’, regulators’, and employers’ agendas.

Halla-freakin’-luya.  With PBMs’ opioid programs getting major traction with many clients (at last); IAIABC and AIA developing policies/model language on the topic; an entire, and quite well-attended, track at NWCDC devoted to the issue; major progress in Texas and Washington; a first-ever conference on the subject attracting over 600 attendees (Operation UNITE), and every pundit and opinionator now on the band wagon, you couldn’t swing the proverbial hat without smacking into an opioid program/conversation/report.

We need more.

5. Now that Illinois is starting to approve Preferred Provider Programs, there will be lots of interest followed by disappointment that they really don’t do much to control over-utilization.

Premature at best.  The approval process has been somewhat slow, perhaps due to what appears to be a very methodical approach to writing the regs.  Jury’s out, till we have some actual PPP performance.

6. As work comp premiums begin to rise, we’re going to see a renewed interest in loss control, risk management, and medical management.

A guarded yes, with particular focus on opioids (see above), utilization management (see California), networks and specialty managed care.  To be entirely accurate – which is a noble if unattainable goal – my sense is a lot of the attention focused on specialty managed care is due to the dollars flooding into the space from private equity firms, a flow that has gotten a LOT of attention from payers.

Not much news about more work on loss control or risk management, so it may well be that this prognostication was premature.  As this would make the prediction only one-third accurate, I’ll count this a ‘no”.

7. The physician dispensing cost control bill currently pending in Florida will pass.

No DAMN IT.  Despite the dedicated, noble and diligent efforts of Senator Alan Hays (the most straight-forward and direct elected official I’ve ever had the pleasure to meet), the bill was never brought to a vote in the Senate, as then-Senate-President Mike Haridopolous refused to allow it to be brought to the floor.  If you’re wondering if the $3.4 million spent on lobbying and contributions by the physician dispensing industry had something to do with Haridopolous’ position, I’d say you’re pretty damn naive to “wonder”.

That said, there was GREAT news in Illinois and most recently Michigan, where the profiteering plunderers who suck money out of employers’/taxpayers pockets were dealt severe setbacks when regulations preventing upcharging for repackaged drugs.

8. More payers will diversify their provider network partners.

Done.  There are more payers working with more networks than before, and more bill review companies are offering more generalist and specialty networks than ever.

9. York Claims will finish the year well on its way to becoming a top-tier TPA.

It is.  With the acquisition of JI Companies and organic growth to boot, they’ve had a pretty good year in terms of revenue growth  York’s programs, staff, and capabilities – as well as the approach they take to medical management – are as good as anyone’s.

10. Oklahoma will eliminate the requirement that all employers have workers comp insurance.

Well, blew that one too.

So, here’s the score.

3 – NOs

6 – YESes

1 –  NOT YET BUT ON THE WAY.

If this was baseball, I’d be earning gazillions…alas it isn’t so.

Yesterday’s post on CorVel was cut short by the demands of real work; here’s the rest.

Financially, CorVel has had a very mediocre year.  Their most recent quarter saw revenues stay pretty much flat, while earnings dropped 10 cents a share from 68 cents the previous quarter; the last six months saw a decline of the same magnitude. Revenues increased less than a million dollars for the latest quarter, while “cost of revenues: was up about $4 million.  The company attributed that increase to the higher cost of running their TPA operations, which are more labor-intensive than managed care ops, and higher costs for drugs.

The company’s stock price has remained surprisingly high, perhaps due in part to their ongoing stock buyback program.

With a P/E ratio currently above 20, that strategy seems to be working well.

Their latest push appears to be in pharmacy, where they’ve been touting MedCheck’s ability to control costs more effectively than PBMs (disclosure – I work with a number of PBMs thru CompPharma).

Here’s how their most recent press release put it:

CorVel is uniquely positioned in the marketplace to more effectively manage pharmacy costs due to the Company’s integration with its bill review solution. MedCheck?, the Company’s medical bill review software, captures all prescription out of network transactions such as the rising occurrence of physician dispensing. These transactions are generally not managed via pharmacy benefit management (PBM) programs, which traditionally only track point of sale (POS) prescription purchases.

Sounds good, except it’s wrong.

