Things work comp can/should learn

In addition to my focus on work comp medical management I’m deeply involved in governmental programs (Medicare/Medicaid/dual eligibles) and related businesses.

Here’s a few things work comp would do well to understand/explore/pursue.

  1. Auto-adjudication of medical bills – the standard target for auto-adjudication of medical bills is 90%.  That’s far higher than any workers’ comp bill process, and about twice as high as the average.
  2. Medical bill turn-around time (TAT) – average is at or below 20 days from receipt of complete “claim” (defined as a medical bill and needed documentation)
  3. Administrative expense ratio – <10%. yes, I understand work comp is a lot more litigious, blah blah blah. But seriously – 28-35%??
  4. Value-based care – is taking over the big governmental programs and corporate plans as well. Yes there have been a ton of misjudgments, errors, problems and failures, but make no mistake – in the near future VBC will be the dominant form of contracting and basis for reimbursement. (those who declare VBC isn’t going to happen in work comp may want to look outside their bubble)
  5. The impact of provider consolidation – this is one area where recent articles/briefs/research are starting to scratch the surface – but only just. Reality is consolidated markets are much more expensive and WC payers have way less ability to “manage” care in those markets. WC needs to get a whole lot smarter and more agile.

Whether this actually happens is up in the air. We veterans with decades in this business recall all too well what happens to claim counts/claimdurations when recessions hit.

What does this mean for you?

This is rarely helpful.


It’s getting real, real fast

The impact of global warming on climate change is happening faster than anyone thought.

And that will lead to more occupational injuries and illnesses.

Today’s early heat wave is smothering much of the country in brutally hot and oppressively humid conditions; as the heat and humidity shifts west and north, the southwest is getting a bit of a reprieve while the eastern US is blanketed with heat warnings.

It’s not just the heat – it is the unexpected/unprecedented storms, droughts, high winds, and resultant floods and fires that are becoming all too common.

credit CNN

Yellowstone is closed, and some roads are impassable  – and will remain impassable for some time due to flood damage. The Yellowstone River reached an all-time high Monday – more than 2 feet higher than the previous record. This in an area that’s been parched in a drought.

flood damage in Gardiner Montana, credit CNN

Hundreds of thousands of Ohioans and West Virginians are without power.

Winds gusting north of 80 mph hit Chicago yesterday – exceeded by a 98 mph guest in Fort Wayne Indiana.

Six months ago I wrote this:

the biggest long-term concern for workers’ comp is global warming...yet this is getting zero attention.

There’s going to be an inevitable increase in issues related to heat, flooding, fires, drought, tornados and hurricanes. This is getting more real every day yet remains all-but-ignored by pundits, policy-makers  and rate-makers.  We can expect more heat-related claims. Hurricanes, fires, and tornados will increase in number and severity; affecting logistics, labor, construction, and claims. The research is clear.

It didn’t have to be this way, but thanks to big oil and its ability to manipulate people and pay off politicians, we failed to take action.

And let’s not forget people were willing to be manipulated.

Now, we are paying the piper. More specifically, workers in public safety, manufacturing, healthcare, construction, logistics, agriculture, forestry, mining, transportation and other sectors will be the ones suffering from the lack of foresight and inability/unwillingness to believe science exhibited by far too many of us.

As of last summer, only three states had adopted standards for workplace heat exposure – kudos to California, Minnesota and Washington. The Feds have yet to set federal requirements.

Jeff Rush of California Joint Powers Insurance Authority and I will be discussing the impact of global warming on workers’ comp at National Comp 2022; thanks to Michelle Kerr and her colleagues for inviting us to speak.

What does this mean for you?

  1. Denying the reality of human-caused climate change will have devastating effects on all of us – with worse consequences for our kids and grandkids.
  2. States and the Feds will enact heat/humidity exposure standards, which will drive big changes in risk management.



Those damn facility fees

If you are a work comp payer, you don’t have to pay those ridiculous facility fees when care is delivered outside the hospital – at least not in Pennsylvania.

That’s the decision rendered by the Pennsylvania Bureau of Workers’ Compensation in a case dating back to 2017. The case arose when a hospital (which I promised not to identify) tried to get reimbursed for care delivered by an affiliated provider, which was NOT “located within XXX hospital”.

The details

The hospital, a “Part A provider and billing entity” didn’t provide the billed services, rather a

“part B provider whose clinic [was] not located with[in] XXX hospital performed, billed, and was reimbursed for services.  XXX hospital is not entitled to payment as XXX hospital provided no medical services…”

The actual provider – a “part B provider” affiliate of XXX hospital, delivered the services, submitted a bill and supporting documentation, and was reimbursed.

The hospital also submitted a bill along with documentation that the treating provider had a professional services agreement (PSA) in place with the hospital.

