Quick takeaways from CWCI’s annual meeting

One of the best conferences of the year is CWCI’s annual get together in Oakland California.

More information is packed into a morning than you’ll find in most multi-day events – and in a more entertaining format – and no one is more informative and entertaining than CWCI’s Alex Swedlow (I’m fortunate indeed to count Alex as a good friend and colleague).

First question – As Alex noted, way back in the pre-Triangle Shirtwaist fire days (no, I wasn’t around then), business claimed 95% of injuries were considered to be the fault of the workers – what is the actual number?

And why do many claims organizations/processes seem to operate as if that statistic is true today?

Okay, back to key takaeaways…

  • Average drug spend dropped 34% from 2012 to 2015 – Rx and DME combined amount to 8 percent of total spend of med payments at 24 months after inception
  • Opioid spend dropped dramatically, while NSAIDs went up.
  • Compared to all claims reported, Cumulative Trauma injuries have increased – a lot – since 2009. CWCI thoroughly debunked the contention by others that CT cases have decreased.
  • IMR decisions continue to uphold UR determinations more than nine times out of ten, a rate that’s held steady since 2014.
  • UR decisions on compounds are upheld in 99.2 percent of all cases.
  • Work comp administrative expenses are higher in California than any other state – by a lot. Part of the answer is the outright abuse of the IMR process by a handful of scummy providers in SoCal…and a couple up north too.

Gary Franklin MD gave a compelling, passionate, and pointed argument that opioid manufacturers are at fault for the disaster that’s killed more than 200,000 of us. Gary never hesitates, never waivers, and is the individual who has done more than anyone else to confront the opioid issue.

More to come next week.


Opioids – bad news and good

Patients taking opioids over the long term don’t go back to work, yet many long-term opioid patients can be weaned off opioids within two years.

Those are the quick takeaways from two studies that came out last week.

First, a study from WCRI validates earlier research, finding:

  • patients with multiple opioid scripts are out of work three times longer than patients with no opioid scripts, and
  • patients who lived in places where providers prescribe a lot of long term opioids…are more likely to get opioids for longer periods than individuals who lived elsewhere.

This is the first study that looked at ALL lost-time claims with a diagnosis of low back pain in a very large area – 28 states that represent 80% of claims – over a five-year period. This is important because it shows  cause-and-effect independent of so-called “severity” measures, which often use cost, treatment, or prescriptions to indicate medical severity, instead of actual clinical indicators. By looking at ALL low back claims with lost time, claims, it is clear that the driver of disability is long-term prescribing of opioids.

The takeaway is this – chronic use of opioids extends disability, and you can figure out where you need to focus your efforts by looking at publicly-available prescribing data.

California is one state with way too much experience in dealing with opioids in work comp; the graph below shows both the overuse, and the progress made in the Golden State since it got serious about reducing opioid usage.

source – WCIRB

Which brings us to the good news: weaning works, as research from California’s Workers’ Compensation Insurance Rating Bureau shows: 

47% of the injured workers demonstrating chronic opioid usage weaned off of opioids completely within the 24-month Study period. Injured workers who did not wean off completely over the Study period still reduced opioid dosage by an average of 52%.

The research included all patients with more than 50 morphine equivalents over at least 3 months within 24 months of the date of injury.

Yes, it is difficult, expensive, requires a lot of assistance from trained professionals, and does not always work. All that said, given the finding that patients taking opioids for longer periods are out of work a lot longer, it is well worth the time and effort to help these patients reduce or end their use of opioids.

Stuff that affects work comp

Here are a few of the events/transactions/deals that may affect the workers’ comp industry, along with my take on that impact.

First – Trump’s steel and aluminum tariffs

Leaving aside the fact that China – Trump’s primary target – supplies just one-twentieth of all foreign imported metals, there are way more American jobs in other industries  that would be lost if the European Union and/or other trading partners impose retaliatory tariffs.  

