Medicare Set-Asides and Workers’ Comp

I’m gingerly stepping into a topic I’ve mostly avoided to date – MSAs.  I avoid it because it is mind-numbingly complex, seemingly illogical in application, and served by often-contentious vendors.

NCCI’s Barry Lipton et al just released an excellent synopsis of the MSA situation (opens .pdf) and summary of where things are today. The report focuses on the feds’ review process, wherein they examine payers’ proposed MSAs.  Based on an analysis of data submitted by Gould and Lamb and NCCI’s Medical Call database, a few of the Research Brief’s highlights include:

  • most MSAs are for Medicare-eligible claimants, with 45% over 60
  • MSAs make up 40% of the average total proposed settlement
  • Drugs make up fully half of the MSA amount
  • CMS’ processing time for MSAs has declined of late to a median of 41 days
  • The gap between submitted and approved MSAs has shruck dramatically.
  • 29% of settlements are for amounts over $200,000, while 45% of the MSA amounts are less than $25,000.
  • Most MSA settlements are paid as a lump sum.
  • More than 90% of MSAs completed in December 2012 were approved as submitted.  That came after CMS changed approval vendors in July 2012.

The report is stuffed full of great information and, for those of us who are relatively ignorant of MSAs yet encounter them on occasion, well worth a read.

What does this mean for you?

If you don’t have the time right now, put it in your research file so you’ll have it when you need it.  And you will need it.

Friday catch-up

Today’s catch-up is pretty workers’ comp-centric.  Lots going on, so here we go.

The ACOG (APAX-Coventry-OneCall-Genex) conglomeration continues.  A couple of items of note; APAX is out recruiting several execs to add depth and experience to the senior management ranks.  They are looking for case management pros, and word is at least one former Coventry exec is being targeted for a return.

On the Coventry network side, a well-informed source indicates a couple hospital providers in TN and GA recently renegotiated a new contract with Aetna……and with a significant decrease in the discount % below fee schedule.

On top of the news that the Geisinger and Washington hospital system contracts did NOT include workers’ comp, it is not surprising that payers are seeing a decline in “savings” from the Coventry network.

Cheers from here for former Oregon SAIF CEO John Plotkin; an Oregon court just ruled that former CEO Brenda Rocklin is NOT entitled to a state-paid defense of Plotkin’s suit against her and others.  Rocklin was allegedly involved in ousting Plotkin based on what I can only describe as ludicrous, made-up, laughable charges based on statements by Plotkin that, if they were actually made – which is highly doubtful in some cases – merit no punitive action at all.

Seriously, asking an actuary to speak English is “culturally insensitive”? Since when are actuaries a “culture”? Warning a colleague that your dog is a “humper”? talking about a goats “teats”? Even this liberal progressive Democratic ACLU member Obama fan can’t fathom how anyone could possibly construe those comments as “offensive”.

Kick their asses, John! (and so I am not misconstrued, “asses” means their butts, not their donkeys)

At another state fund, things continue to spiral down.  The latest news (courtesy of WorkCompCentral’s Ben Miller) from North Dakota regards WSI’s (state fund) use of “Independent” medical examiners – which look anything but.


Fully three-quarters of the IMEs support the WSI adjuster’s position.

So, no big deal, right?

Wrong.  Those (very) few who follow WSI know long-time and highly-regarded Medical Director Luis Vilella recently resigned.  Why?  Well, it appears his concerns about medical decisions were a major factor; evidently adjusters and their legal department used “outside” medical experts instead of Dr. V.  The full story on this rather distressing – and all too common) lack of judgment by WSI senior management is here.

Notably, David DePaolo noted just yesterday that state requirements around IMEs may have made it difficult for adjusters to locate in-state physicians able and qualified to perform IMEs.  HOWEVER, this is a separate issue from the Dr V problem as it pertains to IMEs and not peer reviews.

Meanwhile, Karen Foshay has produced a three-part series on the California compounding mess.  The FBI is involved, an infant has died, and one of the alleged participants was recorded saying ““I’m a behemoth, I make 8 to 10 million a month.”