Notably, the PSA “designates that all care and treatment is rendered by [the affiliate’s] personnel, therefore the payer’s attorney questioned exactly what XXX hospital was “providing.”

There’s a LOT more to this; location codes, provider details, Medicare regulations, bill types and the like are all important. The knowledge level required to correctly reimburse and successfully uphold a denial of payment for facility fees in PA is quite impressive; the entity providing that expertise has a wealth of experience and expertise in the Keystone State.

The cost reduction is equally impressive .

What does this mean for you?

  1. If you are paying facility fees for care delivered outside of a hospital (Part A) provider, you better get your act together.
  2. Expertise is way more important than price or throughput.


Things I missed while despairing

We’ll get to what we missed in a second; first this – The slaughter in Buffalo and Uvalde had me focused elsewhere, as it did for many.

That focus must not shift as we celebrate Memorial Day with friends and family; we cannot just move on, as tempting as that is. Rather I’d encourage you to commit to doing something, to be a difference maker.

Please don’t just move on. Please.

  • Get the facts about gun violence here.
  • Support the Sandy Hook parents’ efforts here.
  • Support Moms Demand Action here.

WCRI published two excellent studies this week…thanks to Andrew Kenneally for sharing the news.

The craziness of workers’ comp extends to the prices you pay doctors and therapists for carehow crazy you say?


Docs in Florida are getting screwed (but FL hospitals are rolling in dough), while their counterparts in Wisconsin are making bank. Like so many things in comp, this makes zero sense.

Download Rebecca (Rui) Yang PhD and Olesya Fomenko PhD’s insightful study – for free – here.

There’s far too little information on the outcomes of chiropractic care. WCRI just published a multi-pronged analysis of chiropractic care’s impact on low back pain, with a comparison of costs and disability duration for patients treated by chiros vs other care givers.

An intro video is here.

The study, authored by Kathryn Mueller, Dongchun Wang, Randall Lea, M.D., and Donald R. Murphy is available for purchase here.

Have a safe weekend, and remember – Democracy depends on your involvement.


The invasion of the techies

Artificial intelligence.  Block chain.  Wearables. Smart phones. Chatbots. Various combinations thereof.

All these tech wonder-things are working their way into workers’ comp…or at least trying to. I’ve been tracking this sporadically (who has time to monitor all the press releases announcing this revolutionary app or that whiz-bang solution??) and have come to a few conclusions.

  1. With rare exceptions, the companies developing and offering these “solutions” are founded and run by either a) clinicians or b) techies.
  2. Those run by techies seem to think they can stitch together a wearable thingie connected to a smartphone app and voila’! they’ve built a substitute for/adjunct to physical therapy.
    Of course, the techies KNOW tech, understand AI and video tracking of movements and integration of smart-phones with remote devices. What they do NOT know is medical stuff, what really happens in rehab, the role of the therapist/prescriber/patient, the realities of the therapy process, where things break down in the patient/therapist process/interaction and why. And a lot of other stuff I can’t think of this second.
    Oh, and patient engagement.  That’s kind of super-important.
  3. Those run by clinicians really understand the care process, clinical issues, the reality that effective therapy and recovery is driven largely by patient compliance. What they don’t get are the tech challenges, the singular importance of reporting information back to other stakeholders, the limits of technology and adoption/effective/consistent use of technologically-driven “solutions”.

So, tech-centric approaches rarely address patient engagement, compliance, or the obstacles thereto.

It doesn’t matter how great your tech is if people a) can’t figure out how to download it; b) don’t have a smartphone; c) can’t figure out the app/wearable/bluetooth connection/whatever; d) it isn’t specific to the needs of each individual patient (language, physical characteristics/comorbidities/functional limitations/pain levels, reading level, therapy needs and evolution of same…).

And it doesn’t matter how great your clinical expertise/knowledge/experience is if: a) the tech is clunky, b) your staff has to onboard/explain/coach/be tech support for your patients, c) the data collected isn’t automatically shared with stakeholders, and d) the data isn’t entirely secure yet accessible for reporting/analysis/research.

On that last point, no device/app/tech is helpful if other stakeholders (the therapist/prescriber/case manager/claims handler/employer) don’t get reports on progress and alerts on potential problems – especially if those reports and alerts aren’t easily accessible/pushed to them so they don’t have to go looking for them.

What does this mean for you?

Apple beat Microsoft because it made using a computer easy. Adoption of tech-enabled “solutions” requires making the entire process/use by all stakeholders “easy”.

Put more succinctly, Ideas don’t matter – execution does.



Sedgwick buys Orchid Medical

Sedgwick has acquired Orchid Medical in what is the giant TPA’s latest move to add more services to its portfolio. Sedgwick hasn’t posted on this yet; when it does it should be here.

