NWCDC Quick recap

It’s been a blur – here are the quick takeaways from the last 3+ days in New Orleans

The new new thing is…

Telehealth.  Several entities are either specializing in telehealth, telemedicine, or some aspect thereof.  Provider organizations have proprietary applications, independent third parties have theirs (CHC is one I met with), and others are talking about what they’re going to do.  Seemed like there was a lot of product development happening on the fly – which is fine – and a good thing.  Hearing from lots of stakeholders is always productive.

Blockchain.  When asked to name one thing that people aren’t talking about that they should be, I named Blockchain.  Here’s what this is – and why you need to know about it. That was actually one of two things I discussed – the other is admin expense – which we’ll dig into next week.

What wasn’t there?

More accurately, who wasn’t there.  Young executives in positions of significant responsibility were noticeably rare.  BTW “young” is a very relative term in workers’ comp; people who I think of as “young” are 51-52.

In other industries, I’d guess young is rather…younger than that.

As many have been noting, we’ve got a real dearth of young talented professionals in positions of responsibility.  That’s pretty damn scary, as the work comp world is in for massive changes over the next decade, and old guys like me aren’t nearly as prepared to anticipate and address these changes as younger people are.

There was also a noticeable lack of insurance folks at the gathering. Im hearing this is due to end-of-the-year cutbacks on travel to make those 2016 financials just a little rosier.  TPAs were also a little light on staff this time around.

Deals

While the pace of acquisitions has tapered off significantly, I spoke with several owners who are in the process of working on transactions.  Not big ones, but what we’re going to see is more small transactions beefing up a company’s core capabilities or expanding its product lines.  Prices are also down, as at least two investors told me the OneCall situation has significantly affected valuations.

 

 

Heading to New Orleans..

It’s the annual gathering of the work comp tribes time.  This year the National Work Comp and Disability Conference is in New Orleans, and I’m really looking forward to the great food, wonderful music, and Southern hospitality. As I’m sure many of you are.

I’m honored to be speaking twice – Thursday morning’s a discussion of chronic pain guidelines with Steven Feinberg MD.  Steve is compassionate, very knowledgeable, and highly experienced and I’ve learned much from him. Thursday afternoon is the Bloggers’ Panel; get there early as this session is always well-attended.  Any bets on how long before I get grief over the election results from Bob Wilson? (Bob was right and I was wrong in our predictions)

A couple years back I listed a few recommendations based on my far-too-many-years attending work comp conferences.

1.  Realize you can’t be everywhere and do everything. Prioritize.

2.  Leave time for last-minute meetings and the inevitable chance encounters with old friends and colleagues.

3.  Unless you have a photographic memory, use your smartphone to take voice notes from each meeting – right after you’re done.  Otherwise they’ll all run together and you’ll never remember what you committed to.

4.  Introduce yourself to a dozen people you’ve never met.  This business is all about relationships and networking, and no better place to do that than this conference.

5.  Wear comfortable shoes, get your exercise in, and be professional and polished.  It’s a long three days, and you’re always ‘on’.

6. Finally, what happens in New Orleans gets posted on Instagram.  Don’t be stupid. Like these guys. Alcohol is not your friend, and this is not spring break.

Travel pleasantly!

Trump and workers’ comp

There’s no question the Republican sweep will hugely affect workers’ comp.

There are nothing BUT questions about what that impact will be.  Here are a few thoughts based on what little we know so far.

The quick take – huge uncertainty; if Trump delivers on his campaign promises, there’s a high likelihood of higher claims frequency and increased medical expenses. 

I preface this by noting Trump is already backing off campaign promises – including repealing “Obamacare”.

The DOL “intervention” in workers comp is dead.  There will be no new National Commission, no federal standards, no study or research or advisory panel. There will be much less emphasis on OSHA enforcement and workplace safety as well.

More jobs?

Energy projects will likely be fast-tracked, although there will be big battles in court as environmental concerns rally to intervene in the only way left open to them – civil suits. Pipelines, coal mines, oil will all see more jobs – although the world economy will have much more to say about that than the White House.

Trump has been touting a trillion dollar investment in infrastructure – anathema to Republicans who don’t want any increase in government spending. Where this will end up is anyone’s guess; if it does go forward, premiums, along with claims costs and medical expenses will rise significantly as these jobs are in high-claim-frequency and high-severity industries.

