Yesterday’s announcement that Concentra owner Select Medical is purchasing US Healthworks sent waves through the workers’ compensation world.  The “new” Concentra will:

• have 565 occ health clinics and on-site centers in about 40 states,
• handle around one out of every seven occupational injuries, and
• further cement Concentra’s position as the largest initial treatment provider in work comp.

The transaction valued USHW at $753 million, or about $3 million per location. Concentra is currently jointly owned by Select Medical and investment firms Welsh Carson, Cressey & Company (and several other firms). It looks like one goal of the deal was to buy out minority investors, a not-uncommon objective for this type of transaction.

So, what does this mean for workers’ comp?

1. Workers comp services is a very mature industry, where scale and buying power are critical. This is yet another indication that players in the industry recognize scale is critical.
2. This looks to be continued move on the part of Concentra to focus on occupational care and de-emphasize urgent care – which is focused on non-occupational conditions.
3. Concentra will have more bargaining power with work comp PPOs and payers. The giant provider can’t quite dictate terms today, but is certainly in a very strong position.
4. USHW has a reputation for over-prescribing physical therapy, a concern some have with Concentra as well.  Payers would be well-served to monitor this closely going forward.

What does this mean for you?

Consolidation can be beneficial for all parties.

It can also be a cause for concern for customers.

Hello readers – apologies for my silence this week and a good chunk of the last few weeks.

As some may know, I’m running for County Legislator in Onondaga County, New York (Syracuse and surrounding towns and villages) and the election is November 7. I’d been told this was a lot of work – and the tellers were certainly correct. It’s a full-time job doing this right.

Even more so when you’re a political rookie and don’t know what you don’t know.

There are a couple items worthy of your attention this Friday.

1.  TrumpCare has replaced ACA. A few key facts have been lost in the debate:
   1. Don’t expect many more health insurers to drop out of the Exchanges; those still in priced in the loss of CSRs a long time ago, which is why rates are so much higher.
   2. Most of the for-profit health insurers bailed out a while ago for two reasons; they can’t figure out how to make money in the individual market and they can’t deal with the lack of clarity due to President Trump’s conflicting statements and action.
   3. Remember only about 6 percent of us get our insurance through the Exchanges…
2. Reminder – some of the people in DC screwing around with our healthcare have no idea what they are doing. Healthcare is one-sixth of our economy, a major employer, and critically important for each one of us. Yet politicians who admit they don’t know anything about healthcare are trying to “fix” it. This is like putting an English teacher in charge of a nuclear plant.

Thanks to Hank Stern for his edition of HWR, with posts on ACA, funding thereof, and the revolving door that is US healthcare.

Read on!

There appears to be a “trend” among many work comp insurers to shift more and more claims handling responsibilities to third party administrators (TPAs).

I (and I’m sure many others) have been somewhat aware of this for a few years, but like the proverbial frog in the pot, the temperature has been increasing rather slowly, and the consequences have been barely visible.

Currently, the big TPAs – Sedgwick, GB, York and Broadspire are all doing a lot of claims handling for big work comp insurers. AIG has outsourced a big chunk of its claims for decades, but other insurers are slowly following suit.

The drivers are many:

• decreasing claim frequency is now a structural trend; insurers have to work to stay ahead of the declining volume and off-loading claims to a third party makes managing a shrinking business a lot easier
• total administrative expense, long a bugaboo for insurers, rating agencies, and regulators, has to shrink as well. Stripping out the upper management, IT, compliance, and related functions slashes unallocated loss adjustment expense, or perhaps more accurately shifts it into allocated expense.
• some more “self-aware” insurers have realized that their company’s claims handling just isn’t that good.
• technology, IT/systems changes and improvements, training requirements and the like are becoming increasingly expensive. As carriers look to move from their existing green-screen-based technology to SaaS or other cloud-based technology, some are finding the switch incredibly expensive, very risky, and potentially career-threatening (this last is perhaps the biggest driver). Better to just get out of the business then screw up a tech migration.

I’d expect the big TPAs to assume more and more responsibility for claims functions over the next few years.

There are implications aplenty for all parties involved; they have different revenue models, different service expectations and definitions, and different priorities.

What does this mean for you?

Good stuff if you’re a TPA. And perhaps fewer headaches if you’re a carrier…unless you pick the wrong TPA.