Over the last few years Sedgwick added Managed Care Advisors (government contracting firm focused on work comp services) and CareWorks (WC services firm acquired as part of the York deal) to its portfolio; multiple sources indicate it is deep into discussions with start-up work comp PBM CadenceRx to supply back-office and perhaps network services (CadenceRx uses a third party for its retail pharmacy network).

The net effect of these acquisitions/ventures – which continue Sedgwick’s decade-plus expansion into work comp services – is to add top-line revenue to the company’s financials and increase profitability. (I’ve written about this here, and described how TPAs are growing here (the latter was a while ago…but a pretty accurate forecast.)

Here’s how this works.

When Sedgwick uses a specialty network like Orchid to arrange for durable medical equipment for a claimant, the actual cost of the DME is booked as “revenue” by Orchid. This makes Orchid’s top line bigger – and bigger is always better.

Now that Sedgwick owns Orchid, Sedgwick gets to add that revenue to its top line. If/when it launches its own PBM the giant TPA will look giant-er simply because drugs bought by its customers will count as revenue for Sedgwick.

I’d hazard a well-educated guess that Sedgwick will move as many customers as possible from external service providers to Orchid.

OneCall is the most likely casualty…reports indicate staffing reductions already occurred in Jacksonville.

Based in Orlando, Orchid provides a range of ancillary services including imaging, DME, transportation and translation to the work comp market. Sources indicate a large chunk of that business – perhaps half or more – flows through HealthESystems‘ ancillary pipe aka ABN.

What does this mean for you?

If you are a Sedgwick customer, you may want to have a detailed discussion re its plans re ancillary services. A very careful and studious analysis of costs and benefits might be a good idea.

If you are a current Orchid customer and Sedgwick is a competitor, make sure the powers-that-be are aware of the transaction.

If you are an Orchid competitor and Sedgwick is a client, you’re probably way ahead of me.


NCCI’s take on medical cost drivers, part 2

Last week I posted on Raji Chadarevian and Sean Cooper’s excellent presentation at AIS.

Here’s my what-this-means-for-you takeaways.

Drug spend decline

While NCCI’s reporting that dollars for drugs now account for 7 percent of annual isn’t too much of a surprise, there are a couple other factors at play here. First, the older claims are, the higher the drug costs.

During the 18-24 COVID months that were generally pretty awful, a lot of high-severity, higher-frequency jobs disappeared. Along with those jobs went a significant number. of high cost and cat claims (fewer workers; fewer claims). In what could best be described as a mirror image of the snake swallowing the pig (you know, the big slug of stuff/incidents/whatever works its way through the system), we’re going to see a long-term decrease in drug spend due to a decrease of X% in long-term claims incurred during COVID.

Obviously this will eventually work its way through the system…that said, it’s just one more bite out of pharmacy spend.

Similarly, rehab care and skilled nursing dollars will also decline along with home health care.

Peak network

With around 75% of physician and other treater dollars going through networks, we are at – or darn near at – peak network penetration. Some states – NY being a good example – are just not going to get there due to regulations on direction and very strong provider lobbying plus employers and insurers just aren’t pushing changes.

To be precise, that refers to overall network penetration – almost all work comp networks/PPOs have carve outs for specialty services.

I make the distinction because specialty network penetration will increase – at the expense of declining PPO penetration in specialty areas (PM, Imaging, DME/Home Health etc.). This will happen because those service areas lend themselves to more active management, often involve proactive scheduling, and  benefit from focused clinical management.

But, again that’s just one reason PPOs aren’t a growth thing – claims counts are declining and medical costs are flat too…

Oh, and big healthcare systems have A) figured out work comp is the golden goose, and B) are increasingly stingy with their discounts.

So, the average net discount after network fees (!!) is significantly lower than it was even five years ago.




Medical cost drivers in work comp – NCCI’s take

Sean Cooper and Raji Chadarevian delivered perhaps the most useful presentation I’ve seen at any NCCI Conference…There’s a LOT 0f important – and very timely – information in their presentation, so I strongly encourage you to watch it  – or watch it again here.

Let’s start with the top line – facilities and physicians (which includes physical medicine as well as MD costs) are by far the biggest chunk of spend. Note that NCCI reports annual drug spend is down to 7% of total spend. This aligns closely with what I’ve been reporting for some time.

The key takeaways…

The discussion focused on medical prices – which are the single biggest driver of total US healthcare inflation (see here for more details on this) – and utilization. Disaggregating cost increases provides/ed the audience with a deeper understanding of drivers – well done.

We are approaching network saturation.

Fully 75% of Physician services were delivered in-network – and, as in-network prices grew much more slowly than non-network, this helped reduce overall medical inflation.

Physical medicine is increasing…which is good.

The cost of physical medicine has been increasing while costs for surgery costs have not. What’s driving PM costs is mostly more utilization – indicated by the light green shading below. That is NOT necessarily – or even likely – a bad thing…A course of PT is way less expensive than the costs associated with a surgical episode. 


