Is group health paying for medical care for work comp injuries?

According to a study published in the December Journal of Occupational and Environmental Medicine, the answer is yes – to the tune of at least $200 million dollars annually.

The researchers concluded that “zero-cost” claims – those that were filed but did not result in any payments from the workers’ comp insurer or TPA – showed higher than expected medical expenses in their group health plans following the date of injury.  Some may, and undoubtedly will, argue that just filing a claim does not mean it is “real”, that many if not most of these “claims” were not occupational in nature and therefore there should NOT have been work comp dollars spent.  Therefore the dollars spent after the date of injury SHOULD have been higher, as there was an injury, it just wasn’t a work comp injury.

Well, not so fast.  These were actual, accepted workers’ comp claims and not attempts to file claims for non-occ injuries.

That being the case, I’d suggest the author’s finding, that about 0.7% of workers’ comp medical expenses have been paid by group health insurers, may be correct.

What does this mean for you?

With group health medical loss ratios fixed at no less than 85%, health plans have dramatically increased their efforts to identify and avoid any and all medical expenses that are not really truly absolutely theirs. Expect much more diligence on the part of those insurers, and a lot more subrogation efforts in the future than we’ve seen to date.  

Thanks to Insurance Journal for the tip!

Request – before you argue, please read the ENTIRE study, available here.  It is pretty well done.

What’s happening with health care premiums and costs?

Employer health insurance premiums increased 4 percent for families, 5 percent for singles this year. While that’s a modest increase, over the last decade, family premiums are up 80 percent.

And, premiums have been held down of late in large part due to rapidly increasing cost-sharing; the average deductible for employers with 3-199 employees hit $1715 this year as the percentage of employers with deductibles over $1000 jumped from 49% in 2012 to 58% this year.

Large insurers’ actual trend rates continue to come in lower than projections, with the latest stats indicate Aetna, CIGNA, and Wellpoint all reporting mid-single digit rises.

Combining Medicare and commercial health care costs as reported by health care providers shows an increase of 3 percent in June over the preceding 12 months.  Medicare’s trend was a lowly 1.27 percent…Medicare is increasing hospital reimbursement by less than 1 percent, a move that will certainly help keep the program’s costs increasing very slowly.

But those price controls are far from the only reason Medicare’s cost trends are at historical lows.

What’s behind the relatively good news on cost increases?  While commercial insurers see the recession as a contributor to past success in keeping trend rates down, the recession doesn’t appear to have had much to do with Medicare’s relatively low cost increases from 2000 to 2010. According to the Congressional Budget Office, the modest trend rate:

“appears to have been caused in substantial part by factors that were not related to the recession’s effect on beneficiaries’ demand for services…other factors–namely, a combination of changes in providers’ behavior and changes in beneficiaries’ demand for care that we did not measure–were responsible for a substantial portion of the slowdown in Medicare spending growth.”

In fact, CBO is projecting Medicare’s total costs by 2020 will be some $169 billion lower than earlier projections.

So, what does this all mean.

Well, mostly good news for folks not in the health care sector.  The decline in projected costs will have a substantial – and very positive – effect on the Federal deficit and long-term debt.

Employers and individuals won’t see costs hit the troposphere just yet – I guess that’s good news, although they certainly aren’t going to drop out of the stratosphere…

For the health care provider sector (broadly defined), what have been wrenching changes to date are about to get even more dramatic.  I’d expect some payers will see increased efforts to cost-shift as providers seek to increase revenues where they can while they struggle to strip cost and inefficiencies out of their operations.




Outsourcing customer service – I don’t get it.

Yesterday my bride was attempting to book a hotel room at a specific Hilton Garden Inn near the Sacramento airport.  She got bounced to Hilton’s intergalactic call center, and then spent 15 minutes trying to get a person – likely in another country – to reserve a room at that specific property at a rate they’d advertised.

My wife is a very patient person (she’s still married to me after 26 years…) but even she had to finally end the call after it became abundantly clear that the customer service agent had no idea where the airport was, what the rate should be, or why we didn’t want to consider another less expensive property located somewhere within a fifty mile radius.

Hilton lost a guest, and all because they decided it is more “cost-effective” to outsource customer service.  At the same time, the chain is working diligently to monitor and improve guests’ experiences on-site; I get a survey request for pretty much every hotel stay these days.

This makes NO SENSE.

Customers are the core of any business.  Without them, you’ve got a big bag of nothing.  Yet many companies – including some in this space – outsource the absolutely-critical business of talking with customers to some outfit on the basis of how cheaply they can get calls answered, how many calls can get answered how fast and other “metrics’.

Where’s the metric for “pissed off customers”?