Trade drives jobs, consumer buying, and inflation. All of which impact work comp.

Trump will label China  – our largest trading partner – a currency manipulator (it’s been keeping the value of the renminbi low to make its exports more attractive). He has to, as that’s a big part of his campaign. BUT it’s going to be a lot of talk and NO action – this is going nowhere, for four simple reasons.

The law requires three conditions to be met for a country to be declared a currency manipulator; China only meets one.

Second, China has been increasing the value of the yuan for months.

Third, consumer demand has been a big part of our economic recovery. If Trump starts a trade war, consumer goods will get a LOT more expensive, driving down consumer purchasing power and consumer confidence. The working class that supported his election would be hurt the most.

Fourth, China owns a shipload of our debt. China can stop – or greatly reduce buying our debt, which will drive up borrowing costs, triggering inflation and more damage to consumer buying power especially for baby boomers who are already living paycheck-to-pacheck.

Oh, and we have a $28 billion surplus in the service sector. If a trade war does start, China will stop sending students here, stop importing movies and music, and its new moneyed class will find other travel destinations.

That said, even the whiff of a trade war will hurt work comp. Inflation will hurt investment returns and lower the value of claim reserves, export jobs will be lost, and the tourism, educational, and cultural industries will suffer as well.

For a brief and helpful summary of Trump and trade, click here.

ACA

Evidence suggests the Affordable Care Act has helped work comp. Work comp medical costs have declined since ACA’s full implementation despite rising employment and middling cost increases in group health. The newly-insured are in higher-frequency jobs.

If Trump rips out ACA “root and branch”, we can expect medical costs to increase and cost- and case-shifting to ramp up significantly.

There’s a lot more to this and we will be tracking it closely.

What does this mean for you?

Given Trump’s already walking back campaign promises, this is just speculation. For now, expect higher premiums, more claims, and higher medical costs.

Thanks, Jimmy.

(Edited to correct my error, Jimmy Morales is a woman.  MY apologies to Ms Morales for mis-identifying her.)

This morning’s WorkCompCentral brings us a report that Miami Beach’s City Manager is rejecting two police officers’ work comp claims for coverage due to Zika infections.

Reportedly the officers work in Zika-infected areas, but the mosquito has not been found where they live.

City Manager Jimmy Morales refuses to cover these cases, saying:

“He/she must show that the exposure/bite took place while on duty and identify the specific infected mosquito,”

To be fair to Ms Morales, she claims that the two officers have yet to comply with requirements to submit full medical documentation.  If that is the case, then they need to do so. HOWEVER her “requirement” that the officers bring the the specific infected mosquitoes isn’t just ludicrous, it also makes her – and her city – out to be heartless, uncaring bureaucrats.

If Ms Morales wants to perpetuate the meme that workers’ comp folks are heartless, penny-pinching, claim-denying, conniving, scheming bastards,s he’s nailing it. I don’t think that’s Ms Morales’ intention, and I’m hoping she mistakenly relied on a legal interpretation in a misguided attempt to stick to the “letter of the law.”

Ms Morales has not only damaged her relationship with his City’s police force, she’s also provided system detractors with yet another iconic example of how work comp is grossly unfair. And she’s done this in Florida, where the workers’ comp system is already on shaky ground.

Thanks, Jimmy. 

What does this mean for you?

People, please think before you act. You can’t unring the bell, take back what you said, or in this case claim you were misquoted.

 

Friday catch-up; CorVel, deals, & drugs

Good morning all.  Out in SoCal for the CompLaude event; looking forward to two days of great discussion about the good things in workers’ comp.

More evidence that WC medical trend is flattening

WCRI released it’s Indiana CompScope report earlier this week. Headline is medical trend flattened in 2014, with the change to facility reimbursement a likely contributor.

You can order it here.

CorVel

The TPA/managed care company released its Q2 earnings report yesterday; revenues inched up 3%, while earnings per share were down almost 16 percent. 

EBITDA dropped from 14.8% to 8.8%.

According to the company, TPA revenues were up 13%, but:

“…staffing and adjusting to the new laws for time management resulted in recruiting expenses and legal fees. The Company is also experiencing extended sales cycles due to the economic uncertainty in the healthcare marketplace caused by the election and the evolving conditions under the Affordable Care Act.”

