Be careful what you wish for

The list of those opposing health reform includes Tea Partiers, libertarians and other small government advocates; the Chamber of Commerce, Association of Manufacturers, and National Federation of Independent Businesses; health plans (some of them), brokers, and insurers.
For some the issue is personal “liberty”, decrying governmental intrusion into what they believe should be an entirely “free” market.
Others are more specific, outraged that they are forced to buy a service from a private insurer.
But for some, primarily the larger DC-based organizations and their dues-paying members, the issue appears to be more broad, a general perception that reform is yet another indicator of increased governmental intrusion into ‘their’ business. Private companies want to be left alone, to run their businesses and do their stuff without what they view as often unnecessary and ill-advised interference from bureaucrats. The faith in the free market, the belief in unfettered competition’s ability to deliver the best result for the most is the underlying driver, driving many big companies – who would benefit from the mandate and most other provisions of the PPACA, to work diligently to overturn health reform.
Understand that those of us with insurance (including big corporations, small employers who provide health insurance, and governmental entities (and therefore taxpayers)) are subsidizing the health care needs of those without. The 49 million Americans without health insurance get health care, they just don’t pay for it; those of us with insurance do through the miracle of cost-shifting.
The willingness of reform’s opponents to sacrifice their corporate profits on the altar of the free market is admirable, as is the enthusiasm of libertarians and true followers of the Tea Party ideology.
But I wonder how ideologically pure they’ll be if reform is overturned.
As evidence of the potential consequence of failing to think thru the long-term and unintended consequences of ideological purity, I give you the Export-Import Bank, an agency of the federal government.
Stick with me here; the Ex-Im Bank provides credit to American companies selling goods and services abroad. For many companies, it is the ONLY source of credit financing their overseas business. As a result, the Ex-Im Bank helps drive exports, which creates and maintains employment, improves our balance of payments, and builds American companies.
But – the Ex-Im Bank is in deep trouble; the House has rejected further funding for the bank [opens video] (which is very profitable, generating over $5 billion in profits) thus the Bank will have to shut down in two months. If it does, businesses from tiny crop dusting aircraft manufacturers to Boeing, chemicals to finished products will find markets dry up, sales fall off, and profits plummet. We can expect layoffs at the Boeing plant in South Carolina, the duPont plants in North Carolina, Air Tractor in Texas, and Keller in Wilmington.
If that’s the necessary consequence of a return to an unfettered free market with less government intrusion, than so be it.
But that’s not what many backers of the GOP want. In fact, a long list of ardent supporters of the GOP, those who helped funded the historic gains won by Republicans in the 2010 midterm elections, are pretty unhappy with the men and women they elected. These new legislators, and ones who’ve been around for years, are the ones who are denying funding for the Ex-Im Bank, and thereby hurting the very folks who funded their successful campaigns. GOP Sens. Saxby Chambliss of Georgia, Charles Grassley of Iowa, Tom Coburn of Oklahoma Rand Paul of Kentucky Jim DeMint of South Carolina and Mike Lee of Utah are all opposing re-authorization of the Ex-Im Bank.
What some – Heritage and the Club for Growth – decry as corporate welfare and unfair competition, others of a very similar political stripe champion as critical to American business.
The same will happen with health reform.
If the Supremes overturn health reform and/or the individual mandate, employers, taxpayers, and individuals are going to see higher health insurance premiums. The entire market will be in a death spiral. As more opt out of coverage, the cost for the shrinking number of insureds will increase. Members of the Chamber of Commerce, the NFIB, and the Club for Growth will find their profits eaten up by health insurance premiums, or they’ll be forced to drop coverage entirely.
Individuals outraged by the mandate will be free to find coverage on their own, coverage which will be unaffordable for all but the richest Americans without any pre-existing medical conditions. New Jersey, a state with no mandate and restrictions on medical underwriting, provides insight into what individual insurance costs would be if the Court overturns the mandate (thanks to Bob Laszewski for the research)

a two adult plan with a $2,500 deductible and 80% coinsurance for example, there are only three carriers offering it. Aetna at $4,913 per month, Celtic at $12,322 a month, and Horizon at $6,127.78 per month. [emphasis added] These rates do not vary by age.