Is there a place for compound in workers’ comp? Yes. HOWEVER, the legitimate use of compounds is all too rare as crooks, thieves and liars are using compounds as the route to huge profits, regardless of the consequences for patients, employers, and taxpayers.

Hope your weekend is excellent!

Friday catch-up

The first week of September marks the start of the busy season in health care, insurance, and workers comp.  This week certainly maintained that tradition.

here’s what I noticed this week.

Health care costs

The news this week was pretty good - current health care cost trends are significantly lower than earlier projections, although predictions for future increases remain higher than we’d like.  That said, recall past predictions weren’t that accurate.

While we don’t KNOW what the impact of ACA, recovering employment, and health care system chances will be, we can look to Medicare – which isn’t affected much by the economy.  Jonathan Cohn’s take: “the slowdown in Medicare spending (which has little to do with the economy or changes to private insurance) is a powerful indicator that health care really is becoming a more efficient enterprise.” [emphasis added]

Another perspective is from the Washington Examiner - you can tell their bias as they lead with “President Obama’s health care law” – which PPACA decidedly wasn’t. Disregarding the Examiners’ disregard for accurate reporting, they cite a CMS actuary study which indicates government spending on health care will increase from 41% of the total to 48% in 2023.  That is accurate – however recall that CMS’ past projections for Medicare and medicaid growth have been shown to be too high.

 Health reform implementation

One of the concerns about PPACA was the employer mandate would encourage smaller employers to move workers to part-time status.  Early indications are there isn’t much of a shift – if any – to part-time work due to PPACA.  Rather the slow recovery of the economy seems to be the key factor.

A great piece by Incidental Economist Austin Frakt (a long time Health Wonk Review contributor!) in WaPo’s Upshot blog finds that the more competition in local markets, the lower the insurance premiums are.  Specifically, Austin notes the absence of United Healthcare from markets led to premiums that were 5.4% higher than they would have been with UHC participating.

Another take is that premiums in less competitive states were higher than in those with more health plans participating in the markets.

Pennsylvania is joining the ranks of the sane states that are expanding Medicaid, and in so doing will avoid:

*   $37.8 billion in lost federal spending over the next decade

*   $10.6 billion in lost hospital reimbursements over the next decade

*   380,000 low- and moderate- income people would not gain coverage in 2016

Workers’ comp

The BIG news just came out today – a study by McClatchy found rampant misclassification of workers as independent contractors receiving money from the 2009 stimulus. This is a damning indictment of governmental oversight, and one that demands our attention.

Liberty Mutual produced an excellent study that appears to indicate back pain patients who got MRIs early on had worse outcomes than those who did not have MRIs.  Their conclusion:

The impact of non adherent [not consistent with medical treatment guidelines] MRI includes a wide variety of expensive and potentially unnecessary services, and occurs relatively soon post-MRI. Study results provide evidence to promote provider and patient conversations to help patients choose care that is based on evidence, free from harm, less costly, and truly necessary.

Kudos to Liberty for conducting this research.

Remember – no emails, no business after 5 today – unplug!


The Apax-Coventry deal – implications aplenty

While it may be a bit premature, I’d suggest it is never too soon to being thinking thru the potential implications of a deal of this magnitude.  

Let’s do a very quick review of market changes, then jump into some detail on the network issue – we will look at other aspects in future posts.

The workers compensation medical management market is going through a period of rapid consolidation across all segments.  There are now five large PBMs; three years ago there were eight (plus two much smaller ones).  Bill review application companies now number four (mcmc, Medata, Mitchell, Xerox); four years ago there were eight.  (this does not include CorVel, it does not sell access to its application) There are now two PT firms; last year there were three.  The sector that has changed the most is IMEs; EXAM is now the biggest player, with its competitors far behind in terms of revenue and market share.  Similar consolidation has occurred in DME/HHC, transportation/translation, and other segments, and this will continue.

The work comp PPO landscape looks markedly different.

