Watch out for “innovation”

In any very mature industry – and workers’ comp is certainly that, certain truths are immutable. Scale, margin compression, consolidation are all inevitable – or at least two out of three are.

Innovation – mostly “small i” innovation – can and will help smaller entities compete with goliaths, and large companies maintain and even grow margins.

The innovations I’m speaking of are the tweaks, efficiencies, streamlined processes and smoother customer interactions that make vendors easier to work with. Front-line customers benefit from these small innovations, sometimes almost without noticing them.

  • What used to take two phone calls now is done automatically.
  • Medical services are scheduled, visits conducted, and progress reports prepared and delivered with no action by front-line customers needed
  • Bills that had to be reviewed line-by-line are now auto-qdjudicated, with only those lines or bills that qualify via a rules engine hitting the front-line person’s queue.
  • Medical services are automatically authorized, with relevant guideline language attached.
  • Medical service reports are auto-uploaded to the claim file, with only those issues needing attention highlighted for review.

What’s easy to lose track of is the purpose of automation and innovation. The primary purpose is NOT to make the vendor more efficient and reduce vendor costs; it should be to deliver better service to the end user, be they provider, patient, front-line customer.

Therein lies the trap. In a mad dash to strip out cost and improve “efficiency”, many service companiess don’t pay near enough attention – if they pay any attention at all – to how those changes affect the end-user.

For a while, those “improvements” will reduce costs and add to profits. Then, as front-line users suffer in voice-mail hell, or can’t find anyone to answer their questions, or have to ask for another password to enter a “portal” for the umpteenth time, revenues will start to decrease.

Instead, focus your innovation efforts on those that will make your end users happier, less stressed, and less busy.

Take work off their desk/workstand and put it on yours.

That’s innovation that delivers long-term results.

 

 

 

Why the Foresight deal is different.

There are two big takeaways – the price, and why Paradigm paid so much.

Sources indicate Paradigm has bought Foresight for around $150 million, a huge multiple for a relatively small company with trailing earnings of less than $5 million.

Foresight’s niche is narrow but important – the company’s core business is negotiating prices for implantable surgical devices. More recently the company entered the surgical services business with Encompass, a network of surgeons and facilities.

The announcement was pretty much what you’d expect, but the real news is why Paradigm paid what it did. First, a little history.

I’ll admit to wavering between being impressed with Paradigm and thinking it won’t ever become a significant force in the industry. As noted previously, the company has been around for the better part of three decades, and throughout that time has seemed to be just a year or so away from really breaking out.

Today’s no different.

That’s not to say Paradigm doesn’t have deep expertise and hasn’t produced excellent results for some clients – it most certainly has. The problem is two-fold; the original marketing message is tough – we can manage the really tough claims better than your claims staff can. Hard to see how a claims exec would jump at the chance to show a third party is better at a critical core skill than her or his staff.

The second is what Paradigm missed back then, and I’d suggest still doesn’t understand., Payers don’t like vendors that only solve part of their problem. What I mean is this – Paradigm asks a payer to give them data on claims that meet specific criteria. Then, Paradigm winnows thru those claims, picking the ones it can fix, and sending the rest back.

Wrong approach.

If a payer sends you a big bunch of problems, you should figure out a way to help with ALL OF THEM.

That may be one reason Paradigm recently bought a couple of case management companies; in addition to diversifying revenue sources and adding customers, the deals bring more ownership of nurses who will likely be used to service the cat claims that are Paradigm’s core business. That said, case management is a declining business under strong price pressure – just what you’d expect in a very mature industry.

Which brings us to Foresight.

Diversification, technology, and data on surgeries are all going to help Paradigm diversify even more.  And, the surgical network may provide a consistent and growing revenue stream to complement the case management and somewhat-less-predictable catastrophic case business.  It’s likely margins in the implant and surgical businesses are going to be much higher than case management and more in keeping with Paradigm’s cat case business.

From this outside perspective, this is the reason Paradigm’s owner Summit paid what it did. They’ve owned Paradigm for almost 2.5 years, and it’s time to get things ramped up for another equity event in the next few years.

What does this mean for you?

