Thursday catch-up

Sorry folks – it’s been a very busy few days with client meetings and project deliverables. When you’re a one-person operation, it’s just not possible to keep up with posting when client stuff needs doing!

So, here’s a quick review of things you may have missed.

Debates are over…(sounds of cheering, clapping, and general relief)

And thank goodness for that.  By any objective measure, Clinton will be our next president, and the Senate may well flip to Democratic control albeit without the 60 votes necessary to avoid filibusters.

That being the case, it looks like we finally may see some much-needed fixes to ACA.  I’ll dig into these in detail next week, but for now, expect:

  • extension of the federal 100% funding for Medicaid expansion for states who haven’t expanded yet
  • remove the “family glitch”
  • perhaps offer near seniors (that’s me!) the option to buy in to Medicare.

More to come…

Customer service and taking care of employees

My two-part series on customer service got a lot of attention; a very recent story on WalMart’s decision to increase labor costs (!) speaks to much of the same.  The ginormous retailer was having problems with poor store results, unkempt aisles, shoddy appearance of displays and the like.  The solution (or at least a big part of it); pay workers more, and they’ll do a better job. While it is too early to measure results, initial reports are encouraging…

For a company that long relied on low labor costs to deliver low prices, this is a tectonic shift.

The state of the work comp industry

Oregon does a great job reporting on premium rates nationally – thanks to Mike Manley for sharing with me.  Mike  wants to “call attention to…states’ index rates expressed as a percent of median.”, not to changes from previous studies.  Listen to Mike!

Good info from NCCI on macro-factors that will affect the workers comp world: highlights from new Communications Director Dean Dimke are:

  • Employment growth to slow to 2% or less this year and in 2017.
  • Average weekly wages are forecast to increase by 2.2% this year and by 4.2% next year.
  • In 2015, workers compensation medical severity declined for NCCI states, but medical inflation—measuring the price component of that equation—increased by 2.6%.
    Low interest rates continue to constrain investment income in the P/C industry.

For those looking for a lot more detail, WCRI just released its CompScope(TM) reports on work comp medical benchmarks for 17 states.  Great weekend reading!

Break’s over – I got to get back to work!

Pain and pain meds are keeping men out of the workforce

The opioid industry’s insidious tentacles are choking the life out of individuals, families, and communities. Now we learn that nearly 44 percent of men aged 24-54 who aren’t in the workforce are on pain meds.

2/3rds of those men are taking prescription pain killers. Yet many are still in pain – a finding that surprises no one remotely familiar with opioids’ poor record with chronic pain.

Only about 2 percent of these men received work comp benefits in the prior year; it is certainly possible that many more were injured at work, settled their claim, reached maximum medical improvement, or otherwise are no longer receiving WC benefits. Fully a quarter are receiving Social Security disability income.

This is a critically important issue for all of us. Research by Alan Krueger PhD of Princeton University gives us much-needed clarity on why labor force participation is near a 40-year low; it’s about

  • poor health status; 43 percent of  men aged 24-54 not in the workforce report their health as fair or poor
  • 34% of these men report at least one functional disability
  • as a group, these workers report “feeling pain during about half of their time.”
  • average pain rating is 88 percent higher for these men than men who are employed

Of course, Dr Krueger’s research is not just about opioids, but it’s abundantly clear that opioids aren’t helping these men deal with their pain, and pain is keeping many out of the workforce.

This comes on the heels of reports that the death rate for middle-aged whites has been increasing of late – and at least part of the problem is, once again, opioids

What does this mean to you?

STOP approving opioids for chronic pain unless nothing else works. 


Part 2 – Serving workers’ comp patients and payers – what works and why

Yesterday’s post on the problems inherent in outsourcing/offshoring/automating customer service made the case that customer service functions must be handled internally.

Today, we’ll dig into a case study – the lesson being it’s not about your company’s metrics, cost structure, or “efficiency”, it’s ALL about your customer.

MedRisk is a physical medicine management company serving the workers’ comp industry. (MR has been an HSA consulting client for over 15 years) For years, it had the niche almost to itself, focusing its sales and service attention on corporate buyers. Along came Align Networks, a start-up that concentrated on the desk-level user, delivering stellar service to each and every adjuster and case manager.  Align was quite successful, eventually becoming the largest vendor in the PM management space.

A misstep by MedRisk helped Align.  Some years ago, MedRisk chose to outsource key functions, including some aspects of IT, billing, and outbound call center functions including patient scheduling. This did not go well, and the resulting dissatisfaction among desk-level users led some customers to switch from MedRisk to Align.

