Friday’s catchall and catch-up

It’s been a crazy busy year for all; in the run-up to the Christmas holiday I missed a few items that well deserve mention.

First, my post about female CEOs missed a couple women in that role; Liz Haar is CEO of Accident Fund Holdings Inc.  What’s worse is AFHI has been an HSA client for some time, proving I can on occasion be dense as a rock . Artemis Emslie runs myMatrixx, one of the more innovative workers’ comp PBMs.  Deborah Pfeifle was also disappointed I forgot about her.

My apologies to you all; I’ll strive to do better in the future.

On the good news front, medical trend is at an all-time low, with inflation running 1.3 percent since 2010.  That is nothing short of amazing/incredible/mind-boggling.  As a result, CBO projections of Medicare/medicaid spending over the next six years is down $147 billion, or 0.6% of GDP.

On a more esoteric note, CMS announced they are cutting reimbursement for interventional pain procedures; epidural steroid injections will be lowered by 36%+,  fees for spinal cord stimulation and kyphoplasty will be cut as well.  Here’s the issue; interventional pain docs may decide non-work comp patients aren’t worth their time, and focus even more on work comp. Comp payers should very carefully monitor interventional pain docs and claimants treated by those docs and be alert for practice or treatment plan changes.  

(this is the letter ASIPP is requesting docs send to their representatives…)

Finally, a piece from JAMA provides sobering statistics on why health care in America is so expensive.  (thank you to Vincent Drucker for the tip, and kudos to the Incidental Economist for posting on it long before I did)

  • 84% of medical costs are for the treatment of chronic conditions
  • Price increases – not utilization – accounted for 91% of medical cost increases since 2000.  Price is driving cost, with hospitals increasing the most.
  • The aging of the population is pretty much a non-factor, while provider consolidation is a major contributor to pricing power.
  • IT is a driver as well; “investment has occurred but value is elusive.”

So what’s to make of the super-low inflation numbers while historical research indicates prices are up?  Couple things spring to mind.

First, CBO numbers are for total spend, and governmental programs have done quite well in controlling cost; commercial payers not so much (except in Mass, where average group health premiums have gone down over the last two years!)

Second, the JAMA piece includes data from the 2000 decade while CBO is just 2010 on.  Different sample set.

What does this mean for you?

Taking all these cost items together, watch out for cost-shifting!


Work Comp Predictions for 2014 – Part 2

Okay, the easy ones are done.  Now it’s on to the tough, out-of-nowhere predictions, the ones that make – or more likely break, any reputation as a prognosticator.

6. Aetna will not sell its work comp business.  Even though some really smart folks (and people I respect) in the PE world think otherwise, I just don’t see it happening. I should have bet David Donn…(see comments section in the link).

7.  Someone is going to buy Stratacare.  OK, I know this appears to conflict with my earlier statement that the deal flow is going to slow down, but it really doesn’t.  There’ve been, what, a gazillion deals in work comp services this year?  So half-a-gazillion is less, right?

Anyways, Coventry needs a bill review platform (but I don’t think they’ll buy S-care).  Methinks it will be Mitchell; their new owners could consolidate a LOT of the work comp bill review business.  While that may appear to be a market-dominating move, don’t discount Medata and MCMC.  Agile, quick, and aggressive, these companies are taking share at the expense of the big boys – and will continue to if the “boys” become “boy”.

8.  Frequency will level off – somewhat.  Except for the recession-driven increase a few years back, claim frequency has steadily declined, averaging 2-4 percentage points per year.  With employment up, the economy improving, and manufacturing, logistics, construction, health care and energy all strengthening I’d expect frequency’s perennial decline to end, or at least moderate quite a bit.

9.  Guidelines are going to get a lot more attention – and more regulatory support.  I’m doubling down on last year’s prediction that guideline usage would grow; with the release of ACOEM’s drug formulary, Minnesota’s adoption of back surgery guidelines, the great work of PCORI, and Medata’s analysis of the impact of guidelines on cost the pressure on regulators to add more science to the art of work comp medical care is growing daily.

