Friday catch-up

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’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.


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


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.


Adjusters, management, and priorities

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.

NCCI outtakes

This morning began with Ted Koppel – not a workers’ comp expert, but a terrific speaker and highly entertaining.  So, while listening to Mr Koppel, a few things worthy of note are coming to mind.

First, while my original thought was this was, while fun and interesting, pretty much a filler, I have to say that was short-sighted.

We workers comp folks spend far too much time navel-gazing, and the chance to engage, really engage, with a very thoughtful, highly experience, and deep thinker was valuable indeed. Topics addressed included India, Pakistan, the energy infrastructure, Edward Snowden, Putin, Nixon at the Great Wall and where to find good sources for information (Mr Koppel’s favorite is John Oliver’s This Week Tonight on HBO – and yes, it is for the news content, not just the terrific delivery).

While Mr Koppel was impressive, what was perhaps more impressive was the depth and interest level of his questioners.

Kudos to each and every one who posed a question – you enriched the experience for all of us.

What does this mean for you?

It’s not about the urgent; it’s about the important.  Look up, read, listen, and not just to those who think just like you.



NCCI’s PM sessions – hard core research geeks only

NCCI, with the assistance of payer medical directors (shout out to Employers’ Dwight Robertson MD and David Deitz MD among others) presented on 4 research topic areas late Thursday afternoon.

After a long day of great talks (this NCCI has been the best I’ve been to in a dozen plus years) it was time for the real dense, pithy stuff.  I’ll summarize so you don’t have to write your own notes…There’s some really good stuff here.

Joint injuries

Barry Lipton discussed an analysis of knee surgery across six states; you may be surprised to hear costs, even after correcting for price variations, ranged rather dramatically across the six – by around 60 percent.  What’s a lot more surprising is the variation in diagnoses, particularly among strains.  The percentage of knee injuries that were attributed to strains varied by somewhere around 20 points from highest to lowest state.

Shoulders exhibited differences as well, however there were similarities between the two joints.  Namely, the variation in utilization for both was driven by surgery and physical medicine.  A question from the audience asked why there is such variation when treatment should be uniform…

Therein lies the issue.  According to the handout, “Utilization differences across our selected states are driven more by differences in the treatment for given diagnoses than to the mix of diagnoses.”

There was quite a bit more to Barry’s presentation; check out NCCI for more.

Next up, Drug Fee Schedules

NCCI looked at differences in the prices paid for drugs in an effort to assess the effect of fee schedules [FS] on prices paid.  Some quick highlights from Natasha Moore’s talk…

  • Just because states have similar fee schedules doesn’t mean the prices paid for drugs will be similar.
  • Prices in high FS states are generally higher than states without fee schedules
  • There’s quite a bit of variation in prices paid even a) after correcting for drug mix and b) among states with similar fee schedule levels.
  • However, lower fee schedules are correlated with lower prices paid.
  • Brand drugs are 22% of scripts, but 56% of cost

Time from injury to treatment – preliminary results

NCCI is workign on a long term study on the impact of the Affordable Care Act; their first effort focuses on time from injury to treatment.  Highlights are from data between 7/1/2010 – 12/31/2012:

  • 85% of trauma cases are treated within 3 days from date of injury
  • there are longer “delays” in seeing some specialists in some states

My view is this is not likely to bear much fruit; looking at time to treatment by specialist as a way to somehow evaluate the impact of ACA is likely to be confounded by multiple issues, including:

  • practice pattern variation
  • supply of various provider specialties
  • expansion of Medicaid – or not
  • state support of ACA enrollment e.g. California vs those antipathetic to ACA e.g. Texas

Perhaps an analysis holding provider populations level and using the uninsured rate would be more illuminating.

Impact of report lag on claim severity

Following on the ground-breaking work by the Hartford’s Glen Pitruzzello fifteen years back, NCCI looked at the impact of claim reporting lag on claim severity.

There’s a wealth of data shared; the net is the longer the delay, the more likely the claim will cost more – HOWEVER, the correlation is by no means linear and varies by type of injury (e.g. the most expensive fractures are those reported on the actual date of injury, next is during the first week).

A long day indeed…

Listening fast to Bob Hartwig

The estimable Bob Hartwig President of III breaks pretty much every rule re presentations – way too many slides, with way too much information on each,  mixes fonts and graphics and colors and pretty much everything, often on individual slides, talks way too fast…

…yet he’s really good.

