Author: Joe Paduda

Jun
5

Friday catch-up

Posted by Joe Paduda on Friday, June 5th, 2015 | Comments

What’s up?

Implementing health reform

Remember the big concern that employers would drop employee health insurance in response to ACA, and employees would lose coverage?  Looks like that has not happened. The latest data indicates that the number of employees enrolled in employer health insurance actually increased over the last two years albeit incrementally.

The 1.1 percent increase may look small, but when compared to the 11 percent drop in employer coverage seen from 2000 – 2012, it represents a considerable change in direction.

Of course, this may not continue; that said, so far the “problem” predicted by notables including Douglas Holtz-Eakin has yet to appear. (note – Holtz-Eakin’s original article is no longer available on the web)

There’s been much talk about early indications of health insurance premium changes for 2016.  Friend and colleague Bob Laszewski is of the opinion that the increases are “eye-popping”; Bob also notes that the rate changes posted to date are ONLY for those plans that will see increases above 10 percent.

Others note the story is much more nuanced.

Several caveats.

  • data is only for federally-run exchanges
  • the insurers requesting the big increases appear to insure a population that is older/sicker than average
  • data does not include increases of less than 10 percent
  • all rate increases are subject to regulatory review and approval; historically many of the requested increases have been cut during the review process

I’d humbly suggest that before you cite the report as showing ACA is a big success/abject failure, read the citations.

Work comp service providers 

Humana’s sale of Concentra is done. The $1.06 billion deal was completed Monday, with Select Medical and PE firm Welsh Carson partnering on the acquisition.

Welsh Carson, one of the early investors in the workers’ comp/occupational medicine market(s), sold Concentra to Humana back in 2010 for $770 million.  While the original strategy – based on using Concentra as an entry point/primary care provider for Humana’s group insurance  and other members – made a lot of sense at the time (there were major concerns about a flood of newly-insured people overwhelming primary care docs), the predictions have not borne out.

Concentra just changed leadership – and indications are the company is returning to its roots in occupational medicine.  Former COO Keith Newton just rejoined Concentra as President and CEO.  Newton left the company after it was acquired by Humana five years ago.  While the company’s website has yet to reflect the transition, expect to hear more from the nation’s largest occ med provider as it reaches out to past customers and markets.

Humana pushed Concentra to change its focus from occ med to family practice to support Humana’s group health and other insurance business.  As a result, most of the physicians hired over the last 5 years were family practice docs, not occ med physicians. In some markets the change was dramatic; a former Concentra exec noted a key southeastern market did not have any Board Certified Occ Med physicians that treated in clinic. 

Concentra’s traditional employer customers were, understandably, not enamored with the change; there’s a multi-pronged strategy in place to win them back.  On-site clinics are dropping non-occ med services and many clinics are eliminating primary care as well. Hiring is focused on recruiting board eligible and board certified Occ Med physicians. 

CorVel had a tough quarter; net income was down 35% to $5.6 million while revenues increased 1.7% to $122 million. The stock was down 11.7% on the news, but still carries a healthy PE ratio near 22.  CorVel indicated the drop in earnings was due to investments in the company’s provider network…

Competitors opine CorVel is “giving away” their TPA services in an apparent effort to capture new employer clients.  With profits increasingly derived from managed care services (which are much harder for employers to predict, track, audit, and report), this isn’t a unique strategy by any means.

FWIW a source indicated Sedgwick recently took the North Carolina Dept of Public Instruction business from CorVel.

Finally, an anonymous commenter said my report that OCCM is acquiring MedFocus was incorrect.  If any non-anonymous reader has information, please send it to me.  I will respect your confidentiality if you email me directly.  (I responded to the commenter via email, but s/he used a fake address).

 

Jun
4

A work comp exec’s MUST read

Posted by Joe Paduda on Thursday, June 4th, 2015 | Comments

The health care “system’s” problems are even worse for worker’s comp.

That’s the conclusion I reached after I finally got around to finishing “Overkill“, Atul Gawande’s latest piece on the clustermess that is the American health care system.

The top takeaway is this – there is huge over-diagnosis of medical “problems” due to an over-reliance on fancy diagnostic technology, technology that far-too-often identifies physical abnormalities that have little to no effect on one’s health or functionality.