Agriculture, autos, bourbon, bluejeans, and bikes are on the list of possible targets. Total exports amount to $1.4 trillion

Our cultural exports – fashion, film, music, sports – may fall out of favor as Asians and Europeans angered with Trump stop buying American.

My take – the Trump Tariff is going to cost jobs, unless it is quickly hollowed out by exemptions.

(an excellent discussion is here)

The Trump tax plan

First, if wages and hiring increase, as promised by the President, premiums will rise.

So far, that isn’t happening. The vast majority of the windfall is being spent on stock buybacks.  While this is inflating stock prices it isn’t going to have any material effect on the

With the added focus on deporting undocumented workers, industries that demand low-skilled workers for high-stress jobs such as meatpacking are often struggling to find enough workers. Jobs are usually filled with first-generation immigrants – as those jobs always have been.

Third, Employment changes.

The automation of both low-skilled and white-collar jobs is accelerating…over time many low-skill jobs are going to disappear – including burger-flipping, while white collar work including healthcare administrative jobs is being automated as well.

credit Daily Mail

The unemployment rate has improved  from 4.7% to 4.1% over the last year, while labor-force participation has remained flat (working-age people who’ve not looked for work).

Wages are up about 2.5% over the last 15 months, slightly more than inflation.

My take – hiring is strong, and wage growth may accelerate somewhat. This would generate more premium dollars over the near term. As Flippy and it’s relatives take over from Mary and Mike, we may well see average wages increase as there are fewer low-paid jobs available.

And Last-but-not-Least, changes in healthcare, specifically how and where healthcare is delivered.

Compare the revolution in retail – moving buying and delivery from stores to the home. That hasn’t happened at all in healthcare – but it will.

Enjoy the weekend.

Big changes in work comp pharmacy spend

Sometimes data is so compelling you have to get it out there immediately.

CompPharma’s annual survey of prescription drug management is underway; here are quick takes from the first ten surveys.

  • 2017 drug spend dropped 13.4 percent from 2016 – the biggest decrease in the 15 years we’ve been doing the survey
  • Opioid spend decreased twice as much – over 26 percent.

Note that the huge drop in opioid spend occurred BEFORE adoption of formularies and other controls in big states like Pennsylvania, New York and California.

Note also that this is the sixth drop in drug spend since 2010.

Graph from last year’s Survey, Public version available for download here.

There are a few other newsworthy findings;

  • compound spend is down dramatically in most areas – but has spiked in a couple of states.
  • the decrease in spend is attributed primarily to lower opioid utilization
  • despite the big drops in spend, respondents (typically the executive at a work comp payer with overall responsibility for medical management) see pharmacy as MORE important than other medical service types…because pharmacy drives disability and return to work

This is very preliminary; we expect another 15 or so respondents and I’d expect things to change with more data. (if you want to participate and receive a detailed copy of the 2018 Survey Report, email Helen Patterson at HKnightATcomppharmaDOTcom)

What does this mean for you?

The work comp industry’s decade-long focus on pharmacy is delivering far better care and lower costs.

What you don’t know WILL hurt you

Insular, self-absorbed, and unaware are three traits far too common in the workers’ comp world.credit Rational Faiths

When combined with lousy marketing and poor brand identity, the outcome is akin to life in the Dark Ages – nasty, brutish, and short.

Here’s a few things I’ve learned after decades in the healthcare and workers’ comp worlds.

  • Brand Is Everything.
  • Few executives in the work comp world understand this, some healthcare people do.
  • Marketing is NOT proposal writing, powerpoint production, or event planning…yet most “marketing departments” spend most of their time and too-small budgets doing just that.
  • There’s waaaaay too much “presenting” in sales – and waaaaay too little listening.
  • No one cares about your company, your products, your results, your story. Until they believe you understand their problem and have a potential solution.
  • There are several companies that charge high prices and deliver crappy results – yet they consistently win business because their brand images are strong.
  • Companies don’t buy anything. People do.  Just because your “solution” seems to meet a “business need” does NOT mean the person who has to say Yes will say yes.

So, a few suggestions.