There are processes and workflows that are not core, or central to a managed care business – maybe telecommunications, real estate management, accounting/auditing (perhaps).  But talking to your customers? How is that not the most important thing your company does? And why would you not want to have absolute, complete, 100% control over that at all times?

My sense is the reason we see outsourcing of call centers in managed care services is the ops folks are focused on keeping costs down.  That’s fine, but it ignores the overall importance of customer interactions.  It is very, very hard to acquire new customers, and very expensive to boot.  Cost of sales is escalating in this business, making customer retention critically important.

I’m aware of a couple firms that went to outsourced call centers only to reverse that decision and internalize the function.  My guess is the cost per call went up, and customer satisfaction went waaaay up.  Kudos to those companies for recognizing a problem and fixing it quickly.

What does this mean for you?

Figure out what’s important, and do it yourself.

Coventry’s last earnings report

I’ll admit it, I’ve been slacking…It’s now five days since Coventry released their last-ever earnings report, and I’m only now posting on it.  Mea culpa; too darn much work. Here are a few quick takeaways followed by my perspective on the company and their results this quarter. 

(and so much for my title for the Q4 earnings report as the “last ever…”)

  • Very solid earnings – up 61% from the prior year quarter.  Pretty impressive.
  • Revenues were flat after some Medicare Advantage bookkeeping stuff
  • Commercial membership – and revenues – are down again.
  • Medical loss ratios (MLR) for Commercial risk and Medicaid are looking very good, improving substantially over the previous quarter; Part D is not.
  • Workers’ comp revenue is down substantially.

Let’s start with work comp (sorry David Young).  2012 was a tough year – revenue  decreased $26 million or 3.3 percent from the prior year. And Q1 was no improvement; revenues declined almost $8 million from the previous quarter; $16 million from the same quarter in 2012.

The main driver was likely pharmacy; the full impact of the loss of ESIS’ PBM business to Progressive was felt; the numbers may also reflect the USPS’ decision to change from Coventry’s FirstScript PBM to PMSI. Because ALL pharmacy revenue counts as “top line”, losing a PBM customer has a disproportionate impact on financials – just as winning one does (First Script won the Selective Insurance business recently).

I’ve said before – and will repeat again – Aetna is NOT going to dump the WC business.  If anything, they’ll likely invest in the sector.  There’s a bunch of reasons private equity is all over workers’ comp services these days: there’s lots of upside from automation; margins are very healthy; regulatory risk is minimal; and it is a good counterbalance to the group/public sector health plan business.

Overall, decent growth in Medicare Advantage and Part D revenues.  Medicaid growth was negative, driven by exiting one market and increasing membership in two others.  Overall, Coventry’s public-sector business continues to be the largest of the company’s three business segments – while commercial membership and revenues continue to sag.

This is why Aetna is buying Coventry – public sector expertise, market share, and membership.  Mother Aetna has the commercial sector pretty much figured out (as much as anyone does in these pre-ACA-implementation days); they need help in the public-sector health plan markets.

Unless the world ends, this will REALLY be their last earnings report.

What does this mean for you?

Size matters in the post-ACA days – a lot.  Expect more mergers and acquisitions, and some big ones too.


Inflation in Medicare, private insurance, and work comp

Credible research indicates health cost inflation rates will remain fairly low during this decade, driven by “greater cost-sharing in private insurance, new Medicare payment policies, slower growth in prescription drug spending, and an upcoming tax on high-cost insurance premiums.”
Note two of the primary drivers are reduced payments to providers by Medicare and Medicaid and more spending by individuals. These ‘cost-moderators’ are countered (somewhat) by the growth in Medicare eligibles.
The result is overall inflation rates will be about the same for private payers and Medicare at 5.7%. However, on a per-enrollee basis, Medicare’s trend is substantially lower (more than two points) than private insurance. Again, cuts in Medicare’s reimbursement to providers is the primary driver.
It is important to understand the difference between overall program and per-enrollee
cost inflation; it’s also important to think thru the implications for other payers – work comp and auto specifically.
With significant growth in Medicare and Medicaid enrollment coupled with low growth in the number of privately insureds, providers will see flat to declining compensation from a large chunk of their patient population. The latest figures indicate physician compensation rates have been relatively stable; given low overall inflation this is likely “acceptable”. Notably, some specialities saw increases while others dealt with reduced compensation.
However, as patient mix changes, the decline in compensation is inevitable, and will have far-reaching consequences.
What does this mean for you?
Expect utilization to increase, along with charges for services billed to all payers. Those payers without strong fee schedule or contractual controls on price will likely see significant price inflation as well.

