ACA Deathwatch – A Zero-Sum game

The ACA repeal movement may have gained a bit of momentum this week…The quick take – odds are this momentum will peter out as changes wanted by some Republicans are anathema to others.

My take is the hands on the Deathwatch Clock just moved back – not forward.

Here’s what’s going on.

The White House continues to push for a vote in the House by the end of this week, apparently to give President Trump a “win” in his first 100 days.

Hard-right Freedom Caucus Republicans have apparently agreed to a rough outline of a repeal plan. (details below)

Somewhat-more-moderate Republicans have publicly weighed in on the outline, and there’s a good bit of concern over coverage for pre-ex conditions and other provisions.

While the challenge faced by the Republicans is pretty straightforward, the solution is anything but. Put simply, changes that get support from the hard-right reduce support from more-moderate Republicans; It’s a zero sum game.

And that’s before it gets to the Senate, where it will die because Senate Republicans are loathe to pass anything remotely resembling AHCA.

Details on the latest legislation

Healthcare is brutally complicated, a reality that’s becoming increasingly apparent to GOP negotiators. To get to some sort of agreement between hard-rights and more-moderates, the latest repeal legislation includes:

  • waivers that allow states to set insurance premiums for older people 5 times higher than younger folks
  • ability for states to let insurance companies eliminate or limit coverage for different types of medical care – drugs, therapy, behavioral health, nursing home care, etc.
  • ability for insurance companies to “medically underwrite” individual and small group insurance again – in English, let insurers decide whether to cover you, and how much to charge, based on your medical history and risk factors.  To do this, states will have to provide high-risk insurance pools to help offset losses (this is a really complicated solution that hasn’t ever worked)

I won’t bore you with the nitty-gritty details, you can read them here.

What’s becoming increasingly apparent to Republicans in DC is they have a Hobson’s choice.

There is no way they can deliver on their campaign promise to repeal ACA and replace it with anything that won’t piss off a lot of their supporters.

But if they don’t repeal ACA, that will really piss off a lot of their supporters.

Add a President who doesn’t care what legislation does or doesn’t do, but cares a lot about “winning”, and we now understand why they are in the mess they are.

What does this mean for you?

The GOP has yet to transition from opposition to governing party.


It’s not the price of the pill!

Some states and regulators are slashing workers’ comp pharmacy reimbursement. This is a huge mistake.

Work comp drug costs have dropped 11 percent over the last 6 years. Work comp PBMs have successfully reduced their revenues and profits, benefiting their patients, customers, employers.

(Contrast this with non-WC drug costs which have gone UP every year)

(Chart from CompPharma 2016 Survey of Prescription Drug Management in Workers’ Compensation; trend indicates decline in annual drug spend)

And for this, they are getting hammered.

Workers’ comp PBMs have done great work reducing the inappropriate use of opioids, protecting patients from deadly drug combinations, and cutting overall drug spend in the process. Fewer new patients are getting opioids and opioid spend is down significantly. Yet for reasons beyond understanding and contrary to all evidence, regulators in some states have decided that drug costs are now too high, so they are drastically slashing fee schedules.

This is not going to end well.

Managing prescription drugs is very labor- and technology-intensive, requiring

  • expert, highly trained, and very specialized staff, and
  • constant updating of critical information systems.

When regulators slash reimbursement, PBMs can’t afford the pharmacists, IT staff, business analysts, customer service personnel, legal and compliance experts, systems, and resources that have been instrumental in delivering better patient care and lower costs.

Folks, it costs money to do this. And fee schedules based on Medicaid ignore the fundamental differences between managing workers’ comp and Medicaid patients.

Without adequate reimbursement, we’re going to return to the bad old days of “fill it and bill it.”

A bit more explanation.  Work comp PBMs have dozens of clinical pharmacists focusing on:

  • developing, managing, and updating formularies for clients and individual patients
  • working with prescribers to alter patients’ drug regimens based on evidence-based guidelines
  • working with employers and insurers to develop and implement prior auth, medical management, and appeals processes
  • implementing comprehensive opioid management programs to prevent addiction and dependency
  • intervening when patients are prescribed multiple opioids, benzos, muscle relaxants, and other deadly combinations

Then there are the IT folks working on data links so claims adjusters get early, customized communications about potential issues, alerts when patients are prescribed long-acting opioids, information about multiple prescribers and/or multiple pharmacies, and dozens of other potential problems.  Problems that may kill patients, prolong disability, addict patients.

