Monday catch-up

Summer is in full swing, which means the A/C is running at full blast in Florida and Texas, while those of us in upstate NY are gloating…I know, you will be soon when we’re subzero and you’re at 70…

Things are supposed to slow down somewhat – they haven’t yet. Here’s what happened last week while I was working on a couple projects last week.

P&C results

The P&C industry is doing well – very well. For the second straight year it will show an underwriting profit, and the combined is still almost three points below 100. Rating agency Fitch thinks things will deteriorate somewhat as the cost of weather-related cats increases; that and lower investment performance (as the equity markets cool off) will lead to lower return on surplus as well.  Still and all, things are looking pretty good – for the P&C industry.  That said, P&C financials are not exactly good; historical return on equity is really low and the cyclical nature of the industry is legend.

Work comp

One of my favorite states, Montana, is suffering from dramatic increases in already-high workers comps cost, driven in large part by drugs; pharmaceutical costs account for 16 percent of total medical compared to 11 percent nationally. Their top drug, accounting for almost 15 percent of total spend – Oxycontin.  That is about twice what it is nationally.

One more time folks – Oxycontin has almost NO PLACE IN WORKERS’ COMP.

Hopefully the state’s new medical guidelines will help reduce this.  Kudos to State Medical Director for Carla Huitt MD for highlighting the issue.

There’s a news brief from NCCI re claim frequency - they report that it continued its decline last year, with indemnity claims dropping 2 percent.

The Coventry work comp auction is proceeding, albeit without many of the big private equity firms. I’ve heard they are concerned about:

  • the PPO network, specifically Aetna’s unwillingness to help re-contract providers. As this is the crown jewel, the lack of a fail-safe strategy to preserve the network greatly reduces the deal’s appeal.
  • the lack of tech and other support for BR 4.0, the bill review platform.  With the layoff of much of the application support staff and chronic under-funding for BR 4.0, the new owners need to either private label someone else’s app or get out of bill review altogether.  Not good.
  • the mediocre-at-best-performance of the other businesses (case management, UR, PBM, etc)
  • the need to recruit a “name” exec to lead the company (nothing against current management, they’ve been handed an impossible task by mother Aetna)

I’d expect Apax/One Call to be the winning bidder – if there is one.  If that happens, the mega-humongous OCCM/Apax will have even more market power.  Methinks payers are going to be most worried about that.

Joe Boures has been promoted to CEO at Healthcare Solutions, replacing David George who stays on as Board Chair.  Under George, predecessor company Cypress Care acquired Procura to become Healthcare Solutions, then added PBM ScripNet and PBM/DME/HHC provider Modern Medical, making HCS one of only two companies to offer a full range of work comp managed care services. Joe is a friend and good man whose steady, thoughtful style will serve the company and its customers well. [disclosure - I have a very small equity position in HCS]

Also just heard that Acrometis has landed a new customer – MacRisk.

Implementing PPACA

For the states that opted out of expanding Medicaid, the proverbial chickens are headed home to roost – and they’re dropping loads of red ink on hospitals in the process.  That’s the news from Fitch,

Fitch has downgraded 10 entities [hospitals and health systems]. Of those, five are in states that have not participated in expanded Medicaid coverage. Several of those downgrades were driven by operating performance declines related to funding and reimbursement pressures, which may have been lessened by Medicaid expansion. Conversely, of the nine upgrades since Jan. 1, eight were hospitals in states that have expanded Medicaid. [emphasis added]

From Jonathan Cohn comes the news that states that decided to expand Medicaid have seen insurance coverage increase almost three times more than states that have foregone expansion.  As folks in these states are healthier to start with, the health disparity between the states will – depressingly – increase.

I’m really confused by House Speaker John Boehner’s decision to sue President Obama over alleged abuse of executive power; after all the caterwauling about immigration, Guantanamo, the border, drone strikes, recess appointments, and the Bowe Bergdahl trade, the best he can come up with is the delay in the employer mandate...

It doesn’t make sense.  Politically, there’s increasing evidence that voters are feeling better and better about PPACA, torpedoing what had been THE key talking point for GOP candidates this fall.  GOP senators and congresspeople have all but abandoned “Obamacare” as a talking point.  Bringing more attention to an issue that may redound to their opponents’ benefit is puzzling at best.

As evidence, I give you the news that political ads slamming “Obamacare” may well have resulted in higher enrollment in “blue” states.

Back to work now!



Up? Down? Sideways? What’s up with health care costs?

There’s been a good deal of confusion over health care cost trends for the first half of this year.  Initial reports indicated they were up dramatically; more recent intel paints a very different story.

So what’s the deal?