Coventry is still the big kahuna, but the gap between CWCS and competitors has narrowed considerably.  The expansion of other PPOS has been a major reason; Procura, Magnacare, Anthem, Prime, Rockport, MultiPlan are all bigger and have more share than they did a few years ago.  Other Blues plans have expanded into the comp network business (or expanded their existing WC PPO).

Simultaneously, Coventry’s PPO has weakened.  It has been increasingly difficult to get meaningful discounts from health systems and facilities, long the biggest driver of Coventry’s success.  That’s due to the consolidation of the provider marketplace and a lack of emphasis on WC on the part of Aetna (and pre-Aetna) provider contract negotiators.

For workers comp payers, big PPOs are the big “savings” driver, yet the biggest of the PPOs is losing its ability to deliver “savings” while its competitors are getting more competitive.

Way back in the day, Coventry used its leverage with the Federal Mail Handlers’ Program along with PPO HMO and Medicaid lives to negotiate discounts with providers – discount arrangements that included workers comp.  Recall total work comp spend is just about 1 percent of total US medical spend; governmental programs (Medicare and Medicaid) alone  are over a third of US health care costs.

While sources indicate Aetna has committed (not sure that is the right word, and may be too strong) to support the PPO re-contracting process for two years, this is one of those times where actions speak louder than words.  As noted yesterday, Aetna just inked a network deal with a relatively small health system in northern California which does NOT include work comp – but does cover medicaid, medicare, group, individual, and other health insurance.

More significantly, Geisinger and Aetna signed a major agreement earlier this summer that also excluded workers comp. Geisinger is the dominant health system in central PA; a very-well-regarded operation with a great reputation and outstanding quality (disclosure, I did a brief consulting stint there some years ago).

And this means…what?

By far the biggest contributor to CWCS’ value is the PPO.  It generates (or perhaps more accurately generated) at least $200 million in cash flow and provided Coventry with the leverage to get payers to use its PBM, case management, bill review and other services.  Clearly, that cash flow is, if not already significantly reduced, at some considerable risk.

That factor alone is why ALL the financial buyers I spoke with (several of the largest private equity (PE) firms) did not pursue the deal - they were very concerned about the long-term viability of Coventry’s PPO.  While the historical numbers looked good, none were convinced the PPO would continue to deliver those results going forward.

Without the market leverage and total commitment of Aetna, it is difficult to see how Coventry can maintain its lead over other work comp PPOs; its negotiating leverage with providers will be based on work comp, and work comp only.

APAX will pay something like $1.5 billion for Coventry’s work comp division.  I’m very sure it will have a very good communications plan, a well-developed strategy, and some talented and experienced people focused on this.  That’s all well and good, but – as other WC PPOs know very well – without the market leverage of a major national health plan, the real negotiating power will be on the other side of the table.

Turn off the email and thank your server

Labor Day is about the laborers – those whose work keeps us fed, clothed, protected, entertained, moved, housed, healthy.

It’s about taking a whole day to consider who they are, what they do, and how they are treated.

That includes us – we (you and me) are pretty much white collar middle- and upper-middle class folks; well-educated, fortunately-born, and generally well off. Sure, we are “workers”, and as such we need the time off – away from work email and texts.  So put that “I’ll be back to you on Tuesday” message on the phone and email when you leave work today, and don’t think about it until Tuesday morning.

I’d suggest that this weekend is also a great time to consider those who are, indeed, working while we are holiday-ing – and those who make stuff we use and provide services we take for granted.

Nurses (disclosure, our daughter is an ER nurse and will be working most of the weekend), waiters, cooks, police (even those enforcing traffic laws), marina and park staff, lifeguards and hotel staff all deserve our thanks and our appreciation.  As do the maintenance workers, groundskeepers, mechanics, drivers, laborers, skilled workers and construction workers that make life here pretty pleasant compared to a lot of the world.

As my lovely bride says, “we are all in this together.”  

Share the love.

Friday catch-up

The last couple weeks of the “real” summer are flashing by…things have been a little slow out there but a few items of note crossed my virtual desk this week.

