Workers’ comp is leading the way on opioids

Welcome to the war, everyone.

Okay, so work comp is not the most progressive industry. We are – often justifiably – seen as slow-moving, overly conservative, reluctant to adopt change and averse to innovation.

Except when it comes to opioids, where work comp has been far in front – and continues to lead.  By advocating for treatment guidelines, restrictions of physician dispensing of opioids, formularies tied tightly to UR, analytics and clinical intervention, work comp has long been very active in a crisis that is only now getting real attention in the “real world”.

In a shocking statistic, opioid-related deaths in this country hit 28,647 in 2014, a 9% increase over 2013,

On the “What in hell took you so long”, it is wonderful to see the President call for $1.1 billion in funds to address the opioid crisis. The mainstream media is (finally) all over the issue.  Congresspeople are strident and passionate, finally joining Rep. Hal Rodgers R KY who has long been a leader, calling for action action action.  Presidential candidates are speaking out about the crisis.  It is an acknoledged public health emergency.  The CDC is promulgating guidelines.  Meanwhile, the opioid industry and their supporters are employing all their usual tactics in an effort to keep their profits flowing – expect them to spend whatever they need to.

For those of us in work comp who have been desperately working on the issue for years, this is welcome indeed.  We’ve been fighting this battle for at least ten years, thanks to research by CompPharmaCWCI, NCCI, and WCRI. Innovative efforts by a few insurers. Passionate and vocal leadership from pharmacists and medical directors. Washington State fund L&I’s Gary Franklin MD has been the industry’s leading voice on this issue for a decade, and the progress L&I has made under his direction (kudos to Jaymie Mai, PharmD as well) has been enormous.

The American Insurance Association’s Bruce Wood has been a forceful voice for common-sense, practical solutions, tirelessly bringing this issue to the attention of legislators, regulators, comp executives, and other stakeholders

A special shout out to PBMs, where diligent, targeted, persistent effort by execs, case managers, medical directors, clinical pharmacists, data analysts and account execs have actually led to a decrease in new claims with opioids for the last two years.

Think about that.   Working with payers, PBMs have been cutting opioid scripts for new claims by 5-7 percent per year for the last two years, likely significantly reducing adverse consequences – addiction, misuse, diversion, death.

PBMs make their money when patients are prescribed and dispensed drugs.  Yet PBMs, and their payer customers, have been working tirelessly to reduce the number of pills their patients take.

I’d be remiss if I didn’t acknowledge PBMs’ customers – adjusters and execs alike – have been a key part of the solution.  I recall a terrific program instituted by OneBeacon a decade ago that rewarded adjusters for identifying claimants on opioids and referring those claimants to a physician for review and treatment modification efforts.

Somehow the uninformed and unwilling-to-be-informed out there have not seen fit to allocate credit where credit is due.

Yes, work comp can be archaic, byzantine, frustrating, and even stupid.  And yes claimants can be mis-served for any number of reasons.

But what you’ve done about opioids is truly remarkable. Yeah, we still have a long way to go.  But we are well ahead of the rest of the world.

Note – I am president of work comp PBM consortium CompPharma.


Workers’ comp – predictions for 2016

Just realized I’ve yet to post my annual Top Ten Predictions for Workers’ Comp – my apologies!

Here we go…

  1. The comp market will soften pretty much everywhere*.
    As rates continue to come in flat or a few points down, the equity markets flounder about, and interest rates stay low, there’s going to be more capital than places to put it. So, expect work comp insurers and insurance funders to keep looking to expand market share – which will keep rates low.
  2. *Except in California, where rates are up – and will stay there.
    The uncertain regulatory and judicial environment – at many levels and dealing with many aspects of comp – has made just about everyone nervous indeed about the financial future of the industry. Until there’s some clear direction and these ridiculous court cases are put to bed, the market is going to push prices up and availability down.
  3. Liberty Mutual will continue to de-emphasize workers’ comp.
    Which, given the company’s improved financial performance of late driven by personal lines’ profitability coupled with off-loading a huge chunk of legacy claims liability to Berkshire Hathaway, is a smart move.  However, this does open up opportunities for other insurers and those looking to deploy capital.
  4. Private equity’s role in the vendor market will decrease – a lot
    After years of intense interest, private equity investors’ interest in workers’ comp is waning rapidly.  There are several reasons for this, including the most obvious – the market has been over-heated for far too long.  In addition:

    1. Upheaval in the credit markets makes debt financing a lot harder to come by – and somewhat more expensive.
    2. The past consolidation means there are fewer decent-sized assets (>$10 million in EBITDA) to buy
    3. Strategic buyers are winning more of the deals because they can generate more earnings thru consolidation – United Healthcare buying Catamaran (owner of Healthcare Solutions) and Helios, EXAM buying various small companies, Xerox acquiring Stratacare, York buying MCMC are all examples.
    4. Partially due to strategics, prices have been historically high for a very long time. Double-digit multiples are likely unsustainable for much longer – and certainly not in a PE-driven marketplace.
    5. Some recent deals have not worked out so well.
  5. A half-dozen – or more – states will adopt drug formularies
    Here’s hoping they integrate formularies with utilization review and a very solid and efficient review process.
  6. Opt-Out will not gain much traction
    The bad behavior of bad actors will significantly hamper efforts to advance opt-out legislation.  That, and the lack of any real problems in most states’ workers’ comp systems.
  7. We will see a couple/several bundled payment pilots
    Gaining traction rapidly in Medicare and the group/individual health businesses, we can expect bundled payments for orthopedic care to take place in several locations. Initial reports indicate Illinois (!) and – of course – California may be on the leading edge.
  8. PBMs and payers will make even more progress reducing the use of opioids
    The work comp world has a lot to be proud of here.  After years of enabling opioid use, we – all of us – are doing a much better job stopping initial scripts, working to wean long-term users off opioids, and thereby really helping people and companies. Expect opioid use to drop again in 2016, especially for new claims.
  9. A couple of large, vertically integrated delivery systems will make significant moves into occupational medicine
    Work comp pays well (in most states), is a feeder for orthopedics, gets insured people into the health system, and diversifies revenue sources.  Delivery systems are looking for diversification, and their large infrastructure lends itself well to work comp.
  10. There will be big changes at OneCall
    With debt trading in the low eighties, pressure from debt holders on owners and management to deliver the numbers, management shuffles and continued challenges with customer service, I expect OCCM will go thru some significant changes this year.

That’s it – and I’ll check back in this summer to see how I’m doing.

What are your predictions?

OneCall’s new CEO

is Dale Wolf.

Wolf, OCCM’s executive chair, was named CEO yesterday after serving as the interim CEO since Joe Delaney’s departure last summer.

Wolf’s history includes a stint running the small group health insurance business at the Travelers (where he was a client of mine), a series of progressively responsible executive slots at Coventry Healthcare, and a couple years working in the private equity world. Wolf’s tenure at Coventry concluded with former CEO Allen Wise removing his former protege from the CEO position after a series of underperforming quarters due to high medical loss ratios.

The announcement came after OneCall’s sales meeting in Jacksonville where close to 300 sales staff heard about a realignment that reportedly reflects a shift from field to corporate sales.  While many will not be directly affected by the change, the overall mood was, according to some, “muted”.

Word is OCCM will soon have the vacant CFO position filled, the last of the executive slots sitting open.

Where the company goes from here is a great question, and one of intense interest among OCCM’s debt and shareholders.  With its debt reportedly trading well below par and returns in the mid-teens there is, depending on your perspective, significant upside or a lot of risk.  Much will depend on the ability of leadership to staunch the bleeding from Align as that subsidiary is coming off a tough year with significant client defections; more are rumored over the next few months.

Meanwhile, changes in state fee schedules for imaging, especially in California, have reduced the profitability of that business line somewhat.  It remains to be seen if other states follow suit, although I do NOT expect future changes to have anywhere near the impact of California.

The net is Wolf has a tough row to hoe indeed.


Friday catch up

Made it home from warm and sunny Baton Rouge yesterday just in time to escape the travel disaster unfolding across the east coast.  Hope you and yours are warm and snug and home.

The big news-that-wasn’t was the completion of the acquisition of work comp PBM and specialty services firm Helios by OptumRx, United Healthcare’s PBM and ancillary business entity.  If you were looking for an announcement, there wasn’t one.  Although the deal was likely in the $1.5 billion range, Optum alone generated $67 billion in revenue last year, while the entire company totaled $157 billion in sales. Helios might be a blockbuster deal for work comp folks; it is not for United.

I was honored to speak at the Louisiana Workers’ Comp conference earlier this week, focusing on formularies and other tools payers use to ensure patients get the right drugs and don’t get the wrong drugs.  The audience was engaged, very knowledgeable, and had lots to say.  Good people looking to do the right thing despite what can be a very challenging environment.