  1. Figure out what your brand is.
  2. Invest in it.
  3. Do marketing – real marketing.
  4. Be brutally objective. Don’t blow smoke up your boss’s shirt – or your’s.

You’re going to have a spend a lot more dollars on marketing than you ever have, get your “marketing” people involved much earlier in strategic, product development, and sales, listen to what they say and likely change a lot of what you do.

This is going to make a lot of people really uncomfortable – and that’s good. Business people who are comfortable get complacent, and complacent people lose.

What does this mean for you?

It’s really hard, and most won’t be willing or able to do this.

But the ones that do will win.

Work comp medical: cost vs “savings”

I still have a sports jacket I bought years ago because it was a great deal. It’s ugly and doesn’t fit right, but oh, what a deal. I keep it to remind myself that it’s not about the deal.

(I know, I can’t believe I spent money on this)

Most work comp buyers focus on the deal they get on medical expenses, paying little attention to the quality of care delivered, or what that care actually costs.

Reality is, most buyers measure their performance by how much they’ve “saved”, not how much they’ve spent – or what they got for their dollars.

Some, like Albertson’s, are focusing on what matters – quality. But most don’t, relying instead on “savings” reports that purport to show how many gazillions their vendors “saved” by not paying duplicate bills, slashing charges to fee schedule (!), applying state rules to bills, assessing relatedness and using clinical edits.

These buyers are saving themselves to death.

Instead of bill reductions, payers should be looking at medical cost per claim. Replace network penetration with physician performance evaluation, based on total outcomes. Stop looking at denied procedures and start identifying the providers who do a great job, send claimants to them, and leave them alone.

What is scary is that many in the industry think they are making progress. They are plodding deliberately along, reading bill review savings reports, studying, evaluating, debating, discussing, re-organizing, considering, meeting, presenting, recommending other ways to “save”.

They are mistaking activity for progress, when they should be focusing on what matters – measure and reward quality. 

So, you may want to ask yourself, would you buy medical care for your family the way you buy it for your employees or insureds?

What does this mean for you?

If you do want to dig into medical, here are a few ideas.


Is work comp medical inflation increasing?

USI’s 2018 Insurance Market Outlook indicates workers’ comp medical inflation will hit 6 percent, a significant jump over recent years. A key driver is:

“a continued increase in cost shifting from healthcare plans to workers’ compensation due to the profitability challenges faced by the Affordable Care Act as well as other challenges”

I’m puzzled by the scant attention paid to medical cost in the report, and the superficial, and I’d suggest misleading attribution of cost shifting to ACA’s “profitability challenges”.

What “profitability challenges?”

Health insurers are doing quite well. Pharma and device companies are too. Hospitals are rolling in dough, with profits up 43 percent from 2011 to 2016. Sure, around 20% – 30% of hospitals experienced negative margins – but the average net margin was a very healthy 7.7%.

Medical costs drive a LOT of casualty insurance costs in the auto, fleet, workers’ comp, medical malpractice, and liability lines. The quote above is the only substantive statement in the 38 page report, and the statement itself is questionable.

Granted, I’m biased. As one who grew up in and remains firmly rooted in the healthcare world, I see things thru that lens.  That said, my take is the lack of focus on medical is due to a lack of understanding of healthcare, which in turn makes conclusions suspect.

NCCI recently changed its measure of overall medical inflation to a metric that more closely tracks what we’re seeing in work comp. The discussion at the link is pretty wonky; suffice it to say that the Personal Healthcare Deflator (PHC) tracks actual workers’ comp medical trends much more closely than the Medical CPI. (James Moore wrote on this some time ago)

(source NCCI) You’ll note that the PHC Deflator predicts a much lower rate of price inflation than the other more commonly used metrics; PHC does factor in a change in the mix of services, which I’m guessing is a key reason. (In group/Medicare/Medicaid there’s been a significant shift in the location of services from hospital to non-hospital providers which has reduced overall costs.)

It’s impossible to say how USI came up with their estimate of 6% medical cost inflation; it is possible they used the CPI or some other metric.  I’ve got a query into USI and will update this if/when I hear back.