Yep, annual insurance premiums for two adults would cost between $60,000 and $148,000.
Hopefully they’ll be okay with that, secure in the knowledge that they’ve sacrificed good health and medical treatment, for themselves and their families, on the altar of liberty.
And no, the free market will not come up with a solution. If it could have, it would have by now.
Perhaps the fate of the Ex-Im Bank will encourage the ideologically pure to reconsider their objection to health reform, but probably not.

Texas’ DWC misses the mark

Texas will be publishing ‘report cards’ for physicians treating workers comp patients, but won’t include opioid prescribing patterns as a criterion. That’s unfortunate – at best.
According to a piece by Bill Kidd in WorkCompCentral, the DWC – not the group tasked with developing criteria – made the decision to exclude opioid prescribing patterns, which will include data on timeliness and completeness of filing paperwork (really…), release to return to work, and use of MRIs for low back claims. This despite the ‘bi-partisan’ backing of the metric by theTexas Medical Association and the Insurance Council of Texas. (I really don’t like the term ‘report cards’ as it is viewed by many providers as pejorative and somewhat insulting, thus the information can, and often is, given short shrift by providers who hate the term.)
The good news is DWC will consider adding opioid prescribing patterns in 2015 and has already decided to include the criterion in the “medical quality review audit plan’. [opens pdf] However, the group working on the report cards had been actively discussing including assessing opioid prescribing two months after the date of injury and surgery; that discussion is now moot. Including opioids in the report cards would have sent a clear message to providers, one that is long overdue and critically important.
This is unfortunate. WCRI data indicates the Lone Star State is well above the median in almost all opioid utilization categories: volume of narcotics prescribed; number of narcotic scripts per claim; number of pills per script;percentage of claimants prescribed narcotics. Despite the lower potency of narcotics prescribed in Texas, the greater volume of claimants prescribed these drugs, longer duration of care, higher volume of scripts and pills per scripts combined to give Texas claimants more morphine equivalents than the median WCRI state.
Hydrocodone usage alone in Texas has gone up 350% over the last ten years while the death count from other opioids increased over 400%.
Inclusion of the metric would certainly help payers and claimants avoid the worst of the worst; for example, an Oklahoma physician was just indicted for the deaths of five patients after they died of prescription drug overdoses.
There’s very little credible evidence that long term (more than six months) opioid use is appropriate treatment for work comp injuries. These are drugs primarily developed – and approved by the FDA for – treating end-stage cancer pain. Not much cancer in work comp.
There’s ample evidence that long term opioid use leads to longer claim duration, long term disability, higher costs and much more medical expense. And that’s on top of the damage it does to relationships, families, and society.
What does this mean for you?
By not adding opioid prescribing patterns to the assessment of physicians, DWC is missing a chance to shine more light on what may well be the biggest problem in workers comp today.

If health reform is overturned…then what?