They work with PBMs’ business analysts mining data to find doctors with patterns of potentially-inappropriate prescribing patterns – such as the worthies in LA County.

Their legal and compliance teams work with insurers and employers to figure out what can and cannot be done to improve patient safety, alert law enforcement to potential fraud or diversion, and inform stakeholders of the frequent changes in all 50 states’ policies and requirements around work comp pharmacy.

And the front line – the customer service/patient communication staff that talks directly with prescribers, pharmacists, patients, adjusters, families, employers. These women and men have to be patient, kind, thoughtful, educated, knowledgeable.  It’s not like you can just put on a headset and start chatting about morphine equivalents, state regulations, the respiratory implications of increasing opioid intake, or polypharmacy. Initial and ongoing training and education is critically important.

There is much work left to do, as there are still hundreds of thousands of work comp patients taking way too many opioids. These are the most difficult, complex, time- and resource-intensive patients. They are also the patients that are going to be harmed most by the blunt instrument that is fee schedule reduction.

What does this mean for you?

Slashing fee schedules hurts patients, employers, and taxpayers.

If this continues, expect higher overall drug costs due to greater utilization, increased opioid prescribing and dispensing, and longer disability durations.

Note – as president of CompPharma, at some point I may be financially affected by big cuts in fee schedules. Hasn’t happened yet, and it may not.


John Hanna – one of workers’ compensation’s good people

There are few people in this industry I respect and admire as much as John Hanna.

John is the Pharmacy Director at Ohio’s Bureau of Workers’ Compensation, where he and Medical Director Steve Woods MD have done wonderful work on any number of issues.

Perhaps none so important as John’s work to revamp BWC’s formulary, pharmacy program, and pain management approach. After implementing a formulary AND the infrastructure to publicize it to providers and address authorization requests, here’s some of what John has accomplished at BWC:

  • Injured workers were prescribed 15.7 million fewer opiate doses in 2014 than in 2010, representing a 37 percent decrease
  • prescriptions for muscle relaxants and anti-ulcer medications decreased by 72 percent and 83 percent.
  • In 2014, BWC’s total drug costs were 16 percent, or $20.7 million, less than in 2010.
  • Opiate costs were down 36 percent ($19.9 million); muscle relaxant costs were down 78 percent ($3.3 million); and anti-ulcer costs were down 95 percent ($6.4 million).
  • By 2015, total opioid doses for injured workers declined by 41 percent, and
  • the average daily opioid load per injured worker in 2015 was below the 2003 level.
  • The number of work comp patients considered opioid dependent was cut almost in half.

Think about that.

Due primarily to John, over 4,000 people are no longer categorized as “opioid dependent”.

His work has undoubtedly saved dozens of lives, will keep families whole and return hundreds of Ohioans to a functional, productive, livable life.

When John reads this he’s going to be kind of upset, because he will point to and credit everyone else involved in what has been, and continues to be, a big effort. And he’s right. That said, he’s the linchpin; the quiet, steady, very persistent and totally committed driver behind the change. This would not have happened without him. He was instrumental in getting BWC to pay for addiction treatment, using creative and personalized approaches to help injured workers get back to living without opioids.

This cut claims costs by tens of millions of dollars too, and therefore costs for Ohio’s employers and taxpayers – but this wasn’t the intent.

As long as I’m getting on John’s cranky side, I’ll also tell you, dear reader, that he’s the most modest person I know. Just one example – read his bio.  See anything there about his service in Vietnam as a Green Beret medic?

What does this mean for you?

We hear too much about crooks, liars, and cheats in workers’ comp. Thank goodness for the John Hannas.


What’s your company worth?

With investors once again looking to buy into the work comp service sector, owners are looking to figure out what their company is worth. Truth is, many work comp services companies are tough to value, in large part due to their “non-contractual customers.”