Sean noted facility costs have been “the biggest driver of increased medical costs in workers comp” – increasing twice as fast as physician services. (Long-time readers will recall I’ve been banging on this drum ad nauseam.)

There are a host of reasons for this – led by consolidation in the healthcare services industry (also covered in detail here at MCM). Net is when a hospital or health system buys physician practices, it gets to add a facility charge to the what used to be just a physician office bill.

Voila!  Instant profit simply by changing the “place of service”. That’s why private equity firms, large health care systems, UnitedHealthGroup, and dominant hospitals have been snapping up physician groups – they are gaming the system.

There’s more to unpack here – which I’ll do early next week.

What does this mean for you?

It’s facility costs.


Work comp loss drivers…NCCI’s 2021 findings

More details from NCCI Chief Actuary Donna Glenn’s presentation yesterday…

Claim costs are driven by employment, frequency (what percentage of workers gets hurt), the cost to provide medical care to those injured workers and the cost of paying their income benefits while off work.

While claim frequency bumped up in 2021, the increase just offset an almost-identical decrease in 2020. When you pull out the COVID stuff, the average annual decline in work comp claim frequency has been 3.8% over the last 20 + years.

This means – in three years there will be 11.4% fewer claims than there are today – that’s one out of ten claims.

Indemnity “severity” didn’t change last year compared to 2020, leveling off after a pretty consistent increase from 2016 to 2020.

Medical “severity” for loss time claims didn’t increase from 2020 from 2021 – it was dead flat – and has been pretty much flat since 2016.

Ed. note – while widely used in the work comp industry, the use of “severity” to describe what is nothing more than “cost” isn’t helpful. Medical severity should be a clinical measure, not a financial one. I would argue that the use of “severity” further distances the industry from increasing its understanding of the role of medical care in workers’ comp.

Glenn attributed the lack of movement in part to a shift to delivering care in outpatient facilities…more details to come in the final presentation today.

What does this mean for you?

Work comp medical costs are NOT increasing – my guess is the major progress most payers have made in reducing drug costs- and more specifically opioid over-use – has been a major help.


NCCI’s State of the Industry 2022

Work comp is still way over-priced, incredibly profitable, and the industry – defined as total revenues – is a lot smaller than it appears.

Those are my key takeaways from NCCI Chief Actuary Donna Glenn’s presentation just completed in Orlando (ed note – this was supposed to be distributed yesterday, but I missed the 10 am cutoff time)

I’m not at NCCI due to other client needs, but the fine folk at NCCI have provided a media feed – thanks Cristine Pike and Dean Dimke…

(Note NCCI has included data from most but not all states and payers; thus I suggest you pay more attention to overall trends rather than specific figures)

Premiums for private carriers were up just a bit last year – less than 2 percent.  Not a surprise as COVID was still rampant although shutdowns weren’t as prevalent…and employment was way up in 2021 compared to 2020.Rates are down in pretty much every state except Hawaii (betting its those damn physician dispensers in Hawaii…)

Overall, premium rates dropped significantly last year – continuing what has become a 9 year trend. The drop was driven by a decrease of one-third in losses, almost all of which was offset by a 28% increase in payroll. Interestingly “rate loss cost departures” i.e. discounts – have grown significantly over the last few years. See the para below for my reasoning as to why this has happened…

Combined ratio was 87 – again a hugely impactful continuation of 8 years of underwriting gains. WC – which used to be marginally profitable – continues to be a huge profit producer – which is why those “loss cost departures” i.e discounts – are growing. Insurers know how profitable work comp is, and know they can make bank even if they drop their rates.

Even better, NCCI projects accident year combined ratios will improve over time for 2020 and 2021… in contrast to reporting carriers’ initial forecasts, NCCI believes ultimate losses will be much lower. (the blue shaded areas above reflect NCCI’s predicted final loss ratios; the grey reflect carrier’s initial predictions and current predictions.)  One can see that carriers’ predictions have consistently been much higher than their final loss ratios – and there’s still more room to decline.

2021’s 25 percent operating gain (!!!) is just the latest in a 9-year string of operating gains. 

Not surprisingly carriers released a shipload of reserves last year – this reflects the disparity between what they initially report compared to what losses ultimately totaled. NCCI predicts there is more favorable development to come – as in a LOT MORE.

That said, NCCI indicated reserves are still $16 billion too high.

Donna Glenn, NCCI’s Chief Actuary, kept referring to these results as evidence of work comp’s “strong financial position”.

I’d suggest that Ms Glenn’s terminology while directionally accurate, is burying the lede.

Which is this:

  • work comp rates are still way too high,
  • carriers are making way too much profit, and
  • the actual industry size is significantly smaller than today’s premium levels suggest.

What does this mean for you?

More consolidation, more rate cutting, more growth for TPAs.