Monday I opined that the individual mandate will not be overturned. But let’s say it is – and stipulate that the rest of the health reform bill is rejected as well.
Then what?
We’ll leave aside the political implications for the moment, but it’s safe to say that a rejection of the PPACA by the Supreme Court would be bad news indeed for Democrats
Over the near term, what happens to the 49 million Americans currently without coverage? They won’t be able to get coverage under Medicaid.
Their employers – mostly small businesses – who can’t afford the premiums (without subsidies) today certainly won’t be able to find affordable insurance in the future.
In many states, people and families trying to buy coverage on the individual market will find a) their pre-existing conditions won’t be covered, or b) will only be covered after an extended waiting period and with a much higher premium and c) the cost of family coverage – for plans with very high deductibles – will be above $1500 a month in many states.
If health reform is overturned, 20% of Americans may be without coverage in 2020, yet we’ll be spending 20% of our GDP on health care. As more go without insurance, cost-shifting to those with coverage will increase, driving up their premiums even faster. The vicious cycle will accelerate, and as costs rise, employers and families will drop coverage, dumping more cost onto the ever-smaller population of insureds.
Okay, back to the political implications.
As David Blumenthal noted in the NEJM article cited above, if the Republicans win big this fall, after blasting health reform for the last several years a GOP administration and Congress would find it difficult to then legislate a new approach.
Moreover; ” the traditional Republican approach to covering uninsured Americans [is] an individual tax credit subsidizing purchases of private health insurance funded by ending the tax exemption for employers’ contributions to employees’ health insurance. Many employers and employees oppose this idea, and it would be difficult to pass without a major political fight. Historically, Republican presidents have been reluctant to take on the political costs of comprehensive health care reform, and the last thing a new Republican president will want is to fall on the political sword that impaled his predecessor.”
So.
PPACA is overturned, the number of uninsured is on a path to 20% of the population, the insurance death spiral accelerates, and the new Congress and President can’t/won’t do anything about it.
Can someone tell me how the free market fixes this problem? What insurance company is going to seek to cover families and small businesses with significant pre-existing conditions? Which, by the way, more and more of us have?
And if you can’t get coverage thru your small employer or on the open market, what are you going to do?
Those folks lucky enough to live in states with rational, sentient state legislatures will be better off than those living in states less fortunate.
But all of us will be facing family premiums north of $30,000 within five years.

The insurance mandate will not be overturned

There’s too much legal precedence at stake, too many years of “settled” law, too much potential disruption to the legal system for the Supreme Court to reject the individual mandate portion of the PPACA.
That’s the general consensus of legal experts, and while they could be wrong, I don’t think so.
A quick summary.
There are four separate issues in front of the Supreme Court, with perhaps the most significant the “individual mandate”: the requirement that each of us have health insurance or pay a (rather modest) fine. According to an American Bar Association poll of experts on the Supreme Court; “85% said the act would be upheld, [emphasis added] mainly because they believed the court would find the requirement that all adult Americans obtain insurance coverage to be constitutional.”
Before my conservative friends start railing, don’t assault the messenger. This isn’t a political statement, but rather reporting on what looks to be a general consensus that the mandate will be upheld. [opens pdf]
Moreover, let’s not forget that the insurance mandate was the brainchild of the conservative Heritage Foundation; back in 1989 the Foundation’s Stuart Butler wrote:
“[N]either the federal government nor any state requires all households to protect themselves from the potentially catastrophic costs of a serious accident or illness. Under the Heritage plan, there would be such a requirement…Society does feel a moral obligation to insure that its citizens do not suffer from the unavailability of health care. But on the other hand, each household has the obligation, to the extent it is able, to avoid placing demands on society by protecting itself…A mandate on households certainly would force those with adequate means to obtain insurance protection.”
The same expert panel surveyed by the ABA also predicted the Court will:
- not find the challenge to the law is premature (in legal-speak, the issue isn’t “ripe”)
- they will uphold the rest of the law if the mandate is ruled un-Constitutional
- the Medicaid expansion will be deemed Constitutional (24 states have asserted it is not)
As regular readers know all too well, my batting average on these prediction things can be pretty inconsistent, so opponents of the PPACA may well take heart; if I’m betting one way, there’s almost certainly a lot of smart money taking the other side of the wager.
Either way, we’ll have a ruling in early summer. In the interim, health plans are betting the law will be upheld, and are working fast and furiously to prepare.

Build a better Federal budget

There’s a budget proposal from the President, one from Rep Paul Ryan (R WI) and the House of Representatives, a third from the House Progressive Caucus, and several permutations from the four GOP Presidential nomination contenders as well.
But where’s yours?
Haven’t gotten around to it? That’s no excuse – especially now that you can build your own version of the Federal budget here.. Takes just a couple minutes, and you’ll actually know a lot more about where dollars go, and where they come from when you’re done.
Want to keep those taxes low and slash entitlements? Get to it! Time to increase spending on science? You go, girl/boy! Angry that there’s not enough for NASA? Raise their budget to the moon! Want more dollars for border security? You’re the boss!
Best of all, you don’t even have to deal with lobbyists, the media, bloggers (aren’t they the worst?!), arguments among your own advisers, nasty comments from the opposition, or SuperPACs using your own words against you…
Seriously, a pretty enlightening experience for all.