10.  The train wreck that is senior management at the North Dakota State Fund will continue to demonstrate the perils of politically-driven leadership.  After sacking one of the best senior execs in the industry on BS charges, WSI has:

Under state law, an audit is supposed to be conducted right about now.  Haven’t heard what firm will be conducting the audit, but if past history is any guide, expect a whitewash. We can expect continued screwups as the far-in-over-their-heads “leadership” of WSI makes a mockery of management.

The tragedy here is there are a lot of very capable, competent, and diligent folks at WSI, working every day to do the right thing.  They and the workers of NoDak deserve far better leadership.

There you have it.  One more day to go for this “business” year, and then it’s off for a couple weeks.



Work Comp Predictions for 2014

Proving once again that I’m not smart enough to leave well enough alone, it’s time for my annual predictions for the coming year. I’m putting on my Carnac costume, examining tea leaves, and stopped by the butcher to get ready for some haruspicating – that’s analyzing sheep entrails (and yep, that’s a legitimate future forecasting technique)…

liver map

So here’s what’s going to happen in 2014. I hope.

1. Overall, the work comp insurance market will be steady.  Employment is slowly picking up, manufacturing and construction are doing ok, and premium rates are level to a bit higher.  This will mean more business for TPAs, slightly higher premiums for employers (and insurance companies), and more focus on loss prevention and risk management.

2.  More consolidation in the TPA market is on the horizon.  Expect some of the mid-tier TPAs to grow via acquisition, and there may be a deal involving one of the larger ones as well.

3.  Medical trend – on a paid, not incurred basis – will increase by at least a couple of points.  The ongoing problem of facility costs, coupled with cost-shifting and a lack of focus on (real) medical management on the part of most payers will be the drivers.

4.  Deal activity for mid-sized to large transactions in the work comp services sector will taper off.  There’s one more big transaction in process, but after that gets done there just aren’t that many big companies left to sell.  Expect to see a couple transactions but nothing like we’ve seen in 2013.

5.  At least one – and likely more – insurers will discover the real impact of opioids on their claims costs, and the impact will affect their reserves, rating, and/or financial stability.  As of now, few carriers have split out the cost of claims with and without opioids, and when they do, they are in for a (financial) shock.

More tomorrow!


Predictions for work comp in 2013; how’d I do – part 2

So far, not bad.  Let’s see how my other prognostications worked out…

  1. Several more states will adopt clinical guidelines to help determine appropriate/medically necessary care.
    There’s no doubt clinical guidelines help reduce unnecessary, even dangerous care.  A paper published by Medata and ACOEM explores the issue in detail.  Two states (NM and WY) adopted guidelines early this year, NY has continued, albeit slowly, to roll out more guidelines, and Washington continues to lead the way on opioid-related issues.  That said, there is much left to be done.  I’d have to give this a partial yes, as it hasn’t happened as quickly as I predicted, or anywhere near fast enough.
  2. We will learn that physician dispensing of repackaged drugs has harmed patients.
    Yes, definitely.  Research published by CWCI, and an article authored by Johns Hopkins University and Accident Fund (to be published in 2014) both prove physician dispensing leads to longer disability duration and more medical treatment. Both use case-mix adjusted data, both come from stellar research organizations, and both put the lie to dispensing companies’ claims that outcomes are improved.
  3. The good folks at NCCI will finally schedule a credible liberal speaker for their annual meeting.
    Nope.  While David Gergen was excellent, he is NOT a liberal (or conservative for that matter).  Still waiting for NCCI to get a bit more “fair and balanced”…
  4. The level of interest and activity around opting out of workers’ comp will increase – significantly.
    I’d have to say no.  While Oklahoma is moving forward, and there are rumblings from some other states, there isn’t much of a movement or any discernible trend.
  5. Predictive modeling for claims management will come of age.
    I should have worded this more precisely, as there’s no metric we can use to say yea or nay.  That said, predictive modeling is much more widespread these days than in 2012, with many large and small payers employing some type of modeling on the front end of claims and at various times during the life of the claim.  So this is a yes.

Overall, I got 6 right, 2 partially right, and 2 flat out wrong.  Yikes, that’s barely passing…

Hope to do better in 2014.  Those predictions coming up later this week.