$20,728 – your family’s 2012 health care cost

That’s the figure reported by Milliman earlier today.
Yep, almost twenty-one grand just for health insurance and out-of-pocket costs.
The good news (!) is the annual rate of increase was a paltry 6.9%, the lowest trend in a decade.
The bad news? In six years, the average family of four’s premium and out-of-pocket costs will be $31,000. That’s if the inflation rate stays the same; if it reverts to the norm, we’ll see costs pierce the thirty grand level in 2017.
Here’s hoping someone – anyone – finds a solution. We know that Massachusetts’ premium increases are among, if not the, lowest in the country; we also know Medicare’s rate of increase is lower than commercial plans’. Perhaps there is a role for big government; altho I’m hoping private insurers figure out how to control costs without the threat of price caps.
Then again, we’ve tried that – for about fifty years – with pretty poor results

Pharmacy Benefit Managers – if they report, why doesn’t everyone?

Last week’s post on the recent release of Annual Reports by PBMs Progressive, PMSI, and Express Scripts, got me thinking (spurred by a friend’s query); if PBMs produce these reports as a matter of course, why don’t other specialty medical management companies?
The wealth of information contained in these reports provides readers with insights into cost drivers; pricing; changes in prescribing and treatment patterns; differences due to geography, claim duration, and diagnosis; new treatment options; and changes over time in all of these categories/metrics.
It strikes me that industry/speciality appropriate information would be pretty valuable and help differentiate as well.
PBMs have raised the annual report to an art form; PMSI’s is extremely detailed and clinically robust; Cypress Care’s upcoming report differentiates between older (> 3years) and new claims; Express focused on opportunities to reduce costs thru increased use of step therapy and generics; Progressive’s discussion of regulatory changes was comprehensive and thorough.
The short answer is “it takes a lot of resources.” True, but the payoff is likely commensurate with the investment. Others are concerned that somehow competitors will learn the ingredients of their “secret sauce” and use it against them. Possibly, but not if you’re smart and careful.
There’s precious little real differentiation in the managed care services industry. Clearly it’s working for PBMs; undoubtedly it will work in other sectors as well.
and a “thanks for the thinking” to Peter Rousmaniere.

The necessary demise of Usual & Customary

As insurers abandon the traditional “usual and customary” metric in favor of Medicare’s rates for out of network reimbursement, consumers are getting hit with higher bills, and many are protesting.
That’s understandable; it’s also necessary.
The usual and customary reimbursement methodology is used to pay providers that aren’t in the member’s ‘network’; it is based on what other providers in the same area charge for the same procedures during the same time frame. For decades providers have gamed the system by charging more and more every year for the same procedure, thereby ensuring they’ll get paid more next time for the same procedure.
Health plans, struggling to hold down costs, have finally given up, switching from U&C to a methodology based on Medicare’s RBRVS system, albeit one paying at 150% – 250% of Medicare – again for out of network care.
Many members have been surprised/shocked/dismayed/furious when they discover their share of the cost is much higher than they expected, and they’re blaming their insurer. While that’s understandable, it is also anger misplaced.
Members going out of network do so because they are either a)ignorant (our son just went to an OON provider for his elbow MRI…) or b) they want care from a specific physician(s). In the case of a), shame on us for not educating the young man on the intricacies of health plan contracts.
For b), it’s not quite so straightforward.
These folks chose to go out of network for the care they wanted, and that’s entirely their right. In so doing, they forewent the binding rates negotiated – on their behalf – by their insurer with in-network providers. If they’d stayed in network, their out-of-pocket costs would have been much, much lower.
I’ve pilloried insurers for years for their inability to do what they’re supposed to do as a matter of course – deliver quality care at a manageable cost. The change from the easily-gamed U&C system to one based on Medicare is an appropriate and necessary one. Yes, it’s also painful, but controlling health care costs is going to be ever-more-painful, requiring all of us to choose between increasingly-distasteful choices – higher premiums or more access.

Now I’ve got to go spend some quality time with our son explaining all this. Yippee.