In fact, most PBMs do capture prescriptions from third party billers, mail order, paper bills; a majority see bills from physicians as well (over half, according to the latest data on the subject).

Notably, CorVel’s “PBM” uses one of the huge group health/Medicare PBMs’ pharmacy contracts.  While this can drive great discounts, network penetration (the percentage of scripts that actually go thru the network) is often an issue. (basing this on data I’ve seen from several payers that have used different PBMs).  Thus, they can deliver great rates but for a relatively smaller number of scripts.

Finally, management.

Founder Gordon Clemons Sr is listed as CEO, a position he has held since Dan Starck’s departure earlier this year. Clemons’ son, Victor Gordon Jr., was rumored to be tagged to take over for Senior, however that apparently didn’t work out; Jr. resigned a couple months ago to “pursue personal interests.”

So, what does the future hold for CorVel?

I’ll stay away from stock prices; my portfolio (which doesn’t include CorVel) is ample evidence of my complete inability to pick stocks.

The company is decentralized, with regional execs essentially running regional businesses.  There’s a good deal of autonomy, and some offices are quite good while others are not. The challenge comes in working with national payers who want consistency; that’s tough for any decentralized operation.  Their sweet spot is mid-tier and smaller regional payers, although they do work with at least one national insurer.

The foray into the TPA world has reportedly had mixed results; CorVel’s been able to add business, while losing managed care business from TPAs that now consider – rightly so – CorVel to be a competitor.

As the work comp insurance market hardens, there will be more opportunities for TPAs as employers seek lower costs from self-insurance.  However, buyers are getting more savvy as well, and CorVel’s going to have to be aware of this dynamic; employers are increasingly aware that TPAs make up for low claims fees by increasing revenues from managed care services.   

It’s been a while since we last looked in to see what’s going on at the managed care company/TPA.  Back in May, CEO Dan Starck left to go back to his previous employer, leaving a hole at the top.

Senior staff welcomed former CEO Gordon Clemons senior back, but Gordon junior was rumored to be in the running for the top slot.  Word is senior management wasn’t all that excited. More to come…

Financials for the most recent quarter are not great: revenues are essentially flat and earnings down 10 cents per share from 68 cents the prior quarter.

CorVel has been operating as a TPA and managed care firm for several years now.  While I don’t have access to any data on their TPA performance, there is data available on their managed care results.

Fortunately, the good folk at Texas Division of Workers’ Comp provide an evaluation of the networks operating in the Lone Star State; CorVel’s is included. The news is not so good.  CorVel’s network performance in Texas is, well, poor relative to the competition.  With average medical cost per claim almost 10 percent higher than the next most costly HCN, CorVel’s customers have the highest medical cost per claim of any HCN in the study. Other data points of note:

• 37 percent of injured employees reported problems accessing care, second lowest among all HCNs in the study.
• 12 percent of injured employees reported they had not returned to work, second worst in the study.

It is possible CorVel’s client base has greater risks and more severe injuries.  The 2011 report indicated CorVel had the highest rate of lost time claims of all networks – a whopping 42% of all claims were lost time…

I was talking to an insurance company claims exec about CorVel; this was her/his take: “We have always been concerned about them from an ALAE [allocated loss adjustment expense] standpoint.  They only started the TPA business because the other TPAs were taking all their other bill review and case management business away.

Unfortunately, they are not alone when it comes to TPAs who put greater emphasis on ALAE billing than claims handling.  It’s a plague of the industry right now.”

As I’ve noted in the past, this is partially the responsibility of employers.  They’ve been able to beat up TPAs for ever-lower administrative fees to the point that some TPAs were losing money on claims handling.  As TPAs seem to remain solvent, many have looked to increase charges for managed care services, and perhaps CorVel is one that has followed this route.

Should it be?  Has it become such an unwieldy morass of conflicting regulations, an all-too-soft target for profiteers and plunderers that it is largely dysfunctional?

If so, we may well see other states follow Texas’ lead and allow employers to opt out of workers’ comp.

Friend and colleague Peter Rousmaniere has authored a comprehensive study of the subject, one regulators and legislators would be well-advised to put on their holiday reading list.