Ed. note – got an email from a colleague asking “so why should I care about who owns who or what their strategy is?” Because your service providers – that you pay a shipload of dollars to and through – determine your medical and combined loss ratios. So you’d best figure out if your priorities are the same as their’s.

Okay, we’ve dug thru the differences between corporate- vs private-equity owned work comp service providers, today we focus on multi-service providers and single-service providers – and how they compare.

The first group is Mitchell Genex Coventry (MGC), Optum WC, and OneCall; the second Conduent, ExamWorks and MedRisk (HSA consulting client).

The good thing about being a multi-service entity is you’ve got flexibility, a diverse income stream, and several services/products that may interest prospects and keep customers tied down. You may also be able to leverage one line to get more business, and depending on what your services are, perhaps even apply enough pressure to force customers to use those other services.

The bad thing is your business lines are rarely all best in class; an under-performing service may de-value your other lines. The other bad thing is they can be pretty different, require different expertise, systems, processes, reporting, and network development.

Example – Imaging is one-and-done, customer value is mostly scheduling and price (yeah people talk “quality” of reads…but its almost always talk). Physical medicine is utilization-driven as price-per-service way less important than a scan that often costs 15-20x more than a PT service. PM also requires lots of data and information feeds, more clinical oversight, a different contracting strategy, and ongoing monitoring of attendance and progress. Transportation is different as well, and so is DME.

Net is it is difficult indeed to be really good at multiple services AND have scale where you can get competitive prices and deliver all services everywhere payers need them delivered.

Single-service suppliers get really really good at one thing; this affords them scale, reduces distractions, and builds a lot of corporate expertise – and if done well – a solid brand.

But – and it’s a darn big but – if a big state changes its fee schedule, or Medicare does the same, you could be screwed. Example – California adopted a Medicare-based fee schedule the same year Medicare slashed reimbursement for imaging. Imaging companies got hammered, as California has about 17% of the nation’s WC volume.

Okay, so here’s the net – Multi-line businesses are tougher to manage, but can insulate the owner from regulatory risk and provide leverage over customers.

Single-service suppliers are usually really good at what they do, but there’s that regulatory risk thing.

All that said, each of these companies is – in some very important ways – unique. with their own strengths and weaknesses, strategies and tactics.

What does this mean for you?

Are your suppliers’ priorities, successes, and growth strategies aligned with yours?

Yesterday’s intro to the coming consolidation in workers’ comp services identified 7 entities – Mitchell/Genex/Coventry (MGC), Paradigm, Conduent, Optum Workers’ Comp, OneCall, ExamWorks and MedRisk (HSA consulting client) that might will be the last one(s) – standing when the music stops.

I’ve written extensively (as in more than 60 posts) about what’s driving this, how individual companies are reacting, and potential implications for the industry. While the main themes remain accurate, my views on potential impacts are evolving.

While each of these companies is unique in its own way, they can be grouped into two broad categories – multi-service providers and single-service providers.

The first group is MGC, Optum WC, and OneCall; the second Conduent, ExamWorks and MedRisk.

Another way of grouping is by ownership; Optum and Conduent are owned by much bigger corporations while the other 4 are private equity owned.

While there are multiple factors that will drive who consumes who, ownership type may well be the biggest single influence.  PE-owned firms tend to be much more focused on organic growth, cash flow, and identifying potential acquisitions; their owners are tightly focused on increasing the asset’s attractiveness to the next buyer. In sum, that is a business that:

• shows consistent, strong growth;
• has a stellar management team;
• has strong cashflow; and
• a viable plan for future growth.

In contrast, corporate-owned entities can suffer from:

• lack of senior management attention (that is, management at the owning corporation) and
• resource starvation (workers’ comp is often seen as a backwater and leaders can find it difficult to get the resources and attention needed).

Aetna’s bungled initial attempt to sell Coventry Work Comp is the best evidence of both problems. Optum’s continued focus on quarterly earnings  – and the attendant demand that all Optum entities deliver on their commitments regardless of market conditions – shows that corporate owners often talk a good game but when push (sure, add some staff) comes to shove (how are those quarterly profits looking?), shove wins.

We older types remember Aetna’s multiple “commitments” to growing/expanding/improving the Coventry network, commitments that were never fulfilled, and for good reason. With workers’ comp representing less than 1 percent of total US medical spend, a big healthcare company’s focus rightly should be on governmental and private health insurance.