CorVel is primarily a work comp player. I don’t know why ACA would effect CorVel’s work comp business; I can speculate that the soft work comp market (except in California) is not helping TPAs grow top line or earnings.  While CorVel’s 13% increase in TPA revenues is exemplary, one has to wonder if they are buying business. The precipitous margin decline indicates pricing is indeed an issue.

You can read the earnings call transcript here.  Suffice it to say there’s a lot of talk about structural issues extending sales cycles and blame placed on external factors.

This means – CorVel still hasn’t figured out how to effectively compete in the TPA business.

Deals…

Mitchell just announced they completed two acquisitions. Specialty bill review firm Qmedtrix and work comp PBM IPS were added to the portfolio. IPS joins CogentWorks, CompToday, AutoRx and Jordan Reses under Mitchell’s Pharmacy Solutions business; Brian Anderson will continue to lead that (congratulations Brian).

Qmedtrix will become part of Mitchell’s SmartPrice Solutions; that business includes FairPay Solutions and National Health Quest.  Looks like the individual names will go away as Mitchell rebrands the offering under the SmartPrice name.

This means – more consolidation in the work comp PBM business, and a more viable PBM offering for Mitchell

Work comp drugs

Today’s WorkCompCentral has a great piece by Elaine Goodman about the reduction in opioids enjoyed by Optum’s work comp payer customers. According to Optum:

  • the percentage of patients using opioids dropped by almost 5%
  • average morphine equivalents decreased 4.7%
  • the number of scripts per claim dropped 1.7%

Optum isn’t the only PBM delivering results; Coventry and Express Scripts helped their payer customers reduce the use of compounds by almost a third. 

And, continuing a six-year trend of reductions in drug spend, Optum data indicates drug costs per claims fell another 4.6% in the first seven months of this year compared to last.

This means – PBMs continue to deliver for work comp patients and payers.

What’s really happening in workers’ comp

Injury rates are plummeting, insurance premium rates are flat or dropping, medical costs are down as well.

This morning Todd Foster of WorkCompCentral reports big rate decreases in Louisiana and Texas and a slight decrease in Georgia.  This comes on the heels of drops in most other southern states, some well into the double digits.

Out of 36 states reviewed by NCCI, all but four will get rate decreases.

In Texas, a drop in energy service employment is one factor; this is a high-severity, high-frequency industry (injuries are worse and occur more often than in other industries).

Another article in WCC reported that American Financial’s work comp results improved due to “prior year loss development” improvements.  In English – claims costs for last year came in lower than they predicted.

Injury rates are continuing to decrease every year. Medical costs are flat or down slightly.  And, while wages are slightly higher, employers’ and taxpayers’ workers’ comp premiums are lower.

Make no mistake, this is good news for the three constituencies that matter – workers, employers, and taxpayers. Fewer workers are suffering the trauma and uncertainty of injuries. System costs are dropping for everyone.

There are a couple of things that could will change this.

If Congress and the next President (whoever that is) can work together (yes, I believe in the Easter Bunny too), there will be a massive investment in infrastructure in the near future.  We’re talking hundreds of billions of much-needed spending on bridges, roads, rail, the energy grid, clean energy, broadband.  With interest rates still right around zero, now is the time to finally fix stuff our legislators have avoided for decades over fear of political repercussion.

This work will take years, and as it is high-risk for workers, undoubtedly lead to more injuries.

Longer term, we can look to what’s happened in manufacturing to forecast employment trends in other sectors.

chart2

The US is the second largest manufacturer in the world – despite the decline in jobs in that sector, output is just slightly lower than China’s.  Despite what any politician says, those “lost” jobs are NOT coming back. What’s happened in manufacturing will be felt in every other business and industry, from hospitality to transportation to health care.

What does this mean for you?

Workers’ comp is driven by macro factors. 

 

Halloween catch up

Off to New Orleans for client meetings; should be interesting spending Halloween evening downtown.

A couple tems of note that deserve mention.

Over the weekend 178 GOP and 1 Dem representative called on CMS to stop with all the value-based stuff. Claiming the agency is overstepping its bounds, a letter signed by these worthies evidently wants Medicare to return to fee for service.

In a word, this is dumb. FFS is a big reason health care costs are out of control while quality is spotty at best. Fiscal prudence would seem to demand rapid adoption of value-based care. I know taxpayers will be far better served when more care is based on what actually works, not on what providers can bill for.