A few takeaways I plucked out of the torrent while somehow not spraining any fingers typing…

The P&C industry…

  • P&C profitability is both cyclical and event driven (e.g. hurricanes)
  • for 25 years the industry didn’t turn a profit in any year – yet the last two years we’ve seen profits – totaling $12.3 billion in 2014
  • the last three years have seen premium growth of around 4% each year…
  • as a result, P&C industry is in a very strong financial position with deep reserves
  • is the world’s single largest institutional investor

Work comp specifics…

  • Florida lost 27% of WC premium from 2007 to 2013 due largely to a collapse of the housing industry
  • More so than in other P&C lines, WC returns are driven by investment income, so the longer the Fed keeps interest rates low, the harder it is to generate returns.
  • As WC is heavily invested in interest-rate sensitive instruments, the historically-low-interest rates that have been held down for a historically-long time are dramatically affecting returns.
  • The number of workers not seeking jobs has decreased rather significantly; the forecasted unemployment rate drops below 5% in the next few quarters.
  • 3 million jobs were created last year. New jobs plus slightly higher wages led to increased payroll and thus higher premiums.


  • Look for big bump in construction due to under-supply of new homes – but it’s still picking up too slowly
  • Manufacturing employment growth has leveled out due to high value of dollar
  • Oil & Gas extraction employment down slightly since peak in September 2014
  • Numer of temporary workers is at an all time high – due in part to the slow recovery, but also driven by the “sharing economy”…

The Sharing economy was the closing part of Bob’s talk – noting Washio, Handy, TaskRabbit, WeddingWire as apps to do pretty much anything via your phone – using task-specific “workers” who are often independent.

Today, about 7% of the US population are “providers” in these areas, with the average making less than $50k.  (there are over 300,000 signed up to be Uber drivers…)

The big question is – how will the sharing economy, with its different “use” of “employees” on demand affect workers comp?

The answer is TBD.


The State of the Workers’ Comp Line – 2015 ed.

Chief Actuary Kathy Antonello gave the state of the line at AIS: here are the top data points on a calendar year basis for work comp, the P&C industry numbers were also presented and should be available later here.

  • private carrier combined ratio of 98%; state funds at 115%
  • private carrier pretax operating gain of 14%, down from 17.7% in 2013 (this is NOT equivalent or even similar to profitability or returns)
  • state fund operating gain of 5%
  • private carriers saw a 4.6% jump in direct written premiums
  • claim frequency is down 2 percent for NCCI states; CA is actually seeing an increase in frequency.

Key claim cost data points

  • Indemnity cost per lost time claim was up 4% in 2014, continuing the trend for claim costs to go up faster than the average weekly wage.
  • medical trend for LT claims was also up 4% in 2014; average cost per LT claim is $29.4K. (medical CPI was up 2.4%)
  • these data points vary widely by state from an average annual 2% decrease over the last 5 years to a 10% increase

Ms Antonello was careful to clearly explain the factors driving financials, what the descriptions mean – and don’t mean, and how today’s results compare to historical averages.  She noted that the big jump in investment gain seen in 2013 was largely driven by a single corporate entity’s capital gain; adjusting for this dropped the return – and the operating gain – dramatically.  In fact, actual investment gain was almost dead even with the 20 year rolling average of 14.2%.

Who cares?

Well, mis-understanding these data points has led others – notably ProPublica – to claim the WC industry is delivering a historic return, and infer that return has been due to reduced benefits for injured workers and a system slanted to favor employers.

More on that in a future post…

Antonello and her colleagues have done yeoman work in an apparent effort to help laypeople better understand the work comp system’s financial performance.  Using videos, data maps and graphics, and clear and concise language, presenters illustrated correlations, noted there is a $10 billion reserve deficiency, and clarified the system-wide decrease in premium levels set by work comp bureaus (down 4.3% for 2015).

Another graphic clearly showed how changes in the economy affected premiums in individual business sectors. The use of these visualization tools indicates NCCI is doing much more to help stakeholders quickly and readily track the industry’s evolution.  Kudos to Antonello and her colleagues for this initiative.

Today, premiums are up, despite a decrease in premium levels.  This is happening because employment has increased, and as wages are up slightly, there’s a multiplicative effect.  Compared to 2005, the payroll index is up 16%.

Simply, work comp total premiums are based on the rate multiplied by wages, so the more people working and the higher their wages are, the higher the premium dollars.

What does this mean for you?

Across the nation, work comp is pretty level, however a few individual states are seeing rather radical changes.  Medical and indemnity expenses continue to outpace overall benchmarks


May Day catch-up

It’s a big day for we commie socialists; hope your International Workers’ Day is filled with tributes to the proletariat…

Workers’ comp

While the world was at RIMS, I was otherwise engaged. Heard from several folks that the MedRisk event was just incredible; a terrific party followed by a police-escorted parade thru the French Quarter complete with bands, jugglers, and all manner of entertainment. Kudos to MedRisk Marketing VP Rommy Blum and her stellar team; by all reports this was THE event at RIMS {and yes, MedRisk is a consulting client].

