Back to my day job

As many readers know, I have been running for County Legislator here in Onondaga County New York – yesterday was election day, and I lost.

Results are here.

In the immortal words of Yoda, “there is no try, there is only do.”

Despite a lot of support from friends and colleagues, a massive amount of work, a very, very good campaign manager and staff, and a good message, I lost.

The regret I have is not for the hundreds of hours I put in, or the fun forgone when I knocked on doors instead of visiting with family and friends, rowing or riding my bike. The regret is many of you supported our campaign in many ways, and I did not deliver the win. This campaign was never about me, it was about making a difference for the people here, and many of you bought into that and pitched in.

I deeply appreciate your support and encouragement, kind words expertise and advice. I cannot tell you how much that meant and means to me, and I am profoundly grateful.

For now, the Paduda family is headed to Sedona Arizona for a week of family time, mountain biking, hiking, too much good wine and lots of reading the stuff that’s been piling up on the nightstand for the last nine months.

Looking forward to seeing you in Las Vegas – and thanks.

Opioids now the top killer for those under 50

The death rate for drug overdoses climbed 17 percent last year, killing more than 64,000 people in 2016

‘We have roughly two groups of Americans that are getting addicted,” Dr. [Andrew] Kolodny said. “We have an older group that is overdosing on pain medicine, and we have a younger group that is overdosing on black market opioids.”

For those interested in why this is happening, I urge you to read a “biography’ of the Sackler family, owners of Purdue Pharma of Oxycontin fame.

Here is one chilling excerpt:

[Sam Quinones, author of a book on the crisis talking about the] similarities he finds between the tactics of the unassuming, business-minded Mexican heroin peddlers, the so-called Xalisco boys, and the slick corporate sales force of Purdue. When the Xalisco boys arrived in a new town, they identified their market by seeking out the local methadone clinic. Purdue, using I.M.S. data, similarly targeted populations that were susceptible to its product.

My take is this just one of the many similarities between Purdue and the drug cartels – the one chief difference is Purdue et al dosen’t have to worry about law enforcement.

At least not so far.

Opioids, MSAs, and the Feds

The average California MSA includes almost $49,000 for drugs – about half of all future medical expenses.

69% of MSAs included funding for opioids.

But when researchers compared the MSAs to a

“case-matched control group of closed workers’ comp permanent disability claims for similar injuries, the authors found that the WCMSAs called for much stronger opioids, as average cumulative morphine milligram equivalents (MMEs) allocated to WCMSAs with opioids were 45 times the level used in the control group during the life of the claim.” [emphasis added]


Especially when the report goes on to say:

Federally mandated formulae to financially account for decades of sustained individual opioid use are at direct odds with a growing body of clinical evidence — and a widespread recognition — that opioids are often over-prescribed for the management of chronic, non-cancer pain.

The Feds want/require employers and insurers to pay for another 20 years of opioids, at relatively high doses, for claims that should not be getting opioids.

This is what makes all of us nuts; one hand of the government is pushing us to assertively reduce opioid use, while the other hand demands we pay for opioids for another two decades.

Worse still, many of the MSA patients are also taking hypnotics and/or muscle relaxants. 

[chart courtesy CWCI]

A couple thoughts…

The claims with MSAs may well be those that payers can’t resolve, where the patient, their attorney, or their provider just won’t cooperate in efforts to reduce opioid use. Thus, the MSA projections make sense.

Why are these patients being prescribed – and ostensibly consuming – a high volume of opioids for an extended time when clinical guidelines and best practice clearly contradict this practice, and other patients with similar conditions aren’t getting these drugs?

What does this mean for you?

We are making progress, but we have a very long way to go – and CMS isn’t helping.


Concentra – USHealthworks – implications for workers’ comp

Yesterday’s announcement that Concentra owner Select Medical is purchasing US Healthworks sent waves through the workers’ compensation world.  The “new” Concentra will:

  • have 565 occ health clinics and on-site centers in about 40 states,
  • handle around one out of every seven occupational injuries, and
  • further cement Concentra’s position as the largest initial treatment provider in work comp.