In the interim, I’d suggest we would be well-served if the industry showed a bit deeper understanding of the key driver of claims costs.

After 30+ years in this industry, I’m still amazed at the superficial understanding of healthcare exhibited by most in work comp. The continued emphasis on network penetration and per-line and per-bill “savings”, the failure by most buyers to force insurers and TPAs to report real outcomes, and the resulting lack of real improvement in health care quality in work comp is appalling.

What does this mean for you?

We’ll dig into the drivers of medical costs more this week. It’s a bit complicated, as most important things are.

Are you being gamed?

I’ve had a number of conversations of late with self-insured employers about their workers’ comp “savings” reports; one thing that keeps coming up is how- and why – vendors ‘game’ the numbers.

(this post is a follow up to a post I did seven years ago…)

Perhaps the greatest variation is in bill review “savings” – and the fees attached to those “savings”.

Bill review savings are reported as a percentage below the applicable fee schedule or, in states without fee schedules, usual and customary rates or billed charges (depending on the vendor and state). Savings are also attributed to application of state rules, for example a denial of an assistant surgeon’s fee or physical therapy 59 modifier. These savings don’t generate additional fees for the vendor as they arise from mere application of state regs and fees.

One would think this is an objective result, and therefore there should be little variation among and between vendors, and in an ideal world, one would be right.

However, there is almost always a bit of judgment involved in determining what the ‘right’ fee schedule amount is and what state rules apply. The complexities are many, and the justifications, while often thin, are given to payers unequipped to refute the vendor’s statements.

Then there is the gamesmanship where savings that should be attributed to fee schedule or application of state rules are put in a different bucket, a bucket that just happens to generate additional fees for the vendor.

Let’s look at the ‘why’ vendor BR savings vary.

Simply put, follow the money.

Most bill review services these days are priced on a flat charge per line or per bill; Most BR vendors also charge for additional ‘value-added’ services on a percentage of savings basis – typically 25% of savings delivered on top of fee schedule/UCR cuts. That’s where the…variation usually lies.

The financial motivation is obvious; the vendor gets the same fee for processing a bill whether they deliver $1 or $1000 in BR savings, but their compensation for ‘value-added’ services is based on the savings that are delivered – the higher the ‘savings’, the greater the fees for the vendor.

Therein lies one explanation – perhaps the most significant one – for the wide variation in BR savings percentages. In my consulting practice I’ve had access to reports from several of the larger BR vendors, and the variation can be as much as 300 percent from vendor to vendor. Yes, you read that right – one vendor’s bill review “savings” in a state can be three times higher than another’s.

Almost always the vendor with the lower FS savings delivers great results from ‘nurse review’, ‘complex bill review’, ‘coding edits’, ‘unbundling and upcoding review’, or whatever they call it – suffice it to say that the savings delivered from these ‘extra, value-added’ services – when added to the ‘standard’ bill review reductions – are usually only a bit higher than other vendors who don’t have all those extra, value-added add-ons.

That’s not to say that some savings can – and should – be derived from careful and professional review of bills – coding and clinical reviews are often helpful.

How can you protect yourself?

  1. Ask competing vendors to reprice a set of bills and provide savings numbers in aggregate and for each bill. Compare reductions from application of FS and state rules from the vendors, and on individual bills.
  2. Where there’s wide variation, ask the vendors for an explanation, and don’t accept mumbo jumbo BS.
  3. Make very sure your vendor knows you are holding them to the same standard they used in repricing your sample bill.
  4. Ask your colleagues if you can see their savings reports, and compare the savings allocations to your reports.
  5. Ask your broker, consultant, or adviser for their views, and get them to share de-identified client savings reports with you.

What does this mean for you?

The bad actors are known to many – make very sure you know who they are.