OptumWC is a big player in worker’s comp pharmacy and also has offerings in specialty services; it is also building a network (and has been for some years). To date, Optum’s network development success has been modest at best, as has its ability to get payers to use that network. Sources indicate Optum is investing more in the PPO; if it does Coventry could have a viable competitor.

But “big” in WC is “pretty darn small” in the healthcare world.

WC is far less than one percent of UnitedHealth Care’s total revenue (UHG owns Optum); it can be difficult indeed for leaders of pretty small subsidiaries to get attention and resources from corporate overlords.

Conduent is another story. Built around Stratacare, the industry’s leading bill review company by market share seems to be caught in an endless cycle of management changes, delays in upgrades//updates/fixes, and consistently poor customer service. Conduent is – at its core – a document management business; WC bill review feeds that business.

I don’t see Conduent as an acquirer…if anything it is much more likely to spin off the WC BR business.

What does this mean for you?

Understanding owners’ motivations and priorities helps predict the future.

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What’s coming is quite clear – there will be more consolidation in the work comp services industry, much of it likely in the next 12 months.

Cue Bachman-Turner Overdrive…

Workers’ comp is a shrinking industry; while there may well be occasional increases in premiums, claims counts, and spend, in general the long term trend is crystal clear – the only way to sure way to grow is to acquire other companies.

TPAs are growing in size and influence as many carriers pull back on investments and spending on technology, training, and physical assets. Many – but by no means all – carriers see significant potential benefits in moving claims services to TPAs:

• the cost of claims becomes entirely variable, replacing much of carriers’ fixed costs;
• flexibility – it is much easier to enter and exit states if you don’t have to stand up/shut down claims operations;
• regulatory compliance – specifically staying up on and complying with claim-related requirements becomes the TPA’s responsibility (sure the carrier is ultimately responsible, but it can protect itself contractually)

In turn, TPA growth is affecting medical management, technology, and other services vendors…TPAs make big dollars from revenue sharing with those vendors, with obvious implications for claim closure, claim duration, and medical, indemnity ALAE expenses.

The big players in the service sector are Mitchell/Genex/Coventry (MGC), Paradigm, Conduent, Optum Workers’ Comp, OneCall, ExamWorks and one step down, MedRisk (HSA consulting client).

I’d add Sedgwick to the list albeit with an asterisk; as the largest payer in workers’ comp (outside of the Federal government) it has the market share and negotiating leverage to do what other payers can’t…BUT this power will diminish as the number of service providers shrinks and their leverage grows.

These players are snapping up smaller service providers, broadening the depth and breadth of their offerings while simultaneously strengthening their relations with payers. Buying companies with >$75 million in revenue is helpful strategically and financially, but the bigger these companies get, the less benefit they get from adding “tuck-in” acquisitions.

This week I’ll share what I see coming, how each of these entities stacks up, and what this means for carriers such as Travelers and the Hartford that are staying the course.

What does this mean for you?

Change is coming; success, and survival, favors the prepared.

Okay, a LOT of interest among work comp service providers in rating/reviewing workers’ comp payers…so let’s find out what service providers want to know/share.

I’ve got a few thoughts about key considerations…perhaps assessing payers based on:

• does the buyer really know what they want?
• rating payers on how they work with service providers on a continuum from pure vendor (commodity provider) to true partner (collaborator).
• rating payers on the fairness of the process (with sub categories)
• rating payers on the depth of their understanding of what they need to accomplish their goals
• rating payers on the usefulness of their RFPs – are they asking the right questions, looking for creativity, and not just doing the basics so they can say they “went to market?”
• decision making
  • involvement of procurement/purchasing (which can be helpful, but most often is not)
  • clarity of criteria and ranking priorities, and consistency throughout the process (start in one place and evolve to something(s) else). (again not necessarily a bad thing if they move towards smarter decision criteria)
  • do they stick to the schedule, and if not, are they clear on changes and do the changes make sense?
• their interest in learning how you are different from your competitors
• what they say about price vs how important price is in the actual decision process
• are they frequently market-checkers or are they serious about their interest in getting better?
• does Payer X keep your response confidential?
• if you don’t win the business, does Payer X provide you with information as to why and what you could have done better?