First, let’s not confuse “costs” with “insurance premiums”.  Unfortunately, many mass media outlets don’t understand that insurance premiums are not costs…which certainly contributes to the confusion. Overall, premium increases for large employers have been trending generally downward for years, with 2014′s 4.4% rise just a touch over 2013′s record-low 4.1% increase. A big part of that is from increased deductibles and employee cost-sharing; today employees pay over a third of the cost of their insurance, a big change from way back in the day when many employers covered the entire cost (yep, I’m old).

Second, let’s not confuse “price” with “cost”, as this report does.

Recall cost is the price per service times the volume of services – so the price matters, as does the utilization of health care.

Fortunately, some sources – the PWC annual report being one of the better ones, don’t conflate or confuse.  Their latest estimate is health care costs will go up 6.5% this year, while premiums will only rise 4.5%.

That makes sense – more coverage means more utilization especially among folks who just got insurance.  Early indications are the recently uninsured are less healthy than the general population, a finding that should surprise no one.  Many may have long-term but relatively low-severity chronic conditions, while some undoubtedly could not get or afford coverage.  These newly-insureds will seek care for their long-term conditions, and that care will be pretty expensive. Think of this as a one-time big bump in cost due to pent-up demand; I would not be surprised to see spikes in cost for surgery, orthopedics, cardiology, pulmonology, rheumatology, and other areas with high chronicity over the next couple of years, followed by a reduced inflation rate.

What does this mean for you?

Don’t get too wrapped up in any forecasts or reports of recent cost trends; wait a year before putting much stock in inflation rates and you’ll find you have a lot less back=tracking to do. 




Stop reading this

do your real work, and get out early to enjoy the holiday.

Not to worry, we’ll be carefully monitoring all things relevant to workers comp, medical management, and health policy while you’re doing the family thing, soaking up Vitamin D, and avoiding Hurricane Arthur.

See you Monday.

Friday catch-up

A rather busy week to be sure.   Not exactly beach reading, but plenty of food for thought while you’re manning the grill, watching the game, or lolling about.

Reform rollout

The biggest news was the decline in health care costs, an occurrence that surprised everyone.  If you missed it, healthcare spending declined by 1.4% in the first quarter of 2014 – earlier predictions had it increasing by almost 10 percent.  

Pundits who had cited the earlier incorrect figures as evidence of the horribleness of Obamacare are looking pretty, well, stupid.  If they blame increases on O-care, shouldn’t they attribute declines to it as well?  Not if you’re the Wall Street Journal...who gets this week’s prize for convoluting facts to fit their worldview…

Before we get too giddy, I’d expect costs to bump up this quarter and next as the newly insured start using their benefits.  Hopefully PPACA advocates won’t make the mistake opponents have and read too much into the numbers.  We’re a long way from understanding the impact of PPACA on cost trends…

A helpful analysis by the Kaiser Family Foundation on the impact of Medicaid non-expansion in the South reveals:

  • nearly 80% of the 4.8 million uninsured US adults who fall into the coverage gap (no Medicaid and can’t afford insurance) live in the South;
  • the coverage gap in the South disproportionately affects people of color.

Another KFF report indicates:

  • 57% of Exchange enrollees were previously uninsured
  • many are enrolled in narrow-network plans
  • most think their health plans are a good value, but some still struggle with the premiums

The work comp world

With the reports that Aetna is looking to sell Coventry’s work comp business, there has been lots of talk about who’s going to do the deal. CWC’s revenues have been declining for the last three years, so there isn’t a huge amount of interest among financial buyers.  Apax/OneCall is the early frontrunner; the investment firm seems to have an insatiable appetite, bottomless cash (and credit) resources, and a remarkable ability to see high values where other potential investors do not.

A key point worth pondering – Aetna has NOT re-contracted their provider network; any buyer will have to convince providers to sign a work comp-only contract.  Considering comp is just over 1 percent of US medical spend, and many providers never see a work comp patient, and  very, very few providers have more than one work comp patient a month, and (sources tell me) at least half of the Coventry work comp network’s providers likely don’t even know they are IN the Coventry work comp network, that’s going to be a heavy lift.

A timely report from WCRI analyzes Ambulatory Surgical Center costs, prices, and expansion; the brainiacs in Boston have come looked at 23 states and find there’s not a lot of consistency across the group with ASCs less costly than hospitals in some states and pricier in others.  Another report looks just at prices paid to ASCs - which are also wildly variable…

The agenda for this fall’s Las Vegas National Workers Comp meeting is out; one timely session will feature principals from three investment firms very active in the work comp space; they will be discussing the role of private equity in workers’ comp.

Make those plans now!

Aetna is selling Coventry Workers’ Comp

It was perhaps the worst-kept secret in the industry; Aetna’s effort to sell the Coventry work comp business.

Now the secret is out, and yes it is true – they are looking to sell the entire thing – network, bill review, PBM, case management, and the rest.  