Predictions for work comp in 2013 – how did I do?

It’s that time of year – I get to revisit my predictions for 2013, an often-humbling experience for someone who spends far too much time out on the bleeding edge. So, here goes.

  1. Vendor consolidation – I said “we ain’t seen nothing yet…Expect several of the larger players to join forces/be acquired/become platform companies that PE firms use to build large, diverse providers.
    A resounding yes.  First OneCall’s string of deals, KKR’s acquisition of Mitchell, then the blockbuster OneCall/Align move, then Progressive/PMSI, with at least one more big one in progress today.
  2. Higher medical costs driven by facilities.
    Yes – especially in California as health system consolidation continues. We are also seeing it in other states as physician practices are bought up by hospitals, who can then bill for facility fees on top of physician charges.  Many payers are seeing double-digit trend rates.
  3. Continued ignorance of opioids’ impact on long-term costs and outcomes, coupled with inaction by most payers.
    I’d give this a partial yes.  The opioid survey we just completed revealed that many payers are actively involved in opioid management, although those programs are typically disjointed and not integrated.  However, very few payers, if any, have estimated the long term cost of opioids.  Most don’t separate out claimants prescribed opioids from those that aren’t, lumping all claimants with the same diagnosis together.  Once they start separating out (for example) back claims with and without opioids, there will be an “oh crap” moment followed by a lot of finger-pointing.
  4. Aetna will keep – and grow – their workers’ comp service business

    Well, it isn’t growing, but they are keeping it.  Aetna has been the bridesmaid on a couple of deals, as they are looking to expand via acquisition as well as incremental sales.  And no, the departures of Rob Gelb and David Young do NOT mean mother Aetna wants to dump the business.

  5. Physician dispensing of repackaged drugs – we’ll see higher prices in some states and much more physician dispensing in many.

    Oh heck yes.  WCRI’s latest reports indicate costs are up, and so is volume in many states.  My best guess is the industry – employers, taxpayers, insurers – are paying over a billion dollars more than necessary due to the plundering profiteers in the physician dispensing business.Okay, that was the first five.  Five more tomorrow – hopefully I’ll break even…


Where are the female work comp CEOs?

Congratulations to Broadspire CEO Danielle Lisenbey for her designation as one of Business Insurance’ Women to Watch, a well-deserved award to be sure. Last year saw PMSI CEO Eileen Auen receive the same award. Those worthies are in rare company as they, along with MedRisk’s Shelley Boyce are female CEOs, a rare commodity in work comp.

Why aren’t there more women running workers comp insurers, big service firms and TPAs?

Sure there are lots in senior roles at brokerage houses, vendors and insurers/TPAs, but very few in the top slot. It isn’t due to lack of experience or expertise or a track record of success. And there may well be more women than men in many companies in every position.

Except the top one.

As the father of two intelligent and very capable young women, I’m very much hoping this pattern/misogyny/lack of opportunity changes and fast.

But they have some time, unlike the female mid- and upper- managers who have spent years accumulating expertise and savvy that has still not given them the opportunity they deserve.

Lets get going here boys. It’s 2014.




North Dakota WSI blows $17 million

Ya gotta love NoDak, the state where you can get prosecuted for spending a couple thousand bucks on gift cards, party favors, and sick leave for other people, but pissing away $17 million on a failed IT project gets nothing but yawns.

That’s how much the state fund spent on a new IT system that has never and will never work.  Now, there are a lot of good people at WSI, but the executive leadership – one Bryan Klipfel – somehow (mis-)managed to allow his COO – John Halvorson – to allow an IT manager to take a project that was moving along pretty well and turn it into a cluster mess.

The project which began well enough under then-Executive Director Sandy Blunt, meandered aimlessly and expensively after Sandy was forced out, until it arrived at this point – less than a million dollars in actual value delivered, continued reliance on an aged, creaky, and poorly-working system, and a state legislature allocating even more money to sue vendors.