The transaction valued USHW at $753 million, or about $3 million per location. Concentra is currently jointly owned by Select Medical and investment firms Welsh Carson, Cressey & Company (and several other firms). It looks like one goal of the deal was to buy out minority investors, a not-uncommon objective for this type of transaction.

So, what does this mean for workers’ comp?

  1. Workers comp services is a very mature industry, where scale and buying power are critical. This is yet another indication that players in the industry recognize scale is critical.
  2. This looks to be continued move on the part of Concentra to focus on occupational care and de-emphasize urgent care – which is focused on non-occupational conditions.
  3. Concentra will have more bargaining power with work comp PPOs and payers. The giant provider can’t quite dictate terms today, but is certainly in a very strong position.
  4. USHW has a reputation for over-prescribing physical therapy, a concern some have with Concentra as well.  Payers would be well-served to monitor this closely going forward.

What does this mean for you?

Consolidation can be beneficial for all parties.

It can also be a cause for concern for customers.


It’s been crazy busy.

Hello readers – apologies for my silence this week and a good chunk of the last few weeks.

As some may know, I’m running for County Legislator in Onondaga County, New York (Syracuse and surrounding towns and villages) and the election is November 7. I’d been told this was a lot of work – and the tellers were certainly correct. It’s a full-time job doing this right.

Even more so when you’re a political rookie and don’t know what you don’t know.

There are a couple items worthy of your attention this Friday.

  1.  TrumpCare has replaced ACA. A few key facts have been lost in the debate:
    1. Don’t expect many more health insurers to drop out of the Exchanges; those still in priced in the loss of CSRs a long time ago, which is why rates are so much higher.
    2. Most of the for-profit health insurers bailed out a while ago for two reasons; they can’t figure out how to make money in the individual market and they can’t deal with the lack of clarity due to President Trump’s conflicting statements and action.
    3. Remember only about 6 percent of us get our insurance through the Exchanges
  2. Reminder – some of the people in DC screwing around with our healthcare have no idea what they are doing. Healthcare is one-sixth of our economy, a major employer, and critically important for each one of us. Yet politicians who admit they don’t know anything about healthcare are trying to “fix” it. This is like putting an English teacher in charge of a nuclear plant.



Trump’s ACA Orders – One’s big news, the other’s just political fluff

President Trump announced two major policy changes yesterday; one will do little to affect healthcare markets and insurance, the other will have a drastic and almost immediate impact.

Cost Sharing Reimbursement payments help those making less than 250% of the poverty level pay for deductibles and other costs.

Ending CSR payments will force health insurers to:

  • increase premiums by almost one-fifth to offset the loss of CSRs; this is already happening in many markets…many had already done this, but others are sure to do so immediately
  • and/or stop selling insurance immediately and cancel policies already in effect, ending coverage for poorer Americans.

Here’s the funny thing; ending CSRs will INCREASE costs to the taxpayers because people who no longer get the payments will get tax credits – and others will too..

The reaction from many in Congress was negative; CSRs had been funded in the Republicans’ bills to repeal the ACA, and several House and Senate Republicans expressed concern that the President’s move would harm their voters.

This may be an unwise political move as well;

Trump’s supporters (51%)…[and] eight in 10 Americans (78%) say President Trump and his administration should do what they can to make the current health care law work.

Trump’s other Executive order will have far less impact on insurance markets. In sum, the order allows insurance companies to sell policies across state lines and offer stripped down policies 

The first – selling across state lines:

  • is already allowed in 3 states, and no insurers participate because mandates do influence costs, but the underlying cost of insurance is the cost of care.
  • Contradicts Republican orthodoxy – and ACA repeal efforts – that keep states in control of insurance markets. The across-state-line sale of insurance guts state insurance regulatory authority.