Confronted with the loss of business, MedRisk got back to basics.  The lesson was apparent; a dramatic change in customer service was critical. That involved a major shift in understanding about the central importance of the desk-level customer, the provider and the patient, and a recognition that those customers required, above all, personalized service.

Service isn’t about a couple codes on a bill, or the timing of a patient visit, or A/R days outstanding.   I spoke with MedRisk COO Michelle Buckman about this.

When we’re talking to a provider about our contract or a bill or treatment, it isn’t about crunching numbers on the issue, it’s about the overall relationship – we need to be the liaison, to understand it isn’t about that specific issue or problem, but the entire relationship. Anyone who calls in here, we need them to feel and know that the person on the end of the phone understands where they are coming from and is there to solve their problem…they weren’t getting that before.

We recruited US-based college grads who wanted careers in health care, looking to help people; we did NOT look for folks with call center experience.  That training isn’t necessarily helpful as it can be tied to ending calls quickly – that’s not what patients want to hear or how they want to be treated, and adjusters may need to have more time.

In fact, some metrics used by call centers are counter-productive; MedRisk found it’s much more important for staff to spend time on the phone to get a feel for what’s happening with the patient, the provider, the adjuster, to make sure questions are fully answered, issues identified and understood, then to get off that call and on to the next one. Buckman:

Our people are Patient Advocates. That is their title; their job is not just about setting an appointment, but guiding [patients] through the work comp process. Many [patients] don’t know anything about work comp or functional capacity evaluations, so we educate them…every number is a person who couldn’t pick up their child, or go to work; there is a person, a story, a need behind each one of these calls…

[The Patient Advocate] handles each patient end to end, monitors duration and type of care, in contact with the provider regarding progress. If there’s an issue, the Advocate engages one of MedRisk’s US-based PTs to evaluate the issue, [depending on the issue, resolution may include] perhaps peer to peer to discuss utilization and guidelines…if there is an issue, we get all stakeholders together to figure out how to get things back on track.

Getting there took a huge amount of effort and focus and disciplined execution to bring all customer-facing functions back inside the company. In turn, that required major investment in IT, because those customer service folks had to have the information and the tools necessary to quickly diagnose issues, answer questions, and resolve problems.

In-house IT was beyond necessary, it was mission-critical.  Again, Michelle Buckman:

customers want customized workflows, when IT was outsourced, the [outsourcing vendor’s] folks didn’t get our industry or what we wanted to deliver to customers…One size doesn’t fit all, different customers have different protocols – [I] can walk down the hall and talk to developers [so we can] build what that customer needs…doing it internally is phenomenal, developers understand this is not just coding but actually what they are trying to accomplish [with that coding]

MedRisk now numbers 125 Patient Advocates among its 700+ employees. That’s more than common metrics deem necessary, but “over-staffing” means customers aren’t waiting in a queue, stuck on hold, or rushed off the phone. The company pays those Advocates above call center wages, and invests in them. It hires locally, delegates a lot of responsibility to Advocates, looks to Advocates for system, IT, process, and service improvement ideas, and measures “tangible intangibles”, five core values that make up 35% of performance assessment. Treating staff well does produce some striking metrics;

  • the 4 key staff that began the transition from outsource to internalized customer service are still at MedRisk
  • 78% of patients are scheduled within 4 hours of initial notice
  • calls are answered in less than 10 seconds
  • the “regrettable turnover rate” for the Patient Advocate staff, which is simply losing the people MedRisk wanted to keep – is 9 percent (compared to industry averages far more than twice that)
  • average case duration – the length of time a patient is in PT – declined 15 percent after the Customer Advocacy Program went into effect.

More to the point, investor people, is the financial result.  MedRisk’s revenues and profitability have increased dramatically over the last few years, that growth driven in large part by very happy desk-level customers.

To be fair, this growth has been helped of late by their major competitor’s decision to outsource and offshore key customer-facing functions.

What does this mean for you?

For vendors, serving your customers like your cable company does isn’t a recipe for success.

For payers, do you want your front-line staff to deal with a cable company service model? 


Value-based payment – will it work in workers’ comp?

The IAIABC meeting in Portland Maine (a singularly GREAT location for conferences) includes some really deep dives into very hot topics – this morning’s discussion of value-based payment was certainly both.

Big takeawayCMS is going BIG into alternative payments tied to quality; estimates are 72 million people will be covered by ACOs by 2020.

David Deitz MD led off with a summary of what’s happening with Accountable Care Organizations (ACOs). Note this is NOT specific to work comp, but does have significant implications therefore. A few key takeaways:

  • Doc led ACOs performed better than hospital led-ACOs
  • ACO savings generally improved as ACOs got more experience, with half of the ACOs four years into the program earning performance bonuses.
  • some indication that quality has improved – BCBS MA, Marshfield Clinic are two that have delivered results.
  • several key process measures of quality show good improvement – hospital readmissions being one example.