Revenues and profits from “non-contractual” customers are often discounted by potential buyers, who much prefer locked-in, guaranteed-price, long-term deals for their inherent predictability.

But that isn’t the way the real world works; often case management firms, IME companies, UR vendors and other service entities don’t have formal contracts with many of their customers. Instead, they provide a service, and send a bill to the claims adjuster. There may, or may not be an upfront understanding of the service’s price.

Claims payers like this because it doesn’t lock them into a vendor, while service companies are eager to work with payers and the contracting and price negotiation process can take a long time and yield little real benefit.

Which brings us to a conundrum – how does a seller or buyer value “non-contractual” revenue. Here are six ways to think about that – ways that might get you a higher price. (this is a summary; I strongly encourage you to read the Wharton article and listen to the podcast)

  • How many people have made a transaction, used our product or service sometime within the trailing 12 months?
  • How many people have made a repeat purchase, have engaged with us at least twice over that trailing 12 months?
  • Of all the people who made a transaction with us back in 2015, how many came back and did it again in 2016?
  • With all the purchases that we had today, what percent of them are from customers who did something with us in the previous year?
  • Of all the customers who bought with us, what percent were with us previously? Or of all the orders that were placed with us this year, what percent of them are by customers who have bought previously?
  • Of all the customers who have done anything with us in the past year, how many things did they do? How many purchases did they make or sell on?

I can hear you groaning – how can I figure this out? I don’t have time for this. We don’t have the data.

All likely true – however, if you don’t have time to value your business, you won’t know what it is worth to you.  You also won’t know where you should be investing, what customers drive what part of your profits, and what that means for your strategy going forward.

What does this mean for you?

Knowledge is the most valuable asset you have. It’s worth the time to obtain it.



HWR’s “alternative facts” edition is up and ready

errr. actually, it’s the Laurel and Hardy edition.  

Brad Wright brings us a terrifically readable synopsis of the latest writing from the bestest experts on health policy, work comp, regulations, and why there are lots of treatments that deal with symptoms, but few that actually cure disease.

Two not to miss are HWR maven Julie Ferguson’s piece on worker safety at a time of program defunding, and regulatory collapse, and the increasingly-brilliant Louise Norris’ fact-filled summary of the real story about the “collapse” of exchanges.


Latest news from the work comp world

A few items of interest from the workers’ comp world…

The sale of Mitchell proceeds, with multiple sources indicating four finalists have been selected. Word is one is a strategic, or industry buyer, while the rest are investment firms. Given current Mitchell owner KKR’s avowed intention to double their money (they paid $1.1 billion several years ago), it’s a safe bet the finalists are those with the deepest pockets.

Mitchell’s move to build their workers’ comp and auto pharmacy benefit management business is continuing; the latest deal is an acquisition of Mobile, AL-based PMOA. With this latest transaction, Mitchell has vaulted into the second tier of work comp PBMs, with revenues likely in the $175 – $200 million range.

The expansion into the PBM world makes sense, as it significantly increases top line (revenue).  I’d note that the PBM business is looking less attractive these days as margins have been hammered by states drastically cutting fee schedules.

Optum will announce today – or shortly after – that long-time workers’ comp exec David Young will assume leadership of the company’s workers’ comp subsidiary. Formerly CEO of Coventry Work Comp, David brings decades of experience to one of the largest service providers in the industry.

Congratulations to Gallagher Bassett and Pam Ferrandino; GB has hired the vastly-experienced Ferrandino to help run the TPA’s business development team.  Formerly leader of Willis Towers Watson’s casualty brokerage business, Pam will bring a wealth of knowledge and keen understanding of the buyer to GB. (Pam is a friend and colleague)

Finally, the transactions signal a bit of a resurgence in the work comp transactions. The work comp services world appears to be a focus of attention among private equity firms these days – there are at least two other deals that are in process, both have generated a lot of interest in the investment community.

There are several factors driving this. 