An excerpt makes the point:

Studies of adults with no back pain find that half or more have degenerative disk disease on imaging. Disk disease is a turtle—an abnormality that generally causes no harm. It’s different when a diseased disk compresses the spinal cord or nerve root enough to cause specific symptoms, such as pain or weakness along the affected nerve’s territory, typically the leg or the arm. In those situations, surgery is proved to be more effective than nonsurgical treatment. For someone without such symptoms, though, there is no evidence that surgery helps to reduce pain or to prevent problems. One study found that between 1997 and 2005 national health-care expenditures for back-pain patients increased by nearly two-thirds, yet population surveys revealed no improvement in the level of back pain reported by patients. [emphasis added]

More specific to workers’ comp, the good folks at Liberty Mutual’s Institute for Research found claimants with back pain with:

early or non-indicated MRIs led to a cascade of medical services in the six-month period post-MRI that included electromyography, nerve conduction testing, advanced imaging, injections or surgery.

These procedures often occurred soon after the MRI and were 17 to nearly 55 times more likely to occur than in similar claims without MRI.

“Being a highly sensitive test, MRI will quite often reveal common age-related changes that have no correlation to the anatomical source of the lower back pain,” said one of the researchers, Glenn S. Pransky, MD, Center for Disability Research, which is part of the Liberty Mutual Research Institute for Safety, in a statement.

According to Pransky, evidence-based practice guidelines for lower back pain recommend against early MRI except for “red flag” indications such as severe trauma, infection or cancer.

Dr. William Gaines, associate national medical director, Liberty Mutual Commercial Insurance Claims, said that the National Committee for Quality Assurance and the American Board of Internal Medicine have emphasized for years that overuse of imaging does not represent good care for low back pain.

What does this mean for you?

Our health care system is very, very good at finding physiological and anatomical “problems”.  Unfortunately, it is also very good at assuming those findings actually indicate an underlying and significant pathology.

 

Jun
3

Will Banjo be the social media app that revolutionizes insurance?

Posted by Joe Paduda on Wednesday, June 3rd, 2015 | Comments

It sure looks to be the front runner now.

Banjo consolidates all social media feeds into a single platform in real time, then maps then on a geographic grid so users can see what is happening instantly anywhere.

It’s an “event-detection engine”.

Ok, that’s cool.

What’s really useful is Banjo also establishes a baseline activity ‘profile’ (my word, not theirs) and triggers an alert when one of 35 billion geographic grid cells (each about the same size as a soccer field) goes “abnormal”.  And, users can look back in time to see what was happening just before the triggering event, and monitor how that event unfolded…

Want to track a hurricane and damage therefrom?

See where a tornado is headed?

Know instantly when a violent incident erupts?

Follow a demonstration in Egypt’s Tahrir Square as it moves and evolves?

Know which of your band’s songs are getting the most shout-outs?

See if an insured walked away from a “supposedly debilitating crash”?

The app has been used successfully to do all that and more.  Founded by perhaps the most eclectic entrepreneur in high-tech, a high-school dropout, former NASCAR crew chief, Navy veteran, crime-scene investigation expert turned coder, Banjo is now being used by a diverse group of commercial enterprises who want/need to find out instantly about key events happening anywhere – or in very specific places – around the world.

According to Inc., Banjo:

shows only geolocated public posts made from mobile devices; those posts are drawn from what [CEO Damien] Patton calls a “world feed” he’s created by aggregating more than a dozen major social networks (and counting), from Twitter to Instagram to Russia’s VKontakte to China’s Weibo…with all of the public posts in [a small geographic] area appearing as pins on the map and as cards, complete with text, photos, and video, alongside it. All this in real time.

What does this mean for you?

Early adopters are going to know sooner so they can react faster, and possibly profit more.

Jun
2

Hospital prices are up. Way up.

Posted by Joe Paduda on Tuesday, June 2nd, 2015 | Comments

And this means higher costs for those getting treatment outside of their core networks, and especially for work comp payers.

While Medicare reimbursement has remained pretty level, hospitals have been busy raising their list prices by more than 10 percent over the last couple of years. This doesn’t really affect most patients as their rates are negotiated by private insurers or set by CMS for Medicare recipients (or Medicaid on a state-specific basis).

Examples of procedures with the highest increases are:

  • Back and neck procedures except fusions – 22.5%
  • Medical backs – 17.5%
  • Most fractures – 17.3%

The impact is felt most directly by privately-insured patients seeking care outside of their network, as deductibles will almost certainly be much higher, as will copays and out-of-pocket limits.