What happens to losers in the quality race? Providers in NJ who didn’t meet quality standards sued and employed various other methods to try to address Horizon BC BS’ refusal to admit them to their Tier One network. Expect this “denial of fairness” argument to show up in other states where providers are booted out of narrow networks.

Kathryn Mueller, MD, Medical Director of Colorado’s Workers’ Comp and Dan Hunt, DO, Medical Director of Accident Fund, gave the regulator’s and payer’s perspectives.  As two of the more thoughtful medical leaders in workers’ comp, Drs Mueller and Hunt dug into the reality of work comp and value based payment.

Dr Mueller noted that bundled payments for surgery won’t necessarily help reduce the number of unnecessary surgeries, a point the audience heartily endorsed.

Dr Hunt has experience with bundled payments from his work as a surgeon; he noted that a lot of analysis and preparation went into developing a single bundled payment for one diagnosis in one location.  He also reported CMS is looking at a zero-based bonus system, where there may well be more losers than gainers (this is consistent with CMS’ expectations).  And, with work comp’s focus on functionality makes for a “better” outcome metric than those used in other payment systems.

So what does this mean for work comp?

  • FFS leads to more care – inevitably
  • FS may constrain costs but, FFS pays bad docs and good docs the same amount
  • So yes, value-based payment makes a ton of sense for workers’ comp, but…
  • Effective payment design must link value and outcomes – and NOT pay for harmful or valueless care.

What might work in WC?  Not medical homes, likely not shared savings or capitation. Possibly bundled payments, and pay for performance only with different metrics.

Emphasis on different metrics – because we in workers’ comp care about stuff other payers don’t, namely functional improvement and indemnity payments chiefly among them.

Data from a variety of providers indicates bundled payments have reduced length of stay, delivered lower costs and higher patient satisfaction.

And due to indemnity payments, work comp has even more incentive to pay for bundled care based on functional outcomes.  As a lot of high cost care in comp is orthopedic, which lends itself well to bundled payments, comp is well positioned to use bundled payments.

However…there are lots of barriers, regulatory, financial motivations of bill review and network vendors, TPAs, insurance companies, and no standard outcomes measures across work comp.

Dr Deitz opined that incentives to cost-shift may drive docs to categorize injuries as occupational in high FS states such as Connecticut and Illinois.

What does this mean for you?

Lots of frictional, regulatory, and entrenched interest resistance will make it hard for bundled payments – in fact most types of value-based payment – to see significant adoption in workers comp.


Note – I captured this as accurately as possible, however I may have unintentionally misquoted the speakers.  Corrections welcomed.

Medicare doc payment – the details

My post earlier this week on the pending changes to provider reimbursement resulted in a few emails from colleagues looking for clarification and more detail.  So, here goes.

First, why?

Well, everyone agreed that the Medicare doc payment program known as Sustainable Growth Rate (SGR) that had been in place for decades was not working. Details here.

And, CMS – as well as pretty much everyone in health policy not tied to a specialty medical society – wanted increased reimbursement for cognitive services, and lower payments for procedures – surgeries, imaging, etc.

So, in 2015 Congress repealed SGR and replaced with Medicare Access and CHIP Reauthorization Act (MACRA) (you can now forget what MACRA stands for.  The highlights are, MACRA;

  • Still uses CPTs and reimbursement based on RBRVS system
  • Tosses out the old quality evaluation metrics and methodology, replacing it with one that seems more doc-friendly.
  • The evaluation system is MIPS – Merit-based Incentive Payment System, and includes a value-based payment modifier, physician quality reporting system, and meaningful use of Electronic Health Records
  • MIPS goes into effect in 2019, using data from 2017 and 2018 to evaluate provider performance.  CMS expects docs who score high will get bonuses of 4 – 9% over the next five years.
  • Provides for an annual payment increases of 0.5% thru 2019, then frozen till 2026
  • Then .75% increase for APM providers (see below) and .25% for others

While those increases may seem pretty small, it’s important to understand that these are on the margin.  That is, the extra payments may well double – or even triple, the profit margin for providers.  Conversely, for providers that don’t meet standards, profits (or margins for not for profits) may hit zero.

What is the hoped for result?