  • the mess in DC makes any business case or investment opportunity relying on or heavily driven by CMS or HHS dangerous at best. With the on-again-off-again ACA repeal effort, it’s impossible to predict what’s going to happen. Investors are well-advised to stay on the sidelines until things get clearer.
  • Interest rates are headed up, making now the time to do transactions before debt financing gets more expensive.
  • Private equity firms have a gabillon dollars in funds looking for investments.  They’ve got to find places to park that cash or risk alienating the entities and individuals who’ve bet on their ability to drive huge returns.
  • Sellers are getting multiples in the double-digits for work comp assets. (Prices for their companies are more than ten times the company’s cash flow) Smart owners know that will NOT continue; workers’ comp is a declining industry overall. The owners who are realists know this may be the last best time to sell.

What does this mean for you?

Pigs get fat, hogs get slaughtered, and investors, be careful.


4 million jobs

may be gone when autonomous driving is fully implemented.

At an average salary of $33k, that’s $132 billion in wages that will disappear from payroll.

This from a report from the Center for Global Policy Solutions released last month – thanks to Insurance Journal for the heads’ up.

A quick primer – this contemplates “Level 5” autonomous driving – that is, the vehicle can handle every driving situation without human intervention.  Today, some vehicles have attained Level 4, which allows hands free driving in most situations such as highway and parking.

Some will scoff, citing regulatory hurdles, consumer reluctance, or just Luddism as reasons this will never happen.  Me?  I’d feel a lot safer if that dual semi trailer had Watson behind the wheel – and I’d be pretty happy to have a lot more time to work, read, call my mom, sister, and kids, text and blog while traveling from upstate New York to Boston, NYC, Philly, or Cleveland.

Implications abound.

  • more productivity for Americans
  • lower work comp premium for insurers
  • fewer injured workers
  • far fewer accidents = less need for replacement parts, less need for body shops, paint techs, wholesalers
  • less need for truck stops, mechanics, motels and restaurants (and these are in addition to the 4 million drivers)
  • lower work comp medical costs
  • way harder to re-employ transportation workers looking for employment
  • increased inequality as transportation is one of the few sectors with large numbers of relatively good-paying jobs.

What does this mean for you?

Denial is not a viable long-term option. Adaptation is.


Beware the Ignorant Antagonist

This was the message Accident Fund’s Jeff White delivered in a recent presentation on disruption in insurance – and specifically workers’ comp. A few of Jeff’s slides are shared here…

The idea is simple – things you used to have to do via phone or fax or in person or thru the (gasp) snail mail you can do on your smartphone or tablet – instantly, securely, and at no cost.

Hotel reservation?  Hotels Tonite.

Plane? Get a reservation, get flight status pushed to you, change your seat, get an upgrade.

Get dog food? Amazon Prime.

Nearest coffee? Starbucks app – and pay for it too.

Check on your house? Sure – lock status, turn up the heat, watch home security cameras.

Banking? Deposit checks, pay bills, move money around via your phone.

Sports? Get scores, watch highlights, chat with fellow fans, post pictures, buy tickets.

Travel, retail, security, banking, entertainment – all have been disrupted, middlemen eliminated or drastically changed by adoption of smartphones, spread of a very fast internet, growth of artificial intelligence-driven decision making, internet banking.

This is happening with insurance now, driven by those same technologies, processes, capabilities. Think about the implications; here’s one.

Insurance is risk-sharing for potential losses, but it is a very blunt instrument. Risk is estimated using what are really crude tools to assess exposure, potential cost, liability. Technology allows risk takers and risk assumers to narrow down the actual “risk” a lot, lowering cost of risk and more accurately pricing that risk.  Others with similar risks share the burden – but that burden is much lower due to accurate understanding of exposure.

If a loss occurs, tech can pay the claim instantly.

The graphic below is not a “could be”, it’s a “what actually happened in real life.”

Think this won’t happen in workers’ comp?

Ask a former travel agent – there are lots of them.

Most insurance companies will NOT survive the transition.  That’s because they don’t want it to happen as it will reduce revenues, eliminate the need for executives with newly-irrelevant skills and experience, and make existing infrastructure partially obsolete.

New entrants who don’t have lots of infrastructure to support and business models rooted in current technology and buying patterns are the “Ignorant Antagonists”.  Many of them will fail due to “stupid, ignorant” mistakes – but some will survive, thrive, and come to dominate the insurance industry.

What does this mean for you?