For workers’ comp payers in states without DRG-or similarly-based fee schedules, the price increases are having even more of an impact. For example, employers in states such as Florida that base reimbursement on a percentage of charges are seeing significant jumps in the prices paid for facility-based care.

But that’s only part of the issue.  There’s a “multiplicative” effect as well.  With more and more physician practices bought out by health systems, and more and more docs working for those health systems, their services are increasingly billed as facility codes which tend to be higher and include costs that don’t show up on physician bills.

Medicare is doing an admirable job holding down costs while increasing its focus on quality.

That said, there are some pretty ugly side effects.

As facilities scramble to increase their quality ratings; staff is evaluated on “patient satisfaction” which is a pretty iffy metric. The understaffing of inner-city emergency rooms is gaining more attention, as well it should. These are just two of the unintended consequences of what are dramatic and often wrenching changes in the American health care system.

What does this mean for you?

Higher facility costs for comp payers means they will need to focus even more tightly on the amount paid, and not the network discount for facility care.

May
29

Friday catch-up

Posted by Joe Paduda on Friday, May 29th, 2015 | Comments

Gotta love the start of summer; hope your weekend is going to be filled with fun and family.

But before you go, here’s what’s been going on over the past couple of weeks.

First, your morning outrage...here’s the latest from the world of “how do we suck as much profit from employers and taxpayers as possible”…thanks to a colleague at PBM Helios.

Drug costs

A report from AARP indicates generic drug prices, which have been falling for years, leveled off somewhat in 2013.  Couple caveats – the data is for drugs commonly used by seniors, and the data is 18 months old. Among drugs relevant to workers comp:

  • anticonvulsant prices increased 17.2% in 2013;
  • muscle relaxants decreased 0.7%;
  • opioid analgesics dropped 8.3%; and
  • NSAIDs were down 8.4%.

Two other data points worthy of consideration.

  • CompPharma is currently conducting the 12th annual survey of prescription drug management in workers’ comp; the top issue named by respondents so far is drug price increases (a major change from the historical focus on opioids)
  • All the major PBM drug trend surveys released to date have identified drug price increases as a major issue.

Health reform implementation

The latest data indicates the percentage of Americans 18 – 64 without health insurance decreased to 16.7% in 2014, down from 20.4% in 2013.

According to California Healthline;

The uninsured rate for U.S. adults under age 65 in [Medicaid] expansion states during the study period was 11.5%, a 3.4 percentage-point drop from 2013. By contrast, the uninsured rate for U.S. adults under age 65 in non-expansion states was 16.3% during the first nine months of last year, a 2.1 percentage-point decrease.

There’s a LOT of useless and some outright harmful medical care delivered every day – as has been well documented by many.  A highly readable and compelling analysis comes from Dr Atul Gawande in a recent New Yorker; thanks to multiple readers and friends for the heads up.

Macro factors

Bad news came this morning; the economy actually shrank by 0.7% in Q1 2015; however that comes on the heels of a 5% jump in the latter half of 2014.  Projections for the rest of the year look modest but positive; it also looks like unemployment may drop to 5% by the end of 2015; a major improvement over the 8% we saw two years ago.

Research

Thanks to NCCI for updating our understanding of claim lag, the last broad-based analysis was the Glen Pitruzzello-authored study by the Hartford.

Deals

Summit’s acquisition of Paradigm is said to be close to completion.  While we don’t know pricing or details, expect the transaction will be in the $500 million range as Paradigm’s EBITDA is rumored to be around $60 million.

Finally, word from multiple sources indicate imaging network company MedFocus has been bought by OneCall Care Management.  MedFocus isn’t a major player with work comp revenues in the $25 million range, but the transaction does further limit the number of vendors available to serve comp payers.

 

May
28

Walking to work

Posted by Joe Paduda on Thursday, May 28th, 2015 | Comments

One of the less significant ways tech will change workers’ comp is prostheses.  Alluded to in the introductory post to this occasional series, there are myriad issues that will affect workers’ comp due to new “high mobility” prostheses (my term).

Parker Hannifan is just one of the companies working on your claimant’s next prostheses; there model is the Indego. Currently in clinical trials at Shepherd, Rusk, Chicago Institute of Rehab among other elite rehab facilities, Indego has developed an exoskeleton that enables paraplegics to walk.

Indego20device

photo Craig Hospital

The Indego weighs a mere 26 pounds, has a battery pack that lasts 4 hours and can be readily switched out. According to the website “The user controls his movement by leaning forward to walk forward and returning to an upright position to stop walking. To sit, the user leans backward, and Indego dampens its motors until the user is safely seated.”