Starck leaves CorVel, Lisenbey new CEO at Broadspire

Two top positions in the work comp industry will be occupied by new people this spring. Ken Martino, long-time CEO of TPA Broadspire is resigning to take a new position in his home state of Connecticut, and CorVel CEO Dan Starck is departing the company to assume the role of CEO of Apria Healthcare. Starck’s new job, announced earlier this month, takes effect mid-April.
No public announcement from CorVel on succession plans, and no information on their website either. Notably they did file an 8-K with the SEC noting that former CEO Gordon Clemons Sr will be assuming the role. (that notice is not on CorVel’s website as of today). That’s a bit unusual as CorVel is a publicly traded company and one would expect they’d let the market and investors know that a) the CEO is out and b) who’s taking over long-term, or at least that they’re working on it. I did email Clemons to get his comments, as usual he’s been non-responsive.
Martino’s been a very effective leader for Broadspire, navigating the TPA through a very difficult market. After a tough 2010, they’ve had notable sales growth over the last few quarters, landing several large self-insured employers. Martino repositioned Broadspire as a TPA focused on medical management; they broke away from the usual “national contract with Coventry plus a few other networks” model to identify, contract with, and build connections to a multitude of networks; their pharmacy program is solid and internally managed, and they’ve developed medical management applications inhouse as well.
This continues with Danielle Lisenbey’s appointment as Martino’s successor; her years of experience in medical management is a clear indication that Broadspire sees leadership in this key area as critical to the company’s continued growth. She may well be the only TPA CEO with a degree in industrial engineering; this has served her well as Broadspire has re-engineered the medical management and claims processes.
CorVel, the work comp managed care services and TPA company, is likely searching for a more permanent successor to Starck; Clemons is probably not in the seat for the long-term. Gordon junior may be on the list, but the delay in announcing a new boss may indicate an intention to look outside for more experience, particularly in leading a publicly-traded company.
Starck et al have been able to keep the company’s P/E ratio right around 20 for quite some time; this may prove a challenge for his successor, as their most recent report indicates CorVel earnings tumbled in the last quarter. The company’s gross margin declined by 410 basis points while operating margin (down by 320 basis points) and net margin (180 basis points decrease) also worsened.
While the somewhat-hardening comp market may help CorVel’s TPA business, the company’s recent loss of a significant managed care services account has yet to be fully felt on the books.