Your company tomorrow will be a lot different than it is today.  If it is around tomorrow. 



Work comp disruption and “the important vs the urgent”

A very long time ago a professor in a business school class said “you have to differentiate between things that are important and things that are urgent”.

That may very well be the most valuable lesson I learned in business school – although it’s one I constantly wrestle with.

I bring this to your attention, dear reader, because there’s been a very important series of blog posts sitting in my “drafts” folder for weeks now. I should have finished and posted them a month ago, but more “urgent” things kept coming up. Mea culpa.

So enough of my time-management problems – here’s what’s so important.

Writing in IAIABC’s Perspectives, Jeff White said:

Even more unconventional P2P insurance models are planning to go to market in 2017, some with the intent to cut out the insurance company altogether. Their
plan is to initially appeal to the one-third of the U.S. population that is wildly open to sharing money and property, even if they have never met each other in person before. These companies are adopting models taken straight out of the current Fintech playbook using crowdfunding, microfinancing, and P2P lending models as their guide.

Jeffrey Austin White is the smartest person I know in work comp.  Jeff also has the unique ability to instantly grasp highly technical issues and, more importantly explain them to the rest of us so that we understand the issue, AND get its implications.

You need to read his article, because it explains precisely what the future – peer-to-peer networks, crowd-funding, blockchain – holds for healthcare and workers’ comp.

This future has huge implications for buyers, regulators, suppliers, and other stakeholders. A few examples:

Teambrella will push the limits of our current regulatory system by allowing members to cover their own risk using a distributed network based on the blockchain.

Teambrella’s model will [be]… funded by a closed community of users without a license or the backing of an insurance company, a centralized authority, or state regulators. What? Are they allowed to do that?

Lemonade is one of several new companies, or platforms, that is re-inventing mutual insurance, by operating under what is now referred to as a Peer-to-Peer (P2P) network. This network allows customers to form groups and finance their own claims from a shared pool of funds with excess covered by a re-insurer. In the true P2P model, money left over in the pool, which would normally be profit for the insurance carrier, is either refunded back to the individual participants, paid forward to the next year’s premiums or, in the case of Lemonade, donated to a charitable organization.

Several major organizations are currently engaged in an international insurance pilot project based on blockchain technology. Aegon, Allianz, Munich Re, Swiss Re, XL Caplin and Zurich are among 15 companies that recently announced the launch of the Blockchain Insurance Industry Initiative — B3i.

I’m going to dig deep into this in the next post.



Quick takes…

Crazy busy here at the intergalactic HQ of Health Strategy Associates, so I’ve been slacking on my blogging duties…

here’s what came across the virtual desktop of late.


several articles of note – save them, file them, read them.  You WILL have to understand blockchain, and sooner than you might think.

Blockchain and the sharing economywhich will include insurance

What will blockchain mean for jobs? One expert says: “30–60% of jobs could be rendered redundant by the simple fact that people are able to share data securely with a common record.”


The sharing economy depends on the ability of entrepreneurs to leave big employers with good healthplans. If ACA is repealed and/or individual insurance markets tighten up, the gig economy is going to get slammed.  “Job lock” is real; this from HealthAffairs

Without the ACA, there will be fewer Howards who start their own businesses, resulting in fewer jobs. That’s why anyone who tells you that the ACA is a “job killer” is flat wrong.


Express Scripts’ new work comp drug trend report is out – key highlights are:

  • drug spend is down 7.6%
  • opioid utilization is down 11.1%

What this means – work comp PBMs and payers’ efforts to reduce opioid over-utilization are paying off, and this is excellent news for patients and employers alike.

HOWEVER, with half of all patients receiving at least one script for opioids, we’ve still a long way to go.  No vacations folks, now’s the time to keep a relentless focus on reducing opioid usage – especially for patients who’ve been on these drugs for months.

Truth is, some patients demand specific drugs, and it’s difficult for docs to convince them otherwise. And, it’s notoriously difficult to get physicians to change their habits...they are human after all.

Hawaii’s legislature is considering legislation to limit physician dispensing.  Thank goodness the Clifford Yees of the world seem to be sidelined – at least for the moment.

Back tomorrow to a deeper dive into a key issue…