Health care evolution

The canary-in-the-coal-mine that is California provides more insight into what will happen in your market – rapid and deep consolidation of health care providers into vertically-integrated delivery systems.  One market – the greater San Francisco Bay area – provides a view into the future for others.

This is especially important because these huge provider networks are critical to health care delivery, financing, access and cost and quality improvement.  Which raises the question – are they getting so big they are “too big to fail?”

Not surprisingly, a conservative view is the government is behind this, and the risk is high. The logic of that argument, while superficially valid, fails in the face of understanding.  What the author fails to note is the Co-Ops were established precisely to foster competition in a market dominated by hundred-billion dollar plus organizations.  More importantly, market consolidation has been going on for years – and while the ACA has likely sped up the process, this is an inevitable result of a maturing market.  This isn’t a government thing, this is a business thing.

Of course, if Sen Rubio et al hadn’t strangled the Co-Ops by cutting off their risk payments, there would be more competition…


Interesting research published by the Pharmacy Benefit Management Institute, detailing the state of the PBM world over the last couple of years.  Not only does it have a cool picture of a women’s eight at the catch (that’s rowing talk), the pub has a wealth of information on what’s happening in the real world of pharmacy management. A few highlights:

  • driven by a near-20 percent jump in specialty med costs, overall trend was up over 10 percent.
  • most of the cost control efforts appear to be financial, with more payers adopting multi-level tiers for copays and the expansion of deductibles and other cost-sharing approaches.
  • the top goal across all respondents was managing the cost of specialty meds.
  • “The generic dispensing rate at retail pharmacies in 2002 was only 40%; today it is 78%”

Costs are going up at double digit rates despite more aggressive cost-sharing and a doubling of generic dispensing.

Work comp

NCCI is working on research aimed at tracking potential impacts of ACA on work ; their work includes monitoring time-to-treatment for comp claimants.  Kudos to Barry Lipton et al for this needed research.

Back at it next week – hope your team wins this weekend!

Workers’ comp; where the smart money is(n’t)

Earlier this month the fine folk at CWCI published a two-page briefing on NAIC’s workers’ comp insurer financial returns.  One could be excused for thinking the document detailed halcyon days of overflowing corporate coffers, treasuries stuffed with profits gleaned by jacking up rates and screwing employers and patients.

Shockingly, despite two terrific years of solid financial results, the work comp industry is only half as profitable as the rest of American industry.

I know, I was stunned too.

But the numbers don’t lie; US workers’ comp insurers’ 2014 return on net worth was 7.5% – while the US industry average was 14.3%.

And that wasn’t atypical. Over the decade ending in 2014, work comp insurers’ delivered an average return on net worth of 6.8% compared to the all-industry average of 13.9%.

Digging deeper into the numbers, there were only two years where WC hit a net worth return in the double digits – while the rest of US industry did that  e v e r y year.

Now, thanks to ProPublica, we KNOW you work comp carriers are totally and completely focused on jacking up profits by screwing workers. Clearly, you guys and gals are just NOT getting it done.

What does this mean for you?

Time to get cracking!

The NAIC report is available here.

How to reduce medical costs the easy way

Here’s one very effective way to reduce medical spend.

  1. Identify low-cost providers.
  2. Send your patients to them.

Do NOT send your patients to providers because they give a discount.

Do NOT send patients to providers because those providers are “in network.”

Fact is, there is wide variation between and among providers in the same geographic area – for the same procedure.

Another fact is, there’s no correlation between cost and “quality”.

There you have it.

What’s all this about “white space” in workers’ comp?

Investors focused on the workers’ comp network and specialty managed care businesses are a bit obsessed with “white space” – the “potential” business, the “opportunity” to capture unmanaged services, to get patients to network providers and thus deliver lower costs to payers and fees for networks/specialty vendors.

During management presentations, potential investors are smitten by the unmanaged care, seeing that as the growth they need to increase the value of the company they’re bidding on.

White space is the term used to describe the volume of services delivered to workers comp patients that are outside the networks used by the employer/insurer.  As these “non-network” services aren’t priced at a contracted rate, there is no reduction below the fee schedule or state-set reimbursement rate.  No reduction, no savings; no savings, no fee paid to the network vendor.

About 65% of medical services provided to patients are “in-network” – leaving about a third of spend – or around $11 billion in medical costs – unmanaged.

When potential investors look at “unmanaged” services, they see upside, return on investment.  What they may well not see is the reality – there’s a reason that space is “white”.  Employers, TPAs and insurers have been working since about 1991 to increase network penetration.  They’ve tried lots of approaches and generally had pretty good success, especially in states where employers can require patients to go to specific providers or choose from a network.