And thanks to Bob Wilson, Jonathan Mast, and Jen Jordan for the shout-out from RIMS; I know, I’m a loser for not coming…

Another research study indicates “Persons with non–cancer-related pain have an increased risk of fatal and nonfatal drug overdose related to treatment with opioid analgesics.”  [emphasis added] A great piece in Business Insurance by Sheena Harrison and Bill Keneally explains why this study should cause prescribers – and payers – to think even more carefully before prescribing/approving opioids for long-term users.

Coincidentally, CMS has released a huge database of prescriber information; accessible to anyone, the database provides:

For each prescriber and drug, the dataset includes the total number of prescriptions that were dispensed, which include original prescriptions and any refills, and the total drug cost.  The total drug cost includes the ingredient cost of the medication, dispensing fees, sales tax, and any applicable administration fees and is based on the amount paid by the Part D plan, Medicare beneficiary, government subsidies, and any other third-party payors.

For work comp payors, I could see analysts looking to see if physician prescribing patterns for Medicare are consistent – or inconsistent – with work comp prescribing patterns.

Found this item in WorkCompWire; according to an Align Networks exec, the “top challenge” Align is working on this year is education of nurse case managers and adjusters.  I guess the whole 59 modifier thing isn’t that big a deal…

Lockton’s Keith Rosenblum is referenced in another WorkCompWire story about mis-diagnoses and bad medical treatment.  Why mis-diagnosis occurs and the consequences thereof is laid out in a white paper available here.

I neglected to inform you, dear reader, of a brief-and-excellent take on ProPublica’s recent “reporting” on work comp by the estimable Mark Walls.  Next time someone confronts you with PP’s “reporting”, send them to Mark’s column.

Implementing health reform

In what is an amazingly timely follow on to my post earlier this week about the snake-bitten Florida Legislature, turns out hospitals in states that expanded Medicaid are doing a LOT better than facilities in states that haven’t.  If you’re wondering why Florida’s hospitals are screaming so loudly, there’s this:

Hospitals in non-expansion states actually saw a 9.4 percent decline in Medicaid revenue…

That’s a shipload of dollars.

Unsurprisingly, new research indicates the PPACA non-insurance penalty may be too low to drive much more enrollment.

Oops, gotta run! time to don my red kerchief and head down to the gathering area for today’s celebration of the working wo/man.  Hope to see you there!

California’s workers’ comp UR process is working.

CWCI’s just-released analysis of the Independent Medical Review program’s 2013-2014 results indicate it is working well – despite being flooded with requests from a relatively small group of docs.

Let’s stipulate that the IMR process is not fool-proof.  There’s no question errors have been made and it is likely some patients’ care has been adversely affected.  More on that below…

Here are the key data points:

  • 94.1% of all medical service requests are approved
  • 36% of requests were from the Los Angeles area but only 24% of WC claims
  • Of the requests that are NOT approved;
    • 45% are for drugs (29% for opioids, 12% for compounds)
    • 10% for DME
    • 9% for PT
  • 1 out of 17 medical service requests are modified (the treating doc agrees with the reviewer to do something different) or denied
  • review encompassed 260,889 medical services requested for 76,718 patients
  • 75% of reviewers’ guideline summaries cited the CA Medical Treatment Utilization Schedule; 80% of those cited either MTUS alone or MTUS and non-MTUS guidelines (there’s a lot of additional info in the report on pp 19-21 re guideline usage)

Okay, that’s the data, big-picture stuff.  What’s perhaps even more revealing is what some docs wanted to do to patients.  For example;

  • one wanted to administer Propofol to a patient getting a steroid injection because the patient gets “anxious”.  recall Propofol killed Michael Jackson, and is by no means appropriate for an ESI.
  • another wanted to fuse “every vertebra from the pelvis to the middle back in a 76-year old patient”, despite no documentation of a lesion, neural compromise, or “other clinical finding supporting the procedure”
  • I’ve also heard from a credible source (not in the report) that aspirin was denied to a patient because that patient was already on blood thinners…

What’s abundantly clear is the UR/IMR process has undoubtedly prevented medical catastrophes; opioid addiction, failed back surgeries, adverse drug reactions.

As noted above, we can also stipulate that the process is by no means perfect, however the reasons for those errors are by no means clear.  It certainly appears that the huge volume of IMR requests (the top 1% of docs accounted for 44% of all requests; 10 physicians alone accounted for one out of every seven requests!) overwhelmed the system initially, altho of late requests are being processed on a much more timely basis.

The exhaustive, 24-page review concluded with this statement:

The Workers’ Compensation Insurance Rating Bureau of California recently announced a significant decrease in medical benefit development coupled with a significant increase in expenses related to the delivery of medical benefits. IMR is likely to be associated with both trends. [emphasis added]

What does this mean for you?