Align Networks – SmartComp: the deal is done

The official announcement comes this morning; the merger of Align Networks and Universal SmartComp is done. More precisely, pending completion of due diligence, it’s done.
The new company will be the largest in the workers comp physical medicine space, with over $250 million in revenue, closely followed by industry founder MedRisk (an HSA consulting client). The merger is actually an acquisition, as USC will now be owned by Align.
There appear to be several keys to the deal.
- USC has been in Riverside’s portfolio for four years, smack in the middle of the three-to-five year horizon for most investment firms.
- the investment community’s strong and continued interest in the work comp space. Align’s owner, General Atlantic, while a bit of a late-comer to the industry, is a very large, highly competent, and well-regarded investment firm; undoubtedly they see this as a profitable business.
- those “synergies” that investors like so much; eliminate duplicative administrative costs and spread those costs across a larger revenue base. As I noted last week in a post about the pending Align-Smartcomp deal, SmartComp and Align have a lot of overlap in their provider networks.
Generally speaking, Align has deeper discounts than USC, based on Align’s prospective referral strategy (Align schedules the claimant’s appointments, and has been pretty successful convincing providers that the prospective referral merits a deeper discount). Look for the merged entity to merge their provider contracts as quickly as possible in an effort to deliver better savings for USC customers. That may be a challenge, as providers contracted with both bought off on the Align value proposition, and may well be reluctant to agree to provide the Align discount to USC patients, most of whom are not scheduled by USC.
No doubt Align/USC will be working this issue hard, as it is going to be quite the challenge. PTs who listened to the Align provider contracting pitch will now hear the same provider relations person presenting a seemingly-contradictory argument; the PT should agree to an across-the-board deep discount.
- Align has gotten good traction by selling to individual adjusters, but has had less success convincing corporate buyers to use their services. In contrast, USC has had some success with corporate buyers and TPAs where their fee sharing arrangements are financially attractive. (I have no inside knowledge) but the thinking may well be the two are mutually supportive; USC’s corporate sales married to Align’s adjuster success makes for better penetration all around.
That said, USC’s sales efforts took a hit with the sudden departure of just-hired sales chief Frank Vidrik last fall. Vidrik, along with other sales personnel, left right after the Work Comp Conference in Las Vegas, the biggest trade show in the business. The timing was unfortunate, as following up on leads and discussions at the show requires all hands on deck. In contrast, Align’s sales force has been relatively static, with long-time industry sales pro Tad Grattan leading a large, adjuster-focused sales force. Grattan et al have had good success leveraging their relationships with adjusters; Align’s adjuster focused approach drove the company’s rapid growth and their sales successes were the primary driver behind the original sale of Align at what has been widely rumored to be a very high multiple.
- In what may seem counter-intuitive, the deal may have been pushed along by Align’s biggest sales win to date – the US Postal Service contract. While the potential business is significant, there have been some significant hurdles getting any appreciable volume flowing from the USPS. Among the problems has been:

the Postal Workers’ union’s vociferous and public denunciations of the deal
Align’s inability to direct injured workers to Align providers (there’s no legal ability to direct in the USPS work comp system) coupled with the USPS union’s statement “that strongly discourages member participation.”
the need for Align to have network providers in close proximity to USPS locations (recall some post offices are located in very small towns in rural areas)
some of Align’s initial messaging and communications efforts which drew the ire of the union and a quick ‘clarification’ by the USPS.

I don’t see how the merged company is better positioned to address these issues; perhaps this is best chalked up to ‘learning experiences’ as Align seeks to better understand the corporate buyer and their often-unique needs and operating requirements.
(Note – MedRisk did compete for the USPS business. (I was not privy to the bid nor did I in any way participate in the process) As MedRisk has deep experience with this type of client their bid likely reflected the challenges inherent in delivering services to claimants in a non-employer directed, strong-union, geographically-dispersed environment.
What does this mean for you?
For insurers and TPAs that like to work with multiple vendors, the choices have been reduced.
For PT providers, get ready for some tough negotiating.

Disease mongering…

MRIs used to cost thousands; but today, you can get one for a mere $75 - if you use Groupxx’s coupon (no, I won’t provide a link, that would encourage this behavior).
Today’s virtual in-basket had not one but two notes from colleagues about this fantastic offer, one where you can get an MRI AND a medical consultation, which normally goes for $250, for the tiny sum of $75.
For that, you get “the chance for one of those moments of clarity. We provide you with the opportunity to appreciate and better understand the inner intricacies of parts of your body such as your spine, your joints or your pelvis through an MRI scan.”
Wow, such a deal.
Of course, something could easily appear on that MRI which would lead to more treatment, more bills, and more revenue for the MRI’s owners and the docs doing the “diagnosing”.
Now, I don’t think this is all bad.
Insurers may use these ads as a way to get even lower rates from MRI vendors.

Claims adjusters may want to buy a couple dozen to sock away for that next rash of lower back injuries.
Self-insured employers may even now be getting out their credit cards to reserve a few slots for employees and dependents with undiagnosed musculoskeletal issues.
Isn’t the free market great?
Thanks to Gary Schwitzer and the unnamed colleague for the heads’ up…