A related field is neuroprosthetics – small, powered devices that connect to the brain to simulate or stimulate sensory organs or muscles. Visual, auditory, and muscular control are three areas with a wealth of research.

One area with deep significance for comp involves orthoses for traumatic brain injury patients to control limb movement by reading neurons in the brain, calculating limb trajectory, and signaling the muscles and nerves needed to create movement.

These devices are likely going to be very costly, require ongoing expert maintenance and support, and likely replacement over time.

They will also enable paraplegics to walk, brain-damaged individuals to lead a more normal life, and some day, blinded people to see.

As medical care improves to the point that grievously injured patients actually survive trauma that would have killed them just a decade ago, there will be more and more candidates for these devices in future years.

What does this mean for you?

Very good news indeed for patients formerly consigned to a life of many limits; moral, ethical, and financial dilemmas and decisions for employers, regulators, and insurers.

May
27

Adjusters, management, and priorities

Posted by Joe Paduda on Wednesday, May 27th, 2015 | Comments

During a conversation with an industry executive this morning I was reminded of the rather different perspectives, priorities, and incentives for adjusters and managers.

Faced with a virtual pile of incoming mail, messages, bills, documents, and voice mail, adjusters are tasked with determining compensability, closing claims, resolving litigation, getting claimants treated as quickly as possible – but only for covered services, dealing with vendors, catching fraud, setting and managing reserves, taking CEUS, communicating with employers, spouses, lawyers, and judges, approving drugs and medical services, directing to network providers, setting IMEs…the list is both endless and growing.

This while being measured on claim closure rates, three-point contacts (!?), reserving accuracy, litigation rates, network penetration, claimant satisfaction, and whatever the most recent metric du jour happens to be.

Home office folks have somewhat different priorities; managed care execs are evaluated based on network penetration, “savings” rates, staff productivity for bill review and medical management and various other process measures.

While there’s some alignment between the field and home office, what’s really important to one may be much less lower on the priority list for their counterpart.

For example, field folks’ priorities are to get claims moved along, claimants treated/examined/assessed, claims closed, reserves set.

A conflict can, and often does, arise when a network provider can’t see a claimant for a couple weeks, but another treater has an opening tomorrow. What’s the adjuster to do? In most cases, they will go for the quicker appointment as it moves the claim along more quickly.  This holds true for IME providers, PTs, dentists, you name it.  Time is of the essence.

The conflict here is obvious and happens all day every day, forcing adjusters to balance what are conflicting priorities in what can be a no-win situation.

What does this mean for you?

Clear priorities known and understood by all affected parties can remove a lot of unnecessary stress while eliminating much unneeded back-and-forth.

May
21

The future isn’t coming; it’s here. And we are so unprepared.

Posted by Joe Paduda on Thursday, May 21st, 2015 | Comments

Inspired by a stunning presentation by Accident Fund Director of Innovation Jeffrey Austin White and a terrific session at NCCI by Salim Ismail, I’m going to be posting occasionally on the future of workers’ comp.  This future is one that is rarely discussed, mostly ignored, and often pooh-poohed.

I’ve been involved in comp since 1988 – some 27 years, and focused on work comp almost exclusively for 20+. There have been some changes over the last two decades, but these changes have been incremental, minor, relatively insignificant, and certainly not disruptive.

The next two decades will make the last look stagnant, stuck, frozen.

We aren’t talking offshoring of nurse case management to Manila, or document management to Ghana, or IT to Ukraine, or radiology reads to India.  That’s tweaking around the edges to arbitrage labor costs – but certainly not disruptive.

What is coming is DISRUPTIVE – disruptive like gunpowder was to warfare, steam to transportation, mechanization to industrial production, internal combustion to transportation.  

Driven by massive and almost free computing power, faster and better 3-D printing, incredibly cheap data storage and speed-of-light access to that data, artificial intelligence that in many ways is already far smarter than we biological beings, the future is:

  • automated logistics drastically reducing the number of humans “driving”
  • construction costs dropping just as rapidly as construction speed is increased, with ever-decreasing need for human participation
  • the all-but-disappearance of humans working in agriculture
  • computers doing accounting, sales, marketing, planning, customer “service”

Before we get too deep into this, let’s start with something that is directly affecting workers comp today – prostheses.