Coventry’s 2011 financial results

Coventry Health announced their full-year 2011 results this morning; I’d have to sum it up as quite positive, driven primarily by big Medicaid and Medicare revenue increases. There’s no question where management is focused – with CMS programs accounting for half of the company’s revenue and essentially all of their growth, management’s focus on the call was almost exclusively on governmental programs with some discussion of the impact of health reform.
Most interesting was the continuation of lower medical utilization and lower medical costs into Q4, especially in the inpatient admissions and days across both Medicare and commercial populations. Chairman Alan Wise did note there’s been a slight uptick in physician utilization, but this was outweighed by the decline in facility services.
Geographically, it is increasingly clear Coventry is focusing on their core Midwest states, with expansions in governmental programs, deals with provider systems, and specifically successful efforts to increase their Medicaid business in Kansas, Missouri, Nebraska, and (not strictly speaking a midwest state) Kentucky.
The commercial business is not faring as well, with essentially flat membership for the year; premium increases resulted in an 8% uptick in revenue. The work comp sector is not growing much – more on that below.
Coventry’s utilization trend was consistent with other payers, yet their overall cost trend is a couple points higher than other health plans at high single digits. This appears to be unit cost driven (no surprise), although CFO Randy Giles did state health reform increased trend by up to 200 basis points specifically from eliminating deductibles and copays for preventive services. Seems like an awful lot to me; I can’t see how preventive care deductibles and copays could possibly amount to 200 basis points in losses.
Coventry re-negotiated their Medco pharmacy contract (for their non-workers comp business) and got better terms and an extension, with Medicare through 2015 and commercial a year longer.
On the workers comp front, the loss of a large customer dropped revenue 3%; word is that was the ESIS contract. Management did note that the $1.1 billion in management services/fee revenue is higher margin and provides cash for investment and acquisition activities.
Charles Boorady did ask the only question about workers comp, asking what drove the loss of the large customer – Mike Barr [sp?]is the new manager of the overall services business so Wise deferred to him. WC is an area they’re looking to grow, as it is unregulated revenue it is a ‘great place to be’. Barr said they lost their second largest group due to a competitive environment, noting there was “nothing specific with WC that created the issue, as a line it runs well.” [paraphrase] He went on to note Coventry is centralizing some operations to consolidate especially in areas where there’s no network.
Management said that while Coventry lost the overall contract, some employers (likely administered by ESIS) are looking to come back and work directly with Coventry, and Coventry is working on those opportunities. In commenting on the work comp sector, Wise said it is a stable and slightly growing business, it is an accident based business and in tough environment it has continued to add revenue slightly and ebitda a bit. In response to a question, Barr said they lost the business on price.
What are the key takeaways?
Governmental business is increasingly important – and that’s where the focus will be for the foreseeable future.
Coventry’s trend seems to be just a tad higher than their larger competitors.
MLR rules and the effect thereof are still working their way thru the system; it will be interesting to see how small employers react when they get their rebate checks later this year.
Expect Coventry’s work comp sector to push hard to increase revenue from existing and add new customers.

How’s your PR?

Probably lousy, maybe okay, and just possibly pretty good.
Last week I received a PR email from a work comp services company that had me shaking my head. After I reattached my jaw.
I won’t get into the generalities, much less the details, but it was just not helpful to the company behind it.
Public relations is (pick one or more)
– grossly misunderstood,
– complicated and complex,
– overly involved and time-consuming,
– usually poorly done,
– not worth the money, and/or
– critically important.
My vote is “most of the above”, especially when we’re talking health care/work comp/health insurance.
Public relations deals with a couple areas – building brand and addressing problems. PR is MUCH more important for building brands than advertising – advertising claims aren’t credible, it’s much more expensive on a cost-per-impression basis, and no one believes advertising (especially when it’s from an entity you haven’t heard of or don’t have a solid brand impression of).
There’s a lot of attempted differentiation in the managed care space, but the differentiation exists mostly in the minds of the execs leading the vendors’ efforts. What they see as a definite, valuable, obvious difference their market either a) doesn’t see or b) doesn’t care.
I can’t remember all the times I’ve heard “the market just doesn’t get it” from a CEO lamenting their inability to break thru the clutter and get the market to understand just how great their product/service offering really is. But here’s the key – the CEOs are right, sort of: the market doesn’t get it because it hasn’t been explained to them in a way that will resonate and stick.
The way PR works in building brand is
– credible third party sources
– discuss, debate, define,
– an innovative product or service,
– in mass media, online vehicles, or public forums.
How that happens is the tough part. Press releases about relatively unexciting issues don’t work to build brand (they can have other uses); some press releases (such as the one mentioned in the lead) hurt the brand by confusing the reader, clouding the message, or because they’re just plain unprofessional.
What works is discussion of that brand, product or service by credible sources. But you can’t just get a reporter or writer to blather on about yet another predictive modeling approach, surveillance company, UR firm, disease management concept, network enhancement.
What reporters want to write about is stuff that’s new, different, exciting, fresh. They’re bored to tears writing up stuff they’ve written about countless times; they want something that’s really new, really different, really interesting.
So here’s the hard part, where most companies make a critical mistake. Writers and reporters don’t care what YOU think is new and innovative. It has to be really new and innovative, obviously so. And, except in rare circumstances, if it takes more than fifteen seconds to explain and they still don’t think it’s cool, you’re toast.
That’s where the hard work of PR comes in. Developing and refining your approach, critically thinking about positioning, getting past long-held ego-based self-held ideas about how great/important/innovative your company is, and instead looking in from outside, comparing what you do and how you do it to competitors, and paring down your message to its core.
What does this mean for you?
Most won’t be able to do this, as it can be painful. But those who can, and do, will be much more successful.