Stone Point buys Genex – again

Case management/bill review/UR/IME company Genex has been re-purchased by Stone Point Capital; Stone Point sold the business to Apax in 2014. Takeaways are:

  • Stone Point really understands workers comp and the WC services business. The company is currently pursuing insurer AmTrust and own or have owned a number of companies involved in workers’ comp including:
    • Cunningham Lindsey
    • Oasis Outsourcing
    • StoneRiver
    • Sedgwick
  • Apax’ divestiture is likely NOT a signal the firm is going to break up or sell off OneCall Care Management. OCCM is deep into a systems conversion intended to tie the disparate businesses it owns together and the company just moved most of it’s home office people into a single location. Perhaps most importantly, OCCM’s debt is still trading well below par, an indication the investment is under water.
  • CEO Peter Madeja and the core of the senior management team will stay on. Peter is one of the finest people I know, universally liked and respected in the work comp community, and he and his team have performed well, keeping Genex growing in a declining market.
  • My guess is Genex will likely keep acquiring related businesses. These could include firms in the IME and MSA space as well as the occasional case management company. Mature markets require participants to grow via acquisition, a strategy Madeja et al have mastered.
  • I’d also expect some much bigger acquisitions. I don’t think Stone Point bought Genex to get into the case management and bill review business; these folks have bigger plans.

A couple of side notes...

Stone Point’s initial investment in Genex back in 2007 was reportedly about $56 million. 

One report indicated a source said that this time around, Genex sold for three times the original equity investment (note Apax paid for Genex with a combination of debt and equity). Without any detail or ability to dig into that, I have no idea if that is accurate or even likely.



Anything but simple

To the casual observer, the work comp bill review process is pretty simple:

  • make sure the procedure codes are appropriate for the injury,
  • compare the billed codes to the state fee schedule/allowable amount,
  • apply any reimbursement rules, and you’re done.

The real story is far more complex.  It’s no longer just about making sure the claim exists, the body part matches the medical report, and the procedure makes sense for the injury.

Reimbursement has gotten enormously complicated. Coding and code modifiers, bundled payment logic, clinical appropriateness, duplicate identification, relatedness, location of service verification, surgical groupers are just a few of the issues and considerations often unappreciated – and not considered – during the bill review process.

Far from A to B, it looks more like this – and is unique for some bills…

While some will say this is “not new news”, what is new is the constant focus and attention required to stay abreast of the ever-more creative and sophisticated “revenue maximization” industry. (That’s the label for provider-focused efforts to get as many payer dollars as possible)

I’ve taken a close look at several approaches/techniques intended to help payers keep pace with provider billing. One that caught my eye is Equian’s Clinical and Coding Logic. The folks at Equian were kind enough to spend a lot of time educating me on the research behind their Clinical & Coding Logic (CCL) solution, how it is used, and where it can have the most impact.

CCL has it’s roots in a commercial health application purchased by Equian some time ago, an application that has been adapted for use in workers’ comp. Building on that application, the company continues research to identify emerging billing practices, and develop identification techniques and rules to address those practices; to date more than 100 additional rules and millions of additional edits not found within typical bill review engines are in place.

There’s a LOT behind CCL; while I can’t provide more than a superficial overview, here’s a few things that popped up for me.

  • Diagnosis and procedure codes with a “low-likelihood”of occurring in work comp are flagged; when they appear medical records are reviewed in detail
  • Experimental and Investigational services typically fall thru the cracks in routine bill review processes; these have been identified and payment logic developed.
  • CCL includes identification of services that appear to be body-part related but actually address pre-existing conditions
  • Extensive research on the notorious 59 modifier enables reductions for inappropriate charges associated with surgery

Equally important is Equian’s ongoing research and analysis to identify emerging and previously unseen billing practices, development of identification techniques and rules, and evaluation of results.

CCL is a supplement to, not a substitute for the regular bill review process and technology. It requires data transmission to and from Equian via secure link, similar to PPO pend-and-transmit processes. Results shared by Equian demonstrate CCL is most useful for high-volume bill operations. Across the board, reductions average about $45 per bill (I was not able to independently verify savings or impact, and note that results are almost certainly highly contingent on each payer’s unique situation.)

What does this mean for you?

Never stand still.