Good news indeed for anyone looking to sell their workers’ comp business!

 

Friday catch-up

Hurricane recovery

Thanks to NCCI for a very timely article by Chief Actuary Kathy Antonello on evaluating construction contractors based on information on experience modification rates.

Key takeaway – “It’s not appropriate to use E-mods to compare the relative safety of employers.”

Very interesting take on efficiency in construction; the Economist notes that the construction industry has become LESS efficient over the last few decades. While this may well be about to change, for those rebuilding in hurricane-ravaged areas, costs will be much higher, reconstruction take longer, and preparation to deal with the obvious impacts of climate change may not keep up with the speed of that change.

Blockchain continues to work its way into the insurance industry. An excellent piece in the Harvard Business Review notes that insurance is especially suited for blockchain. Both are predicated on spreading information, and in the case of insurance, that information deals with risk. Blockchain is uniquely suited to spreading risk as at its core it is a “trust and efficiency engine.”

Key takeaway…

it will require uncomfortable transparency [from established insurers] and price corrections in their business models. This will be toughest on the portions of the industry that are the least differentiated, where consumers often decide based on price: auto, life, and homeowner’s insurance. [emphasis added]

And there’s this telling point, which identifies a key reason insurers should be worried…

trust in business institutions, and the financial services sector in particular, is at an all-time low. While the large banks are at the center of this trust vacuum — with a seemingly steady stream of scandals, such as the recent Wells Fargo account rigging debacle — the erosion of trust is bad for everyone

Ignore at your peril.

Louise is the best.

Kudos to Louise Norris for her ongoing commitment to educate the rest of us about all things healthcare and reform related.

Today brings us her edition of Health Wonk Review – capping off a summer of never-ending health care legislative maneuvering with not one but TWO Senate bills that purport to fix everything.

One entry ruined my day – hookworm has returned to Alabama as many people can’t afford adequate sanitation – and the government there doesn’t give a rat’s ass.

Read it here!

Costs and benefits of disasters

Disasters are good for the economy – sort of. They are also very likely to be really bad for people.

Combined, Harvey and Irma will cost about $200 billion – or 1.5% of US GDP.  That’s a huge infusion of capital and cash into the economies of Florida and Texas – and the other affected southeastern states.

Those dollars will go to pay workers, buy new equipment, replace ruined houses, buildings, furniture, technology, and infrastructure.

What’s not accounted for in the $200 billion figure is the cost – both personal and financial – that these disasters will levy on people involved in rescue, clean-up, and re-building.

One example – the bacterial and chemical stew pervading many areas in Houston will lead to immediate and long-term health problems for residents and clean-up workers alike. Living rooms, offices, factory floors, nursing home rooms, healthcare facilities, schoolrooms and firehouses – many will be polluted, requiring thorough cleaning and decontamination.

The real concern here is will the workers tasked with this job have the training, equipment, and clothing required to do this safely.

caption from photo reads: The #HurricaneHarvey clean up crews at our homes that were hired by management number about 200 and notice that none of them were given #Hazmat suits

Several factors are greatly concerning.

  • Texas doesn’t require workers’ comp
  • Companies are desperate to find workers, any workers, who will go into dangerous places and do very hard work in brutally hot and humid conditions
  • Labor brokers are notorious for subcontracting work like this, shaving every possible corner, and in the process hurting workers and dumping the cost of their medical treatment on the public sector
  • There are far too few documented workers available in either state to get the necessary work done quickly, so labor brokers are going to be recruiting undocumented workers.
  • Given today’s political climate and past history, those undocumented workers are far less likely to report and injury or illness
  • Lastly, an illness brought on by exposure to chemicals or bacteria takes days, weeks, months or even years to present, making it a lot harder for any injured worker to prove it was work-related.

What does this mean for you?

While responsible non-subscribers in Texas will do the right thing, many other non-subscribers will not.

Florida’s a different story, but both states must be vigilant to catch unscrupulous labor brokers.

MedRisk is back on top.

Big doings at work comp physical medicine management firm MedRisk.

(MedRisk has been a client for over a decade)

Most significant, MedRisk is likely now the largest firm in the sector, passing OneCall’s Align Networks in total revenue. Two factors driving this result; Align dropped the ball on customer service, and MedRisk upped its game considerably.