Every now and then someone gets what they deserve.  For WSI, they are getting it in spades.  Force out one of the most respected and well-regarded executives in the industry, replace him with a state trooper (who admitted he knew nothing about workers’ comp, had never run a business, and just happened to be one of the investigators behind that exec’s ouster)…what could possibly go wrong?

There’s no doubt the State has to replace Klipfel with someone who can spell “workers’ compensation”, “management”, “leadership” and other important terms.  The place needs a smart, effective, experienced leader.  After what Klipfel and his buddies did to Sandy, the state may find there’s a really short list of execs interested in fixing the mess they’ve created.

Maybe that guy from North Korea who just got ousted by Kim Jong-Un would be interested; he’s used to that style of justice.




The other ways health care will change

That’s the title of a talk I’m giving today at the New York Academy of Medicine. There’s a lot of discussion around the major changes associated with health reform; access to care concerns, fear of adverse selection, provider and payer integration, Exchanges and Medicaid expansion.

The key is understanding that health insurance has fundamentally changed.  Today, health insurers make money by underwriting; figuring out who is going to have claims, avoiding them if possible and budgeting for the claims they can’t avoid.

That’s over.  Now, success will be driven by branding, marketing, and population health management.  Those are areas of expertise not associated with health insurers, ones they are trying to understand/obtain/build as fast as they can. That is perhaps the biggest change coming, a 180 degree shift in business operations and focus.

Here are the other changes on the horizon…

Disability Management will be the next big thing – buyers will want to know what they get for their dollars, and that deliverable will be healthier, more productive people.

Broad access is over.  Amidst all the caterwauling about small networks and restricted benefit plans is a hard truth; providers will give better deals to health plans who can direct patients to them.

Rise of the non-physician will be rapid and reach surprising heights. No question there aren’t enough docs to deliver the same medical care to more people – but that assumes that is the right care (which about a third is not) and docs should be delivering this care – which in many instances is not necessary.

(Almost) every state will expand Medicaid.  When Medicaid was first introduced in the sixties, many states did not go along – initially.  Yet all did within a few years.

Vertically integrated systems will be big winners.

Medicine will become less art and more science.  This goes to the heart of the first issue; a lot of care is the wrong care, delivered at the wrong time, in the wrong setting.  Within ACA is significant funding for outcomes research and dissemination, and the work is proceeding at a rapid pace.

Hospitals will get back to basics.  While some will continue to spend billions on fancy technology and patient rooms, most will not see much of a payoff from that investment. Instead, expect facilities to focus on streamlining processes, improve administrative efficiency, and reduce costs.  They have to in order to survive.

Revenue maximization will get ever more sophisticated.  Providers are getting really smart about coding, payer contract negotiations, and reimbursement “management”.  Payers who are vulnerable (that’s you, property & casualty) are going to get hammered.


What does this mean for you?

Prepare.  Watch, listen, and read.  The world is changing, and it will affect you.  


Is group health paying for medical care for work comp injuries?

According to a study published in the December Journal of Occupational and Environmental Medicine, the answer is yes – to the tune of at least $200 million dollars annually.

The researchers concluded that “zero-cost” claims – those that were filed but did not result in any payments from the workers’ comp insurer or TPA – showed higher than expected medical expenses in their group health plans following the date of injury.  Some may, and undoubtedly will, argue that just filing a claim does not mean it is “real”, that many if not most of these “claims” were not occupational in nature and therefore there should NOT have been work comp dollars spent.  Therefore the dollars spent after the date of injury SHOULD have been higher, as there was an injury, it just wasn’t a work comp injury.

Well, not so fast.  These were actual, accepted workers’ comp claims and not attempts to file claims for non-occ injuries.

That being the case, I’d suggest the author’s finding, that about 0.7% of workers’ comp medical expenses have been paid by group health insurers, may be correct.

What does this mean for you?

With group health medical loss ratios fixed at no less than 85%, health plans have dramatically increased their efforts to identify and avoid any and all medical expenses that are not really truly absolutely theirs. Expect much more diligence on the part of those insurers, and a lot more subrogation efforts in the future than we’ve seen to date.  

Thanks to Insurance Journal for the tip!

Request – before you argue, please read the ENTIRE study, available here.  It is pretty well done.