All the easy stuff has been done – now the real heavy lifting is needed.  Increased penetration will come from:

  • educating small employers (a huge challenge),
  • working with primary care providers to refer in-network (when work comp accounts for a very small piece of their business)
  • faster claim reporting, triage, and acceptance
  • reducing litigation
  • broader networks (but this means some providers will be not-so-good)
  • more effective, precise, and fool-proof medical bill processing systems and workflows
  • better provider data – much better

A good way to think about this is that each incremental percent of network penetration takes twice as much work as the previous percent.

That doesn’t mean it isn’t possible. In fact there are some specialty vendors, employers, and insurers making significant progress.  These are the careful, thoughtful, analytical companies with very well-developed workflows and a very deep understanding of state regulations, provider behavior, employer limitations, and a lot of people working this every day.

There are others that are stumbling badly – not so much because they don’t know what they are doing, but because actually doing it is really hard, complicated, and requires investment.

And that highlights one of the challenges investors have with work comp.  The private equity world is used to automation, stripping people out of processes to improve performance and cut cost.  That doesn’t work so well in workers compensation.

What does this mean for you?

If it was easy, it would already have been done.


Monday catch up

Too much work and travel last week – actually missed posting three days in a row – my apologies!

Here’s what happened.

In the never-ending saga of California work comp, a recent appeals court ruling found a UR doctor potentially liable for problems associated with terminating a patient’s prescription drugs.  The case, King v CompPartners, appears to revolve around the court’s assertion that the UR physician had a patient-doctor relationship with the patient, and thus had a “duty of care”.

If King v CompPartners stands, there could be major implications for California work comp, including significant changes to the entire UR process and landscape. (CompPartners is a subsidiary of MCMC, an HSA consulting client)

Mitchell Pharmacy Solutions acquired PBM Jordan Reses. Mitchell also announced they will re-brand the company’s PBM services as ScriptAdviser. Jordan Reses’ work comp PBM serves a diverse group of employers including school districts, managed care firms, the State of Kansas; it also provides services for the auto PIP program in NJ for Liberty Mutual and other auto insurers. (Mitchell is a member of CompPharma, a PBM consortium; I am president of CompPharma)

After a multi-year hiatus, friend and colleague Bob Wilson finally posted a top ten predictions for work comp .  Despite his antediluvian political views, Bob is the most entertaining of the work comp bloggers – myself included.

Final enrollment figures for the public Exchanges are outTimothy Jost of Health Affairs reports a total of 11.3 million enrollees, 3 million of which were new for 2016.  While 35% are under the age of 35, we do NOT know what percentage of this group were dependents.  That’s critical, as enrollment among young heads-of-household is key to determine the extent of adverse selectio n.

Tom Barrett of BBG posted on a echocardiogram test a client company paid for; same test, prescribing doc, insurer – two different test providers – 525% difference in cost.

Happy Monday!

The Millennium Health settlement

Some weeks back, the Feds announced they’d reached a settlement with Millennium Health on allegations that drug toxicology firm Millennium Health was involved in illegal practices (my characterization, not theirs).

More recently, Millennium has been working through a reorganization wherein the company’s debtors will assume control of Millennium. This reorg (currently held up by legal wrangling) was driven in large part by a $256 million settlement Millennium agreed to pay to resolve allegations of improprieties.

Note: Millennium is a consulting client, has been for almost four years, and will continue to be a client for the foreseeable future.

A bit more detail on my relationship with Millennium.

I’ve worked very closely with Millennium to design and promote a work comp-specific program.  This program – a flat fee covering all drugs and metabolites tested by Millennium, coupled with a payer-specific outreach program and supported by clinical liaison personnel – has been widely accepted by and dramatically slashed drug testing costs for many payers. Everyone I’ve worked with at Millennium – their clinicians, researchers, operations, finance, executive, sales and account management staff – has been professional, highly ethical, and committed to their customers.  Over the last four years, I never encountered anything that remotely indicated a possible ethical transgression.

The drug testing program now being considered by Medicare – a flat fee for an entire panel of tests – is what Millennium has been offering work comp payers for over three years.

After extensive research into the allegations and legal wrangling among and between the parties, there appear to be two primary issues described in the DoJ statement referenced above – giving testing cups to physicians, and promoting/allowing physicians to have “standing orders” for drug tests.