With APM reimbursement going into effect in 2019, MACRA is intended to drive docs from fee for service (FFS) into a merit-based, quality-driven reimbursement system.  However, participation in the Alternative Payment Model s not mandatory; and CMS’ expectation is the vast majority of docs will NOT be in APMs, even though APMs (which include) Medical Homes, ACOs, etc) can get lump sum bonuses of 5% from 2019 – 2024; after that reimbursement increases 0.75% annually.

What does this mean for workers’ comp?

RBRVS stays around, which is key as almost all provider fee schedules are based on RBRVS.

Providers are going to work very hard to meet CMS’ quality standards, regardless of whether they choose to stay with MIPS or go to APM.  They have to; their financial viability is dependent on it.

Work comp’s future is not what you think it is

What drives workers’ comp is employment – more specifically, payroll, industry type, and claim frequency.

Employment is the end-all and be-all of workers’ comp – for premiums and policies on the front end, and getting work comp patients back to work when claims do happen.

So when a whole lot of jobs in a bunch of industries look to be disappearing, we work comp folks need to take notice.

If you insure, manage claims for, provide services to, or otherwise work in the transportation/logistics industry, you’d best be watching developments in Pittsburgh and keeping your eye on Otto.

Uber is experimenting with its self-driving cars in the Steel City, a big step on the way to fully automated driverless cars.


Ford is heavily involved, and will have a self-driving car on the market in 5 years.  Sign me up; as one who spends way too much time behind the wheel, I’m all over this.  Do work, read, work while being transported to client meetings? Heck yes!

The giant “ride-sharing” company is also behind Otto, an effort to automate long-haul trucking.

Photo below from SF Chronicle; testing of Volvo truck by engineer Nic Munley.


Unlike competitor Lyft, Uber doesn’t seem to care that its current drivers are going to be left ride-less in the not-too-distant future, nor is Uber bothered that, if when Otto and its lookalikes are successful in removing drivers from trucks, those 900,000 truck drivers will not have jobs.

And without truck drivers, truck stops won’t be selling much food or necessaries. Motels won’t be providing showers or rooms. Body shops won’t be needed as much either.

Uber contends that the 24/7 usage of driverless vehicles will mean more jobs for mechanics, but that’s speculative at best.  In fact, as these vehicles will just be replacing miles driven by vehicles currently piloted by people and not adding more vehicle miles, I don’t see why any more mechanics will be needed. Actually, less maintenance may be the norm due to constant monitoring of vehicle systems.


  • far fewer truck drivers
  • fewer support staff
  • fewer jobs in service stations, motels
  • fewer “taxi-type” drivers
  • fewer accidents = less work for body shops, less demand for auto parts and paint, less need for auto claims adjusters

For work comp…

  • much lower premium volume
  • far fewer claims to service
  • far fewer jobs to return injured drivers to
  • possibly more claims in the near future as drivers see the writing on the wall

Pre-vacation catch-up

Headed out on a much-needed vacation; MCM will be on hiatus till the middle of next week.

Here’s a few items of note that came across the virtual wire over the last few days.

Mylan’s EpiPen Disaster.

In the story-that-will-not-die, EpiPen manufacturer Mylan continues to dig its hole deeper and deeper.  The latest news – the actual cost to make and fill an EpiPen is less than 10% of the product’s actual price.  And may be as low as four bucks – for a $300 injector.

Of course, when you need an EpiPen, you really, really need one – and could not care less what it costs. (it is used to reverse the most dangerous symptom of anaphylactic shock – asphyxiation)

But there are so many hands out in the EpiPen distribution chain, all making a margin as the product works its way down to the end user.  Most striking is the rebate Mylan likely pays to the insurer – one estimated by the estimable Adam Fein at around 40% of the product’s list price.

Now Mylan CEO Heather Bresch is providing all of us a lesson in how NOT to respond when confronted by reporters asking about price increases and huge compensation packages.  Bresch said, and I quote: “No one’s more frustrated than me.”

That takes some balls – and a whole lot of cluelessness.

The parents who can’t afford to replace their kids’ EpiPens every year when they expire and have high-deductible plans so they pay the $600 out of pocket might be a touch more “frustrated” than Ms. $19-million-a-year Bresch.

Beyond that, there’s a nastier, uglier, and way bigger problem here.  Health care in this country is a for-profit business, and Mylan is operating in the best interests of its stockholders.

And no, the “free market” won’t solve this issue – markets don’t care about people.

Provider consolidation continues

CMS’ changes in reimbursement are driving adoption of IT systems designed to track and report patient encounters with a focus on quality metrics.  These systems are expensive, difficult to implement, and require ongoing updating and maintenance.

More consolidation does not mean more efficiency or cost-effectiveness…in fact some data indicates costs go up.