Workers’ comp

From Insurance Thought Leadership comes a piece about M&A activity in P&C insurance claims.  While the article emphasizes the “supply chain” for auto, the author also believes work comp vendors are ripe for consolidation.  That’s a bit like calling the race after the horses have crossed the line, nonetheless author Stephen Applebaum’s views are worthy of consideration.

Just occurred to me that three very good and highly experienced work comp medical directors have departed/will depart their current employers over the next few weeks.  Rob Bonner, MD of the Hartford; David Dietz, MD of Liberty; and Luis Vilella, MD of the North Dakota State Fund are all free agents, or soon will be.

That’s a lot of talent.

Health cost inflation

The latest data indicate health cost inflation remains really, really low.  Like 3 percent. There’s plenty of opining on which factors are affecting the decrease in the rate of increase, but rather than apportion blame/credit, let’s just bask in the warm glow for a bit.

Health plans

While profits aren’t at an all-time high, early indications are the biggest health plans – which cover 56% of Americans with health insurance – are doing pretty well, with a good chunk of their growth coming from self-insured employers.  From Mark Farrah’s report on Q1 2014 results on the top 7 health plans;  “[the] uptick in ASO suggests more employers are opting for self-funded commercial plans to skirt some provisions of the ACA (Affordable Care Act). Increases in risk enrollment are mainly a result of continued growth in the Medicare and Medicaid segments.”

The data is supported by an insightful piece from Margot Sanger-Katz in the NYTimes’ Upshot blog.  Sanger-Katz notes employee insurance signups at Walmart are up significantly, a data point she uses to build a case for the ACA’s influence on employer signups.  Singer-Katz – “expanded employer insurance coverage illustrates how the Affordable Care Act is set up to build on the country’s existing insurance system rather than tear it down. The law doesn’t just create new public insurance programs. It also includes incentives designed to get more people enrolled in employer health coverage.” [emphasis added]

Ten days till the unofficial end of summer – relax like it’s your job!

Monday catch-up

Had a great few days of vacation last week; completely ignored work, spent a lot of time with many old friends, and learned for the millionth time how unbelievably lucky I am to be married to Deb.

Here’s a VERY brief summary of some of the happenings that happened while I was doing everything possible to ignore them.

Workers’ Comp

NO acquisitions were announced.  Maybe it’s because August is a big vacation month – not that the investment world ever takes vacations – but no deals were announced, or even rumored to be done last week.   Word is APAX/OneCall is still the front runner for Coventry Work Comp, more accurately that’s the consensus of the rumor mill.  There are a couple other interested parties, but for now IF a deal gets done it will likely be finalized in October.  

The big Florida Work Comp conference is happening this week and it’s likely to be bigger than ever.  Your trusty author isn’t there, but Bob Wilson, Mark Walls, Roberto Ceniceros and the other real experts will be keeping us posted on the goings-on.  There’s also WCI-FWCI TV; the conference broadcasts selected sessions and does an update each day on happenings.

In what will likely be the top topic on everyone’s mind, a Florida judge ruled that the state’s work comp law is unconstitutional; the Miami Herald reported ““The benefits in the act have been so decimated,” [Judge Jorge] Cueto wrote, “that it no longer provides a reasonable alternative” to filing suit in civil court.”

More details here from the Herald.

Health reform roll-out

The latest PPACA Chicken Little story is that Exchange enrollment is falling off dramatically as newly-insureds drop out.  According to the Investor’s Business Daily, the attrition rate is around 30 percent…

Except that’s completely wrong.

IBD’s piece distorted the figures by using the initial enrollment data as a baseline – NOT the initial PAID enrollment figure. A chunk of those who originally signed up didn’t pay, so they never had coverage to begin with. Comparing the total number of those who signed up (regardless of whether they paid or not) to those who stopped paying is apples to oranges - unless IBD’s intention was to mislead.