While a couple of friends have chided me – and undoubtedly more will – for my statements that this wouldn’t happen, I’d suggest that it may not.

The reasons are two-fold.  First, the PBM, FirstScript, uses Express Script’s retail pharmacy network and processing engine.  It represents about a third of the total revenues of Coventry Work Comp (CWC).  If Express decides it wants to own that business, or terminates the network and processing engine deals, FirstScript is in trouble.  Anyone looking at CWC is going to look at that as a risk.

Second, Aetna still has not figured out how to deal with the network contract issue. As I noted in a previous post:

The network generates the lion’s share of the margin; if Aetna wanted to sell the WC business it is hard to see how it could transfer the network’s provider contracts to the new owner as most are a combined WC/group/governmental contract. Sure, Aetna could guarantee access to their contracts going forward for some period certain, but given Aetna’s history with workers comp, any buyer would be very reluctant to bet the future of their investment on that guarantee.

Word is Aetna is NOT going to support the work comp contracts, which means whoever buys CWC – if anyone does – is going to have to convince providers to sign a contract based solely on work comp claims.  Considering workers’ comp accounts for just over 1 percent of total US medical spend, that’s a tough sell.  

So, who’s likely to bid on the asset that some lunatic said could go for as much as $1.5 billion?  (must’ve been on their way out of Colorado at the time..).

We’ll dig in to that later…

Friday catch-up – non-competes, compounds, and clustermesses

It is a gorgeous day in upstate NY – not that every day in upstate isn’t fabulous.  Hope your weather is equally spectacular.  This week has been nuts…between deals, indictments, PPACA enrollment…gosh how’s a guy supposed to keep up!

First up, my post earlier this week about non-competes generated a lot of attention and more than a few resumes.  I can’t act as a clearinghouse for folks hiring and looking to be hired (much as I’d like to), but a couple companies did reach out to let me know they are looking for workers – non-compete or no.

Broadspire is looking for a bunch of talented, motivated, hardworking people eager to work for a company that cares about them.  Jobs are listed here.

Dane Street is as well – they’ve got eleven jobs open as of now; check them out here.

Evidently OneCall is also hiring, as a friend asked me my thoughts on potentially working for the company.  No comment.

Alas, there are OTHER jobs out there – for people who want to earn “$300 to $1200 per Script and all of its refills” touting compound medications.  The fine folks at TYY Consulting are doing their best to get those meds to people who need them!

Gosh these people are great; “Every patient receives their medication, even if not approved. Should a patient’s script be declined, we send them a 40 gram emergency supply, overnight, and free!!!”

Oh, the wonder of it all!!!

In what can only be described as exquisite timing, WorkCompCentral’s Greg Jones authored a piece in today’s WCC concerning the indictment of a bunch of California docs, “business people”, pharmacists, and assorted hangers-on for a scheme allegedly involving payments of more than $25 million to encourage docs to write scripts for three compound creams that just happened to be formulated based on the profitability of their ingredients.

Hmmmm.  I’m quite sure this is an isolated, one-off case, and wouldn’t want anyone considering a career in the compounding industry to worry at all about any potential legal issues.

The fine folks at Liberty Mutual are encouraging their employees in PA to let their legislators know they support a bill limiting physician dispensing – a practice awfully similar to compounding in that it sucks money out of employers and taxpayers for no good reason.  Kudos to Miss Liberty for pushing this – and hey, other insurers, let’s get cracking, eh?

here’s an excerpt from their piece…

HB 1846 is currently supported by the Pennsylvania Workers’ Compensation Advisory Council (WCAC) so please let your Pennsylvania state Senators know you also support HB 1846, without amendments, by writing an email or making a call today. Take action today and don’t let the orthopods and dispensers dilute this bill.

Click Here to View HB 1846

1) CONTACT one or more members of the Pennsylvania State Senate at the Pennsylvania House and urge them to vote yes on HB 1846 

Despite some wishful thinking to the contrary on the part of at least one CompIQ staffer, that app is going the way of…CompReview, PowerTrak, BR 4.0 and other expired/ing bill review platforms.  Shockingly, StrataWare will be the survivor of the acquisition of StrataCare by Xerox.  I know…who woulda thunk it?

I’d be remiss if I didn’t acknowledge and applaud Bob Wilson’s ongoing efforts to keep us informed about the clustermess that SAIF is making out of the firing of former CEO John Plotkin. Bob is setting a standard here that I won’t even try to meet; kudos to him for keeping a very bright – and extremely well-written – focus on this blatant injustice.

No one can turn a phrase into a knife like Bob can…to wit: “ a huge crapfest ensues, ensnaring all involved into a quagmire-like vortex of controversy.”

Bravo, Bob-o!