Millennium was accused of violating Stark laws by giving docs test cups that the docs would use to collect urine specimens and send those specimens to Millennium for quantitative testing if further testing was required.  Millennium was also accused of inappropriately billing Medicare for drug tests by promoting custom “panels” wherein physicians would always request the same panel of drug tests for each payment.

First, the cups – and this is where things get a little confusing.  According to  Health Law Attorney Blog, 

Millennium initiated the practice of entering into “cup agreements” with physicians under which Millennium agreed to provide POCT [point of care testing] cups to physicians free of charge if the physicians agreed: (i) not to bill any insurer for the urine testing service; and, if further testing was required, (ii) to return each test cup to Millennium for lab testing of the urine specimen. If the physicians failed to comply with these requirements, then Millennium would charge them for the price of the cups.

There’s an illuminating discussion of the cup issue here.  It looks to me like the key issue is the government’s contention that by giving docs cups with immunoassay test strips attached, Millennium violated Stark laws.  If the cups did NOT have those test strips, this would not have been an issue.  I’m not clear as to how MH could have violated the Stark laws if the docs did not bill any payer for those cups and thus did not receive any remuneration, but it is clear that this was indeed a violation.   As the above-reference Blog notes:

quoting the government here – “whenever a laboratory offers or gives to a source of referrals anything of value not paid for at fair market value, the inference may be made that the thing of value is offered to induce the referral of business.” With that statement, the government clarifies its position that the fact the physician does not bill for the item or service does not, by itself, negate this inference.

So, just giving the cups away, even while requiring the docs to not bill for them, was a violation.

Now, the panels.  Drug test are supposed to be specific to a patient; the allegation against Millennium was that physicians and/or Millennium created custom panels of drugs and metabolites, specific to individual physician, panels that would be tested for every patient.  Here’s how the Department of Justice described this:

Millennium caused physicians to order excessive numbers of urine drug tests, in part through the promotion of “custom profiles,” which, instead of being tailored to individual patients, were in effect standing orders that caused physicians to order large number of tests without an individualized assessment of each patient’s needs. [emphasis added]

The DoJ also notes the agreement settles allegations that Millennium inappropriately billed Medicare for genetic testing.

Clearly, these were very significant issues. They have resulted in major changes at Millennium including an overhaul of the Board and significant changes to management and ownership.  There’s also a requirement that Millennium operate under a “corporate integrity agreement” overseen by HHS for five years.

The $256 million settlement addresses the Feds’ allegations, and there has been no determination of liability.  That said, some may well infer that Millennium’s decision to settle the case and essentially turn the company over to its creditors indicates the company was not confident it would prevail if things progressed to trial.

It’s been an ugly, messy, and at times repugnant story.  Here’s hoping the legal wrangling ends soon.  In the meantime, I will continue to work with Millennium to help them deliver on their commitments to the work comp industry.

Note: Millennium Health has not provided any information to me regarding this matter other than what is publicly available on their website.  Millennium has been aware of my intention to write a post on this topic once the legalities were resolved.  MIllennium has not reviewed, seen, edited, or otherwise been involved in this post.

“Obamacare”, Medicaid, and workers’ comp settlements

In a piece in Insurance Thought Leadership, misleading labeledObamacare Expands Into Workers’ Comp”, MaryRose Reaston asserts that

The Affordable Care Act (ACA) was created to expand healthcare coverage. Unfortunately, the act has overstepped its bounds and will dip into the workers’ compensation coffers by requiring mandatory reporting for Medicaid beneficiaries. [emphasis added]

No, ACA has not “overstepped its bounds”.  The efforts by states are just that – state-based – and they are allowed/enabled by Federal legislation that is separate and distinct from the ACA.  Michael Stack has written an excellent summary of the situation, noting that the federal legislation allowing Medicaid to pursue settlements was part of the Medicaid Secondary Payer Act, which in turn was part of the 2013 Budget Bill..

In fact, I find the attempt to link ACA with state Medicaid recovery activity curious and convoluted. ACA expanded Medicaid – in states agreeing to do so. States remain the primary regulatory bodies for Medicaid. There is nothing in Ms Reaston’s argument that indicates how or by what means ACA encourages Medicaid to pursue workers comp settlements. States that expand or don’t expand Medicaid can decide to pursue settlements – independent of ACA.
Make no mistake, there are clear “winners” here – taxpayers. Any taxpayer should demand Medicaid recover any monies necessary to provide treatment paid for by Medicaid that should have been covered by workers comp.