As I wrote last year,

For years, [MedRisk] 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.

MedRisk’s results prove the back-to-basics approach worked; the company has taken major market share from Align, and continues to add new business. Operations expanded, and the company had to lease new space to accommodate the hundreds of new workers.

Now, One Call is all-in on a technology solution, investing millions in a customized application intended to deliver on the “One Call” promise (currently the seven different services offered by OCCM have separate systems and processes). “Polaris” is slated to be “fully implemented” in Q1 2018, although it’s not clear what “fully implemented” means.

I don’t believe “automating” and off-shoring key customer-facing functions is the right answer, not in a high-touch business where adjusters, therapists, physicians, and patients all are key parts of the rehabilitation process.

While many MedRisk people made this happen – including COO (and fellow Syracuse grad) Michelle Buckman, CIO Vic Pytleski, and EVP Marketing Rommy Blum, the effort was led by President Mike Ryan.

Mike is one of the best-liked people in our industry, and most respected as well. Today, MedRisk will announce he is taking over as CEO from founder and Board Chair Shelley Boyce.

I’ve known Mike for years, worked with Shelley and her team for almost two decades, and am delighted for all. They traveled a long road and it is truly gratifying to see MedRisk back on top.

What does this mean for you?

It’s all about customer service.

Thursday catch-up

Genex acquires Prium…

Good move by Genex, as Prium’s portfolio of services including physician review and pharmacy management ties in well to Genex’ current offerings. I’m a big fan of Prium CEO Michael Gavin – he’s one of the most thoughtful, intelligent, and measured people in our business…good news is he’s sticking around.

Kentucky’s making big progress on opioids

Thanks to WCRI’s Vennela Thumula PharmD for her study on how new legislation (HB-1) helped to reduce the number of new work comp patients receiving opioids.

The legislation required prescribers to check the Prescription Drug Monitoring database prior to prescribing opioids, limited opioid prescriptions, and implemented mandatory educational and patient treatment practices.

Key Takeaways

HB-1 immediately reduced opioids prescribed to patients in the first 12 months after the date of injury.

Both the percentage of patients receiving opioids and the amount of opioids decreased by more than 15 percentage points.

Major surgical patients weren’t significantly affected by HB-1; not much change in prescribing to these folks.

Patients with back sprains and similar diagnoses had far fewer opioid scripts.

Thanks to Andrew Kenneally, Communications Director of WCRI, for the head’s up…

Opioid marketing practices

Kudos to Sen Claire McCaskill, D MO, for publicizing opioid manufacturer Insys’ alleged efforts to get approval for fentanyl product Subsys through misrepresentation. McCaskill’s report included an:

audio recording of conversations between an Insys employee and pharmacy benefit manager representatives related to a Subsys prescription for Sarah Fuller, who later died from an alleged fentanyl overdose. This recording suggests the Insys employee in question repeatedly misled Envision Pharmaceutical Services to obtain approval for Ms. Fuller’s Subsys treatment—heavily implying she was employed by the prescribing physician and misrepresenting the type of pain the patient was experiencing.

Sarah Fuller

This follows other reports of Subsys’ unethical and potentially illegal marketing practices, where other Subsys reps said they called payers, saying they were from doctors’ offices and were seeking approval for the drug.

Hell is too cold for these people. 

Finally, a very revealing piece in HealthAffairs provides more insight into just how powerful big healthplans are:

insurers with market shares of 15 percent or more (average: 24.5 percent)…negotiated prices for office visits that were 21 percent lower than prices negotiated by insurers with shares of less than 5 percent.

Differences in providers’ and insurers’ bargaining power are a major contributor to variation in commercial health care prices

Workers’ comp folks – you’re lucky if a generalist work comp PPO’s market share at a practice is 3 percent…

Back out onto the campaign trail!

Labor Day Special Edition

Happy Labor Day Weekend readers!

Make sure to thank the folks who work hard every day to make our lives better – teachers and support staff, building trades, healthcare workers, factory folks, agriculture and food workers, public safety, transportation, public works, and everyone else we often take for granted.

