Insight, analysis & opinion from Joe Paduda

Jan
1

Predictions for Comp managed care in 2009

Much against my better judgment, here are my predictions – in no particular order – for the work comp managed care world in 2009.
1. Coventry will be acquired.
Currently trading just under $15 per share, Coventry Health looks to be an attractive target for another second-tier health plan company. They have solid operations in many secondary and tertiary markets, some decent business in Medicare and other governmental programs, and their work comp sub is wondrously profitable. Expect it to get bought some time this year – likely after the credit markets loosen enough for potential acquirers to feel a little more comfortable. As to what happens with Coventry’s comp business, more on that when the time comes.
2. Aetna’s work comp network business will slowly dissipate.
Now that the provider relations, sales, compliance, and other support services are not all reporting up to one leader, it is inevitable that the focus on work comp will diminish. For customers hoping for improvements in the quality of provider data, this isn’t good news; nor is it for payers looking for solid networks in key states.
3. Corvel’s transition to a TPA with managed care services will accelerate.
As the company’s TPA customers continue to depart, pressure will mount on Corvel to demonstrate the viability of the TPA strategy. For a company that has seen sales increase slightly more than 3% over the last three years and profits decline over the last four quarters, 2009 will be a key year. Either the company is able to make a go of it as a TPA, or investors will weary of the “its coming soon” meme and cash out. The timing is a little better, as the hardening market may make the TPA business more viable in 2009 than it has been the last two years. Then again, there’s lots of other TPAs that are going to be fighting for that business too.
4. Several of the larger payers will announce their own, small physician-centric network products.
Beyond frustrated, large payers have given up hope that the Coventrys will ever do anything meaningful in the small, EPO-type physician-based network product line. Several large payers have been working diligently to do things on their own or in partnership with vendors; expect these to hit the market in Florida and several other states by Q3 2009.
5. – Correction- Oregon will do a do-over.
The state’s misguided, ill-informed, and illogical stance on workers comp network reimbursement is going to blow up, big time. Many carriers are carefully considering their options, as Oregon’s new regs require comp payers to reimburse at fee schedule for those services subject to the FS. Non FS services are to be reimbursed at billed charges. When I asked when a top carrier’s managed care exec what they would do if a bill for a non-FS service came in at a billion dollars, he said, after a pregnant pause, “according to the State, we’d have to pay it.”
6. Innovation
Uh, wrong industry…there will be precious little in the way of innovation, unless you count a few “aggregators” trying to become the “pipe” for payers to connect with various managed care vendors.
7. Specialty managed care
There will be new entrants into the various specialty managed care areas, as private-equity funded companies seek to take advantage of the ground-breaking work done by the innovators. These follow-on firms will do fine for a couple years, after which their customers will figure things out.
8. Medical costs
Will continue to increase far faster than they should, driven by lousy managed care models poorly implemented by payers more concerned with “savings” than claims costs.
If that isn’t a safe prediction, I don’t know what is.


2 thoughts on “Predictions for Comp managed care in 2009”

  1. CVH go easily go, but you could say the same about players like Healthnet (large exposure to Cali market, where the uninsured are the highest), Amerigroup (instant access to Medicaid-driven rev stream for larger MCO that doens’t have it), and even Humana (large as it is, it has a great lead in Med Advantage – if Obama doesn’t blow them up with his 2011 PFSS network mandate or hammer those juicy 12% higher than traditional Medicare rate payouts, the stock looks compelling)…Cigna or Aetna getting in bed with Humana? It could happen….

  2. Regarding Oregon (Prediction No. 5): the new rules do not require the payer to pay “billed charges.”
    The fee schedule applies – just as it did before the rule change. The rule reads, in relevant part: “Insurers must pay for medical services at the provider’s usual fee or according to the
    fee schedule, whichever is less, unless otherwise provided by contract or fee discount agreement
    permitted by these rules. OAR 436-009-0040, Calculating Medical Provider Fees.
    Note that discounts below the fee schedule are still allowed, just controlled.
    For those of us who think the PPO arrangements benefit every participant in the process except for the payer and the injured worker, the new rule is probably a wash.

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Joe Paduda is the principal of Health Strategy Associates

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