I’m also going to nominate SAIF employees for workers of the year; the way these folks have rallied behind John is just, well, unprecedented?  And this for a guy who was just there for a few months.

So here’s to you, SAIFers…a toast with your favorite Gilgamesh 22 – or perhaps a great Oregon Pinot Noir!

Monday catch-up

After spending the last few days on vacation – the boys’ annual mountain biking trip – plane time is needed to catch up on all that happened while I was getting lost in the high desert west of Fruita, Colorado.


CWCI’s June 10 missive listed the top ten work comp writers in California; in addition to indications that premiums will keep increasing, there are a few other takeaways worth contemplating.

  • First, total premiums are above $10 billion, a big jump from 2009’s $6.9 billion – but a LOT less than the $16 billion high hit just a decade earlier.
  • Berkshire Hathaway is writing a boatload of comp, growing their premiums by 49 percent over 2012. State Fund’s premium is also up – but “only” 23.1 percent.
  • Liberty Mutual is out of the top ten, dropping four places to number 12 while reducing premiums by 23 percent. This is the largest decrease among the top 20 carriers.

There’s a bit more to this; Liberty has been de-emphasizing work comp as it continues to focus on personal lines. The news from the Golden State, along with changes in management wherein personal lines and other non-comp folks are ascendant, look like proof positive that the transformation of the company to one shifting its focus away from workers comp is proceeding. (note – I worked for Liberty way back in the day – 22 years ago to be precise)

Those wretches at the FDA have gone and done it again – according to the American Society of Interventional Pain Physicians (the docs that inject stuff into patients) they’ve issued a “warning that all epidural steroid injections pose a serious risk for neurological injury, paralysis and death…” And, ASIPP is urging all their docs to write letters, scream, yell, and lobby to get this horrible injustice corrected.

This, after studies documented  ”a 629% increase in Medicare expenditures for epidural steroid injections in use for chronic low back pain, despite the fact that these increases have not been accompanied by population-level improvements in patient outcomes or disability rates.”

As mad as most sentient beings are about the FDA’s unconscionable decision to allow marketing of Zohydro, this is one of those times where the FDA appears to be doing the right thing.

Meanwhile, mergers/acquisitions in the work comp services world – and the fallout therefrom continues. This has been going on for so long that it feels like the normal state of affairs; if one doesn’t hear from at least a couple of analysts, research firms, or investors every week it’s strange indeed.

Finally, I’ve heard from three entities of late who are looking for data analysts.  Many insurers, managed care firms, and TPAs are increasing their investment in analytics.  The emphasis appears to be provider performance, care analytics, and other aspects of medical price, utilization, and cost.


Examworks has bought MedAllocators/ASN

It’s official – in a press release that hit the wire just after 5 pm EST, Examworks announced that they have bought MedAllocators for $80 million.  Cash.

That’s a pretty hefty price, as MA’s revenues were less than half that amount.

It’s going to be a great weekend for Ken Loffredo; he almost certainly got a big payday (and well deserved); he will also be running ExamWorks Clinical Solutions, a new division at Exam.  Ken was smart enough to take his payout in cash, rather than stock.  Exam’s management folks recently sold off a big chunk of their holdings, and the stock dropped rather dramatically at right about the same time.

The weekend will be a pretty crappy one for many MedAllocators/ASN workers.  Word has come from several sources that the layoffs have already begun, and they may have started at Solomon Associates, the Pennsylvania IME company also bought by Exam today.

 Yet another big company getting even bigger.  Seems that’s a trend these days…

Friday’s catch up post

Here’s my quick take on other interesting/important news of the week…

There’s been a good bit of chatter about and fallout from Apax’ acquisition of Genex.

Yes, the specialty networks (NSI and MDN) will be part of OneCall, while the case management and bill review will be operated separately. HOWEVER, a single Apax fund purchased all parts of Genex, so the financial ownership is the same. Is it possible that Genex and OCCM will operate independently? Highly doubtful; big investment firms don’t invest hundreds of millions of dollars then ignore opportunities to drive revenue to their other companies.

On a personnel matter, I’ve been inundated with LinkedIn requests and other contacts from current Genex and NSI staff.  According to two individuals, they’ve been asked to sign non-competes by early next week.  If they don’t, they have been told they will be terminated. Ouch.

NCCI published an excellent review of the underwriting cycle, one that is a lot more worthy of a read than that trashy novel tucked into the beach bag.

The on shoring movement, where manufacturers are moving their operations back to North America, appears to be gathering momentum,  Big potential impact on workers’ comp, altho it is important to remember that a) injury rates and severity in manufacturing have declined precipitously and b) a lot of the returning work is going to Mexico.

The rapidly-changing hospital market is dramatically affecting prices, costs, and utilization.  Two excellent pieces in Health Affairs dig into this in detail; the link takes you to one.

Lots more, but time to get to work!