Evidence-based medical guidelines backed up by a tight UR process prevents a lot of crappy medical care.  It can also be cumbersome, and is by no means perfect.

Friday catch-up from the (still) frozen northland…

Hello all!

Well, (or rather, HELL!) it’s snowing in upstate New York…hopefully it’s a bit brighter where you are. Lots happened this week, so here we go.

First, this really needs a series of posts, but it’s so important that better fast than thorough. There is yet more evidence that the earning power of the vast lower-middle class (and poorer folks too) has been steadily declining.  And that’s a major issue for workers’ comp. Here’s the money quote from Neil Irwin’s piece in the NYTimes:

there really is a shift away from the sectors where less-educated workers can earn a decent living. [emphasis added] In 1990, 40 percent of the prime-age male workers without a high school degree worked as operators and laborers, a number that declined to 34 percent in 2013. Jobs in food service, cleaning and groundskeeping nearly doubled in the same span, to 21 percent from 11 percent. But it wasn’t an even trade: Pay for operators and labors was $25,500 in 2013, compared with $20,400 for the food, cleaning and groundskeeping category.

You’re not imagining it. The jobs that are being created for less-educated workers really do pay less than the ones that are being lost. [emphasis added]

What does this mean for work comp?   A few things come to mind.

  • if good-paying jobs continue to disappear, it is going to be increasingly hard to re-employ injured workers in positions where they earn the same pay they did pre-injury
  • comp premiums may decline slightly due to lowered covered payroll
  • we may see more longevity and less movement among workers currently in those jobs, meaning there are fewer opportunities for experienced workers to get re-employed
  • it’s theoretically possible that people working at jobs that are disappearing may see workers’ comp as a safety net

The net is the work comp system is going to be dramatically affected by this economic trend.  We need to be talking about it now, thinking about the potential implications, and seeking solutions – now.

The Catamaran acquisition of Healthcare Solutions was followed almost immediately by United Healthcare’s announcement that the company is going to buy Catamaran. Personally, I think HCS was the linchpin of the Catamaran – Optum deal; HCS’ unique position in the WC PBM, bill review, network, and related businesses made Catamaran so darn attractive UNH ponied up $14 billion just to get in the WC game.

Well, maybe not.  More seriously, UNH will own the third largest PBM, trailing only CVS/Caremark and Express Scripts, Inc.  The combination of OptumRx and Catamaran will fill about a billion scripts this year.  Catamaran itself was a relatively small player a decade ago; it grew rapidly via acquisition and diversification (along with ESI it is the only PBM active in the work comp and auto sectors).

With this transaction, UNH continues to diversify; the chart on page 2 provides a rather striking view into just how diversified this former HMO company has become.  For some, $14 billion seems like a lot of cash.  Not to UNH; this is a company with revenues that will likely hit close to $150 billion this year.  For you work comp folks, that is about 180% of total US WC premiums. 

(full disclosure – I owned a tiny bit of equity in HCS from a prior role on the Advisory Board of predecessor Cypress Care)

The good folks at Washington Labor & Industry (and other state agencies) are asking for public comment on their revised Prescribing Guidelines for Opioids. The pdf briefly summarizes changes from current guidelines, and is well worth your perusal.  Kudos to the Agency Medical Directors’ Group; they continue to lead the way for the rest of the country.

There’s a rather troubling piece in the latest Health Affairs about the cost and implications of over-diagnosis and over-treatment of breast cancer.  As one who is somewhat troubled by the proliferation of pink everything everywhere (cue the calls for my summary execution as insensitive and uncaring), I see this as evidence of a movement in danger of running amok.  From the article:

The average expenditures for each false-positive mammogram, invasive breast cancer, and ductal carcinoma in situ in the twelve months following diagnosis were $852, $51,837 and $12,369, respectively. This translates to a national cost of $4 billion each year. The costs associated with false-positive mammograms and breast cancer overdiagnoses appear to be much higher than previously documented. Screening has the potential to save lives. However, the economic impact of false-positive mammography results and breast cancer overdiagnoses must be considered in the debate about the appropriate populations for screening. [emphasis added]

Is breast cancer a major problem? Yes. As a major killer of women, and a disfigurer that does deep psychological damage, breast cancer is one of the major public health issues nationally.  That said, telling women who DON’T have breast cancer they do, and treating them for it, is awful indeed.

Finally, Darrell Bruga of LifeTEAM asked me if there is any technology platform already being utilized in workers’ compensation that is designed with the end user being the INJURED WORKER? Does anything like that exist where the claims examiner, caae manager, etc interacts with the injured worker digitally to communicate, provide information, provide health information, etc.

I don’t know of any such app; if you do please let me know – email at jpadudaAThealthstrategyassocDOTcom or just comment below.