As does the part of the order allowing sale of stripped down policies. These plans, known variously as association health plans, multiple employer welfare arrangements (MEWAs), and multiple employer plans (MEPs), have a pretty crappy history. Allowed years ago, many went belly-up leaving healthcare providers unpaid and members uncovered.

There’s a lot of detail to these, (see here) but the real issue is simple – policyholders often get screwed, and, like selling across state lines, MEWAs flout state regulation of insurance.

What does this mean for you?

These orders will further screw up the health insurance industry. The real effect will be to push us closer to single payer, a result unintended and with far more drastic consequences.

Failure is good.

Had a great conversation with an old friend yesterday; he runs a mid-sized work comp insurer and is one of the most forward-looking executives in this industry.

The discussion worked its way around a wide range of topics, as these conversations usually do, before settling on failure – there it took an interesting twist.

Put simply, failure is under-rated.

Athletes learn more from missing the ball, failing to score, blowing the assignment, over-training than they do from winning. If you win, there’s much less motivation – and reason – to look for things that can be improved.

If you don’t win, there’s lots of reasons to figure out why. Of course you can get too deep into this, spend too much time dwelling on the problems and become fatalistic and negative. If one avoids that trap, one can learn a lot and be much better prepared for the next contest.

As a case study, look at Kaiser.  The huge health plan invested $400 million in a new Electronic Health Record project which failed. Rather than fire the team, blow up the effort, and forget about it, then-CEO George Halvorson doubled down, and the final investment was $4 billion – roughly $444 per member.

One reason – the EHR stripped out a lot of unnecessary cost and streamlined patient interactions:

Just having an electronic health record that is connected with all the systems that have to do with delivery of care to a patient means you don’t have patients taking duplicate tests. In the United States, I believe the cost of duplicate testing is about 15 to 17 percent of the total health care spend. We [Kaiser] don’t have that cost.

In talking with my colleague, we both marveled at the fortitude of Kaiser; if someone in work comp made even a $4 million “mistake” in a systems implementation – or anything else for that matter – their head would be on the block.

That’s one reason innovation is so rare in workers’ comp – the tolerance for failure is low indeed. With that tolerance for failure is an inability to learn, to take risks, to get better faster.

What does that mean for you?

Risk has rewards, but rarely in workers’ comp.

Claims, they are a’shifting!

There appears to be a “trend” among many work comp insurers to shift more and more claims handling responsibilities to third party administrators (TPAs).

I (and I’m sure many others) have been somewhat aware of this for a few years, but like the proverbial frog in the pot, the temperature has been increasing rather slowly, and the consequences have been barely visible.

Currently, the big TPAs – Sedgwick, GB, York and Broadspire are all doing a lot of claims handling for big work comp insurers. AIG has outsourced a big chunk of its claims for decades, but other insurers are slowly following suit.

The drivers are many:

  • decreasing claim frequency is now a structural trend; insurers have to work to stay ahead of the declining volume and off-loading claims to a third party makes managing a shrinking business a lot easier
  • total administrative expense, long a bugaboo for insurers, rating agencies, and regulators, has to shrink as well. Stripping out the upper management, IT, compliance, and related functions slashes unallocated loss adjustment expense, or perhaps more accurately shifts it into allocated expense.
  • some more “self-aware” insurers have realized that their company’s claims handling just isn’t that good.
  • technology, IT/systems changes and improvements, training requirements and the like are becoming increasingly expensive. As carriers look to move from their existing green-screen-based technology to SaaS or other cloud-based technology, some are finding the switch incredibly expensive, very risky, and potentially career-threatening (this last is perhaps the biggest driver). Better to just get out of the business then screw up a tech migration.

I’d expect the big TPAs to assume more and more responsibility for claims functions over the next few years.

There are implications aplenty for all parties involved; they have different revenue models, different service expectations and definitions, and different priorities.

What does this mean for you?

Good stuff if you’re a TPA. And perhaps fewer headaches if you’re a carrier…unless you pick the wrong TPA.