In fact, the decline in paid enrollment pretty much parallels what health plans normally see in an individual health block – a couple percent a month.  That’s due to enrollees getting jobs, going on to Medicare, getting married, dying, losing their jobs – normal life events.

IBD – and their fellow ideologues – either don’t understand the basics of the health insurance business, or choose to ignore facts and figures that don’t fit with their ideology.  Either way, it makes one wonder how credible the rest of their reporting and opining is.

Methinks “IBD” stands for “Ideologues Being Deceitful”…


Friday catch-up

The dog days of August are upon us, and I’m going to be on vacation for most of next week, so there won’t be much activity at the Intergalactic HQ of Health Strategy Associates – or here for that matter.

Let’s get caught up on what happened this week.

Workers Comp

First, from the arcane world of Pennsylvania billing comes this note – a recent Supreme Court case, Selective Insurance v Physical Therapy Institute resulted in a ruling favorable to Selective – and other payers in PA.  Allegedly PTI – a Medicare Part A provider – was providing billing services for Medicare Part B PT providers; as PTI was not the provider, the court found the insurer did not have to pay PTI for the services.

Thanks to Linda Schmac of Premier Comp for the heads up. Ms Schmac suggests payers may want to ask their PA patients to sign an affidavit from providers other than PTI to maintain this protection.

In the possibly-even-more-esoteric world of work comp pharmacy, the good folks in North Carolina passed legislation restricting physician dispensing to workers’ comp claimants.  Pricing has to be based on a non-repackaged drug, docs are prohibited from dispensing more than a five-day supply of Schedule II and III drugs.  Kudos to Industrial Commission Chair Andrew Heath and his staff for shepherding this bill thru.

Finally, we’ve just finished collecting the data for the Eleventh Annual Survey of Pharmacy Benefit Management in Workers’ Comp; I’ll do a quick post on highlights Monday.  If you want to peruse past editions, click here.

Health care inflation

Has stayed remarkably low over the last few years.  Now comes a solid analysis that indicates most of that “reduction in the rate of inflation” is due to economic factors.  In an article published in Health Affairs, the authors found that about 70% of the decrease was due to those economic factors associated with the slowdown; whether PPACA implementation will help keep rates down going forward is not yet known. That said, it looks like PPACA could only be responsible for about 30% of the decrease.

Don’t jump to conclusions – the impact of reform won’t be known for several more years. 

Health reform implementation

Those who think the problems with the Federal Exchange are behind us may want to wait just a bit before declaring victory.  Re-enrollment will require verification of income and other bits of data aggregation, assembly, and verification; word is some of these processes are not yet ready for prime time.  Here’s hoping they are before prime time arrives – in two months…

From “The National Memo comes a report on a recent Gallup finding that the uninsured rate is down 4 percentage points in the 21 states that have both “expanded Medicaid and set up their own state exchanges; in the 29 that have taken one or neither of these steps, it has fallen only 2.2 percent.” Given the Federal Exchanges’ problems, this isn’t surprising. 

Notably, “9 of the 10 states that have experienced the largest reductions in their uninsured rates are governed by Democrats (with the exception being New Mexico, where Republican Susana Martinez is governor).” GOP governors happen to run the ten states with the lowest reductions in uninsured rates. 

A big chunk of this is due to not expanding Medicaid; another study indicates:

  • 6.7 million residents are projected to remain uninsured in 2016 as a result
  • Non-expansion states are giving up $423.6 billion in federal Medicaid funds over ten years.
  • Hospitals in the 24 non-expansion states are going to lose out on $167.8 billion “in Medicaid funding that was originally intended to offset major cuts to their Medicare and Medicaid reimbursement.”

As I’ve noted, those hospitals are going to have to make up that revenue shortfall from somewhere…

Medicare Solvency

The Medicare Trustees’ Report is out – just in time for that beach reading!  NASI has produced their much-more-readable review, which finds that there’s currently enough funding to cover all hospital expenses till 2030 – that’s four years more than last year’s assessment.

Good news to be sure.  Now if we can just keep those providers from shifting costs to work comp patients…