The science is evolving so rapidly that there are now prostheses that are controlled by nerves firing in the brain, prostheses that can essentially replace human limbs.  These are far better than your muscle-controlled artificial arm, which was a huge step up from the wooden leg and hook-for-a-hand “technology”

Think about this.  A worker loses an arm in a crushing accident.  The new arm is:

  • immensely capable, able to do anything the biological arm can, and 
  • extremely expensive
  • serviceable and upgradable, albeit at a hefty cost.

A few top-of-mind implications.

  • is the worker “disabled”?  one could argue absolutely not.
  • can this claim be “settled”? only if future maintenance and upgrades are covered.
  • is there a payment for “disfigurement”?
  • if the arm is more capable than the human arm, who pays for that additional capability and why?

This is already an issue in workers’ comp as judges are dealing with medical necessity issues related to prostheses every day.

And that’s just one thing – prostheses for amputees.

Future posts will scratch the surface of automated driving, big data-driven risk assessment and underwriting, return-to-work, and myriad other topics.

What does this mean for you?

The last 20 years are to the next 20 years as the Middle Ages were to the 1800s…

 

 

May
20

Controlling work comp medical – Swedlow and Victor weigh in

Posted by Joe Paduda on Wednesday, May 20th, 2015 | Comments

The capstone to an excellent NCCI AIS was provided by WCRI Exec Dir Dr. Rick Victor and his counterpart at CWCI, Alex Swedlow.

Rick led off with my LEAST favorite topic – physician dispensing of drugs to work comp claimants.  The usually-very-circumspect Dr Victor said that “the evidence is pretty clear in terms of costs and likely benefits of physician dispensing.”

All the evidence indicates:

  • physician dispensing is common in big states
  • prices are higher than for the same drugs in retail pharmacies
  • even after reforms, prices are about 30% higher
  • docs write scripts for OTC meds when they dispense those meds
  • dispensing docs prescribe unnecessary opioids 
  • the price focused reforms – eliminating the upcharge for repackaged drugs – will not deliver long term results.

As great as it was to see Dr Victor and NCCI focus so much time on an issue that I’ve been harping on/screaming about for about 8 years, I – as undoubtedly you – are sick to death of this subject. It’s time to kill the beast – ban physician dispensing and docs profiting from dispensing.

CWCI’s Alex Swedlow jumped full force into a quick review of utilization review in California.

The key takeaway is the decline in medical trend observed recently – which is leading to a reduction in rates – is very good news indeed.

Pharmacy is the fastest growing component of California’s work comp medical expense, now totaling 13.2% measured at 24 months maturity, or $1.2 billion. This despite two fee schedule reforms, implementation of chronic pain guidelines, and shortly opioid-specific guidelines and perhaps a formulary via legislation now under consideration. Yet 45% of UR involves drugs, and 45% of medical reviews do as well.

BTW doc dispensed drugs account for over half of drug spend in the Golden State.

Despite all that effort 29% of pharmacy spend is for Schedule II and II drugs.

That’s just appalling.

Which led Alex to the key question – why is California’s WC medical so much harder to manage?

Alex’ take – a fundamental lack of shared risk – no supply/demand controls, no contractual language that limits care, and a dispute process that features very high levels of litigation.

Which leads to the Independent Medical Review (IMR) process – intended to speed dispute resolution while increasing consistency.  CWCI has done quite a bit of research into this area, most of which is available on their website.

Briefly – 95% of ALL treatment requests are approved.  There is NO wholesale denial of care occurring in California.

Despite what you may have heard, the IMR process is working pretty well.

CWCI’s research (on their website) indicated that the average audit score for timeliness etc was 97%.  And, IMR isn’t nearly as cumbersome as some would like to portray.  

Here’s the real data…

75% of requests for initial treatment are immediately approved.

77% of the 25% that aren’t approved initially are approved after going thru UR. – that equates to 94.1% of all treatment requests are approved initially or after UR.

91.4% of IMRs agreed with UR that the UR-denied treatment was in fact not consistent with evidence-based medical guidelines.

44.7% of services going to IMR were for drugs; those decisions were upheld 92% of the time.  And a lot of the IMR challenges are coming from one area – Los Angeles.  Similarly, the top 1% of docs generated 44% of the letters; only 10 docs were responsible for 11% of ALL IMRs.

What does this mean for you?

Drugs are a big problem, and a relatively few docs are the ones contributing to this problem. 

The IMR process is working pretty well – and would be much better if a very few docs weren’t flooding the system.