Here are a few articles of interest…worth thinking about as you watch parades, cook up your masterpiece on the grill, and enjoy the opening of the College Football season.

What’s been top-of-mind for me is how we’ve commoditized our workers, thinking of them as “expense” instead of an “asset”.  One of the most reprehensible anti-Semitic, racist, nasty people in business – Henry Ford – recognized employers need to pay their workers enough to buy the goods they make. Somehow we’ve forgotten this, along with the truth that workers are people, have intrinsic value, and deserve to be treated as such.

The best employers I know think of their workers as assets, not expenses. They know that when people feel valued and respected, those people do amazing work.

Here in upstate New York, one of the best employers I’ve ever come across is Tessy Plastics, a privately held company with about 900 workers that makes everything from those tiny plastic thingies that close ziplock baggies to surgical stapling devices used in gall bladder surgery.

Facing the loss of their largest customer fifteen years ago, Tessy relied on its workers to bounce back and become an amazingly successful company. I know a lot of Tessy employees, and they love what they do, work incredibly hard and smart, and as a result Tessy is doing very, very well.

We all can learn a lot from Tessy.

On the other hand, there’s a lot of worker risk and abuse out there.  First up, a reminder of how some workers are mistreated, abused, and oppressed by scummy bosses.  Thanks to workerscompensation.com for the heads’ up.

Law enforcement officials in New Jersey busted a company that was allegedly taking advantage of undocumented workers, cheating them and their clients in multiple ways, including money-laundering.

The explosion in the Arkema chemical plant outside Houston is another reminder of the risks faced by workers, risks that almost always are ignored by all of us until something catastrophic happens. Fortunately none of the 60 workers were at the plant when the storage trailers started exploding, but public safety workers were.

For those looking to help out with donations, the Greater Houston Community Foundation is one site that’s been thoroughly vetted.

Have a great weekend!

 

There’s no BIG problem in work comp pharmacy – and that’s scary.

In the fourteen years I’ve been surveying work comp payers on their views on pharmacy, I’ve never seen so little consensus among respondents on emerging issues.

In past years compounds, physician dispensing, opioids, price inflation, and new drug introductions have all been named by at least a plurality of respondents. Not so this year.

Here are some of the 24 respondents’ concerns:

legalization of marijuana – lots of talk about it but concern is what do you do about it, how do you handle it, pay for it, authorize it, etc. so many unknowns and little understanding
state regulations and how to bring information on those changed regulations and how to operate under the new regs back to adjusters and case managers at the desk level and to PBMs
I’m concerned we’ll see branded topicals increasing over the next few years despite a lack of efficacy and inflated prices. teracyn, speedgel, etc aren’t useful
advent of all new formularies, no one has grappled with legacy claims in that environment, thinking is formularies will get docs to taper it off – docs who prescribe all this don’t know how to taper, so finding the right docs and facilities is a real issue for legacy claims
acquisition of comp pbms and consolidation of the work comp PBM industry
Physician Dispensed Drugs and non-controlled home delivery – not just cost but formulary and safety and quality of care
what interventions can they do to to affect drug pricing, especially some of the drugs that have minimal alternatives
more problematic than opioids is the combination of benzodiazepines and sleep aids
watching very closely Evzio, naloxone prescribing practices as part of CDC
still a soft market so anything you can do to reduce costs is important

While payers are seeing good success in reducing opioid utilization and total drug spend, there are a host of troubling issues out there.

Here’s why this is a big issue.

Payers are all too used to getting screwed by unethical and very creative profiteers intent on sucking money away from employers and taxpayers by exploiting loopholes. Branded topicals, “independent” mail order pharmacies and novel drugs are all great examples of these tactics, often hidden under and supported by claims that these promote healing and health despite a total lack of supporting evidence.

In past years when doctor dispensing, the opioid crisis, or compounds were top-of-mind for most respondents, the industry joined together to come up with solutions. That obviously isn’t the case today, leaving patients exposed to crappy providers interested only in profits coming up with myriad ways to game the system.

What does this mean for you?

It’s not the one big problem that’ll get you, it’s the many small ones you may not even notice.