Implication – more sophistication in billing, electronic medical records (EMR), coding and contracting means payers will find smarter and more knowledgeable negotiators across the table, and more sophisticated billing.

Work comp rates keep coming down

California, North Carolina, Kentucky, Tennessee all are joining the states that have announced decreased work comp rates.  I know Florida’s getting all Sunshine-y for plaintiff attorneys, and payers are in a justifiable uproar about that, but that’s an anomaly.

Implications – good news for employers and taxpayers, bad news for opt-out.

Which remains a “solution” (and a pretty poor one at that” to a problem that doesn’t exist.

Okay, gotta run.  see you next week!

Does workers’ comp have a future?

Not much, at least according to workers’ comp legend Frank Neuhauser. In an article published in last month’s Perspectives, the IAIABC journal, [sub req] Neuhauser argues that workers’ compensation is no longer needed for 90% of America’s employees, as the workplace has become safer than the non-occ environment.

Noting that the occupational injury rate has dropped precipitously over the last 25 years, he draws a contrast between today’s occupational risks and those extant 100 years ago when workers’ comp was just a few years old. This contrast is so compelling that Neuhauser makes the case that workers’ comp insurance is superfluous, unnecessary as the risks are so low in our largely service economy.  Further, he makes the case that this safe workplace is one of the primary reasons to do away with work comp. Moreover, the medical care that would be needed for those few injuries that do occur can be delivered via health insurance, while disability coverage can simply be added to workers’ existing short- and long-term disability.

I find Neuhauser’s case far from compelling.  In fact, it is so far-fetched at least one very knowledgeable colleague wondered if Neuhauser had penned the piece just to provoke discussion.

If that was his mission, it was accomplished. At today’s Maine Workers’ Comp Summit, all panelists at the Think Tank disagreed with the central premises of Neuhauser’s case, raising multiple objections to his data and logic.  Here are a few.

  • About a third of workers have disability coverage.  What about the other two-thirds?
  • About 15% of workers do not have health insurance.
  • Employers have worked diligently to reduce injuries and risks thereof in large part because they pay higher premiums with higher injury rates.  Removing that financial incentives would almost certainly result in higher injury rates.
  • Eliminating workers’ comp would also eliminate the tort protection enjoyed by employers in today’s no-fault system.
  • In some cases, there is no tort system as a recourse. As Think Tanker Alison Denham pointed out, some injuries, such as those suffered by fire professionals, have no “cause of tort.”  Who would an injured fire professional sue?

Pennsylvania Judge David Torrey succinctly addresses many of Neuhauser’s arguments, bringing a much-needed legal perspective.

The net?  Sorry, Frank.  Work comp is here to stay.


Companies need strategies, Execs need success

And those two often don’t match up very well.

Example.  Work comp insurance companies benefit when medical and indemnity costs are lower than expected.  So, lower medical costs = better “outcome” for the company.

Many – if not most – managed care executives are evaluated in part based on “network penetration” and “discount below fee schedule”.  Thus, the more dollars that flow thru their network, and the deeper the discount those providers give the network, the “better” the executive’s performance is.

Superficially, this makes sense – more care thru lower cost providers equals lower medical cost, which benefits the insurance company.

“Superficially” being the key word.  Here’s the problem with this model.

Insurers contract with PPOs, which in turn contract with providers to deliver services at a discount. Most PPOs get paid a percentage of the savings that is delivered by that discount, typically 15 to 22 percent of the savings. So, the more the PPO ‘saves’ the more it makes. On the surface, this sounds good: the system rewards the PPO for saving money and does not pay it when it delivers no savings.

Under a percentage-of-savings arrangement, reducing total medical cost is ignored in favor of saving money on unit costs. The PPO gets paid for savings on individual bills. Therefore, the more services that are delivered and the more bills generated, the greater the ‘savings’ and the more money the PPO makes.

The system encourages over utilization because it is in the PPO’s best interest financially to have numerous providers generate lots of bills for lots of services. Also, the providers, squeezed by a per-unit fee schedule that is lower than fee schedule/Usual and Customary Rates (UCR), have a perverse incentive to make up for that discount by performing more services.

The fact is few carriers, TPAs, or employers have realized that per-bill ‘savings’ is the wrong way to assess a managed care program – or the executive running medical management. And unless senior management changes their evaluation methodology, their managed care departments will have no incentive to change their program to one that actually does reduce total costs.

This is by no means the only example out there; I’m quite sure you can come up with more than a couple off the top of your head.

What does this mean for you?

Take the time to understand  – really understand – what success is, and what drives success.  You may be unpleasantly surprised to learn your execs’ motivations are diabolically opposed to your company’s success.