CompPharma’s annual Survey of Prescription Drug Management in Workers Comp will be out tomorrow at CompPharma.com. Big news is respondents’ drug costs dropped 8.7% in 2015. Opioids are still the biggest concern and compounds the top emerging issue.

Finally it looks like occupational injuries declined yet again; the Department of Labor reported the injury rate dropped from 3.2/100 to 3.0.

That is good news indeed – especially for those workers who didn’t get hurt.

Hope your week is most excellent.

Note- sorry about no URL links; posting from my phone which makes that really complicated.

OneCall cuts back

Last week One Call Care Management conducted another round of layoffs, with most coming from field sales. I’ve heard a few operations folks were also let go.

Word is the field force reduction is driven by two factors.  First, former CEO Joe Delaney hired approximately 20 reps with NO workers’ comp experience earlier this year in what has been characterized as an “experiment”.  Evidently, the experimental stage is over – these reps are gone.

Second, after keeping the sales staff aligned with products and services (one for DME, another for imaging, a third for PT…), OCCM decided this wasn’t working.  Going forward, reps will be assigned to specific customers/prospects, and will have to be up to speed on all OCCM products.

Sources indicate that out of 118 reps, 38 will be terminated.  It appears some will get with severance and non-competes will be enforced, however I’ve been told OCCM will consider letting terminated reps out of their non-competes on a case-by-case basis.

That would be the right thing to do.

Interestingly, OCCM made the layoff and change in focus while the head of field sales position is open – as it has been for some time.  I’m not sure how this transition from seller-of-one-service to seller-of-all-services is going to progress without someone in charge over the long term. This kind of change isn’t simple, requires ongoing training and evaluation, as well as coordination with the service delivery folks to ensure the inevitable glitches and misunderstandings are handled quickly.

For a company with more than 3000 employees, a reduction of slightly more than one percent isn’t a big deal, and may actually make sense, IF those reps are really capable of “repping” all OCCM products and services.  And if they are treated equitably and given the opportunity to work in the industry.

Going forward, I’d expect we’ll see additional consolidation at OCCM. The company has multiple domestic call centers, and as OCCM off-shores various functions (clinical, scheduling, A/R) the need for US-based staff will likely decrease.

What does this mean for you?

Hopefully new opportunities for the newly-unemployed.

 

Why are work comp medical costs decreasing?

Medical costs were up a mere 3% in 2014, and actually dropped by a point in 2015 (in NCCI states).

I’ve been in comp a long time, and nothing like this has ever happened. What’s going on?

One likely contributor – 20 million more Americans have health insurance, and work comp doesn’t have to pay for medical care for non-injury-related conditions. (Surprisingly, not many of us know that coverage has increased so much…)

If someone gets hurt at work, has comorbidities, and needs surgery, those comorbidities have to be addressed as part of the treatment plan. If the patient has health insurance, that’s what pays for the non-injury conditions.  If not, work comp’s on the hook.

Clearly, the more workers with insurance, the less added expense for work comp payers.  So, here are my back-of-the-virtual-envelope calculations of the impact of ACA on work comp (a more-qualified researcher needs to do a much more thorough job): 

In 2009 – 2010, 81.8 percent of the employed population aged 18-64 had health insurance. By March of this year, 90.3 percent had coverage, a 10.4 percent/8.5 point increase.

Around 150 million people were employed this March; running the numbers, that means about 13 million more workers had health insurance early this year than did six years ago.

At 3.2 injuries or illnesses per 100 FTEs, that’s 416,000 patients.  About 84,000 of those patients have more severe injuries, the type that may require surgery, physical therapy, and/or more expensive and extensive medication.

We do not know how much of the moderation in medical inflation can be accounted for by expanded health insurance coverage, but we do know there are around 84,000 folks with pretty significant injuries or illnesses that don’t need work comp to pay for non-occupational conditions.

Another factor – employed people with health insurance are healthier than employed people who don’t have insurance.  Sure, there are confounding factors here – how long do they have to be insured to become “as healthy” as folks who’ve had insurance for years, and how much healthier do they get for each year they’ve had coverage.  I get all that. And some really smart researcher at NCCI or WCRI or NASI will figure that out (c’mon, people, the race is on!)

What does this mean for you?

We don’t KNOW ACA how much reducing work comp medical costs, but it is very likely a major contributor.

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!