• do they actually know what they want/need?
• do they respond to questions in a helpful way?
• will the requested “solution” actually solve the problem they are trying to fix?
• are they transparent about the process?
• are the SLAs (service level agreements) reasonable, onerous, sensible (feel free to add other adjectives)?

Other thoughts

• are there RFPs you won’t respond to because you don’t trust the payers?
• what are the five things any RFP should contain?
• what are the five things RFPs should NOT contain?

Any ideas are welcome and confidential – just drop me a note in the comment section – it will NOT be published but used to build the questionnaire.

Oh, and realize this can’t take an hour – so prioritize what you think is most important.

And thanks.

Customers and prospects rate vendors all the time – yet vendors never rate/review customers or prospects.

I’m as guilty as anyone else for not seeing the obvious; sellers’ views of buyers are just as important as buyers’ views of sellers.  Sure, I wrote about problematic purchasers and their arrogant behavior – but that was 14 (!) whole years ago.

This came to light recently when I was thinking about conversations I had with a couple of buyers over the last few months. Buyers’ perceptions of how they dealt with vendors was quite different from vendors’ views. As in pretty much opposite; the buyers saw themselves as collaborative, collegial, and open to new ideas and perspectives. They opined that their buying criteria prioritizes forward thinking, innovation, and aligned incentives.

That was NOT how they were perceived by vendors. Far from it.

The buyers in question were perceived as dictatorial, dogmatic, and difficult to work with. The buyers always squeezed vendors on price and forced concessions while requiring detailed Service Level Agreements with financial penalties.

The Golden Rule applied – She Who Has the Gold Rules.

Of course all buyers are not like that – some are collaborative and thoughtful and really looking for partnerships that benefit all parties. (Thank you HSA clients!)

It goes beyond the purchasing process; some buyers don’t get the “partner” thing. They don’t realize their success is driven by collaboration and teamwork, that this requires the customer’s cooperation and an investment of time, energy, and often IT resources. Instead they require/demand/mandate the vendor deliver on SLAs while making it darn near impossible for them to do so.

So…I’m thinking of surveying workers’ comp vendors about their views, opinions, and experience with WC payers.  Of course as with all our surveys, responses would be completely confidential. If we do this, we’ll require respondents to identify themselves so we can verify they are who they say they are. Once that’s done, identifying information will be erased.

If you’re interested in participating, shoot me a comment in the box below. All comments are held for approval, so I won’t publish yours if you ask me not to.

What does this mean for you?

This will be fun.

Hundreds of billions of dollars will be spent on heavy construction and everything that goes into that – steel, aluminum and concrete; wire and cable; glass and pipes; rail cars, track, and signaling equipment;  heavy equipment; electric vehicle charging stations; and of course labor.

It will fix huge infrastructure problems – including the Brent Spence Bridge which spans the Ohio River between Cincinnati and Kentucky and desperately needs an overhaul. (the Bridge carries 3 percent of our GDP every year, has no shoulders, is used by tens of thousands of commuters each day, and has frequent accidents that snarl traffic and screw everything up.)

Texas’ electrical grid is also targeted for a major – and critically needed – upgrade. Rail, highways, tunnels and port facilities around New York City are in desperate need of major repairs. Rural America’s access to broadband – essential for agriculture and education – is pathetically sparse. (think DSL…remember that?)

Here in upstate New York, the City of Syracuse still relies on water pipes that can be 180 years old and, wait for it, some are wood. Albany just discovered some of their pipes are even older – and yes, made of wood.

The infrastructure bill will likely pass and be signed into law, but that’s just part of President Biden’s economic plan, the rest of which will be addressed in a massive bill that won’t have to garner any Republican Senators’ votes due to reconciliation.

The budget proposal will include additional investments in human capital that will expand child care, increase protections for workers, ramp up spending on community colleges and education and add funding for clean energy projects. This last will likely have the biggest impact on work comp, but the rest will add tens of thousands of workers to the child care and education sectors.

So what does all this mean for workers’ comp?

Two things – the improvements/upgrades/fixes will generate more premium dollars, more injuries, and more claims; expect this to start ramping up in a year or so, and continue for a decade plus.

As our amazingly crappy infrastructure gets better, those improvements should make us more competitive, remove bottlenecks (here’s looking at you, Brent Spence Bridge) and spur growth – which will add jobs and increase work comp premiums.

What does this mean for you?

More and better infrastructure = more dollars flowing into the work comp industry.