Yesterday I posted on the hiring of a former state trooper as head of North Dakota’s Workforce Safety and Insurance (WSI) entity – the state’s sole work comp agency. For those unfamiliar with ND, they are one of the few states where the state is the exclusive provider of workers comp insurance – they, and Ohio and Washington, are ‘monopolistic’ states.
A bit of googling brought up a bit more information about the new boss – Bryan Klipfel. His background is law enforcement, he does not appear to have any comp experience, and was actively involved in the investigation of the former head of the agency, Charles Blunt. Blunt was terminated after an investigation into an alleged theft of state funds. Blunt was subsequently convicted by a jury of one felony charge of misappropriating state funds.
A quick google of the Blunt case raises more questions than answers. After watching the fiasco at the Ohio fund brought on by a few criminals in the executive suite, I was prepared for another orgy of self-dealing at the public trough.
Apparently not. In fact there aren’t any charges that Blunt took money himself, but rather authorized sick leave for an executive that may not have been ill, and, according to a news report, used somewhere around $26,000 of “WSI funds to pay for employee meals and drinks and buying illegal gifts and trinkets for staff…”.
Ok, so Blunt made a few bad decisions and/or didn’t follow all the rules by the book. But a felony conviction for a sick leave authorization and some apparently inexpensive ‘gifts’?
Boy those Dakotans are brutal. But even if they are, I can’t imagine Blunt was the only exec in the entire history of WSI to run afoul of the employee handbook. So, why the big expensive investigation?
I’m really curious. The investigator who has no experience in work comp and no P and L experience (never ran a business) is the head of a big comp insurer after helping convict the former occupant of his new office of using state funds to pay for meals, sick leave, and gifts?

In my post earlier this week I reported on the change at the top of Coventry’s workers comp division, saying “Young came into the organization in the Concentra deal. Generally well regarded by customers, his promotion has been characterized by several as a good thing; he is viewed as more customer-oriented than execs from First Health.”
Well, it looks like there are two very different perspectives regarding Mr Young. I received several emails questioning my positive statements about Young and a couple of calls as well. All disagreed specifically with my ‘customer-oriented’ claim.
I’ve met Mr Young a couple times, do not really know him except by reputation, and defer to those who know him better than I. I’ll retract my earlier characterization and replace it with this “it is safe to say that Mr Young has supporters and detractors among coventry customers.” I’d also note that people generally complain more than they compliment, so perhaps my correspondents were not representative.
And thanks to all who shared their opinions, even those who blistered my inbox in the process.

The folks at WorkCompCentral find the most interesting stuff. Today’s edition featured an item about the new head of North Dakota’s work comp agency – here’s how they put it:
“Highway Patrol Director Bryan Klipfel [was named] as director of Workforce Safety and Insurance (WSI) and U.S. Department of Agriculture executive Clare Carlson as deputy director and public affairs officer for the agency.”
The announcement, which came from the Governor’s office, quoted the governor: “in his 30 years with the Highway Patrol, Klipfel had a strong record of accomplishments and was highly regarded for his knowledge and integrity in both the Highway Patrol agency and law enforcement statewide.”
WorkCompCentral noted “Klipfel currently is the human resources manager for Job Service North Dakota. He has a degree in public administration from the University of North Dakota.”
Is it just me, or does this look like political patronage?
What does a former patrolman know about workers comp? Turns out he admittedly doesn’t know anything.
According to a local paper in ND, “Bryan Klipfel says he knows little about workers compensation, but the former state Highway Patrol commander believes his management and listening skills will help him do well as director of North Dakota’s Workforce Safety and Insurance agency…”I’m going to work with Bruce (Furness) for a couple of weeks, and I’ll just have to learn some of that information as time goes on,” Klipfel said. “My strong points are that I have leadership ability, and I understand human resources, how to deal with people. And I think that’s the big part (of the job) right now.”
Huh?
He’s going to learn on the job? While getting mentoring for a ‘couple of weeks”? In a business that is incredibly complex? At a time when investments and reserving practices are critically important?
And his qualifications are his understanding of human resources and leadership ability?
Yikes. This bears further investigation.

Jim McGarry has moved on, and David Young has moved in. That’s the quick report on changes at the top of Coventry’s work comp unit – but more is coming.
McGarry, who reportedly has a solid relationship with Allen Wise, will be working on other tasks within the company. And no, this isn’t one of those executive sinecures hiding an internal exile. By all accounts McGarry is well respected and liked by his colleagues on the senior management team, and bigger things are in the offing.
Young came into the organization in the Concentra deal. Generally well regarded by customers, his promotion has been characterized by several as a good thing; he is viewed as more customer-oriented than execs from First Health.
The change was relayed to several Coventry work comp customers Friday and today, along with news about a restructuring of the IT support and maintenance functions. These were consolidated along with other product line support in the Coventry IT department; going forward work comp will have dedicated resources. No surprise here; there have been indications for several weeks that new CEO Allen Wise has been seeking to better allocate costs by product. More specifically there has been ongoing concern about SG&A expense for work comp.
The restructuring of provider contracting and relations is not yet final. That said, there are signs that work comp contracting will be handled by separate staff. While this will likely help reduce facility costs for other lines (that deliver over 80% of Coventry’s total revenues) without the market share of group and Medicare, comp contracting staff will find it very hard indeed to negotiate with facilities. Remember, comp only amounts to 2% of the typical hospital’s revenues.
With the hiring several weeks ago of Pat Scullion as work comp CFO at Coventry, the new management team is almost complete. And the timing of the Scullion hire was nothing if not fortuitous, as several sources indicate Aetna is seeking to renegotiate its PPO contract with Coventry. As Aetna is the de facto network for Coventry in multiple jurisdictions (Coventry has exclusive marketing rights for four more years), it is negotiating from a rather strong position – Coventry would be in a very tough spot without Aetna.
What makes this particularly interesting is the Aetna exec seeking to renegotiate the deal is Dan Fishbein, the same Dan Fishbein who ousted Scullion from his prior role as president of Aetna’s work comp unit. And yes, that was the same Pat Scullion who negotiated the original deal on behalf of Aetna.
Now that must make for a very fun negotiation session; Aetna is negotiating for a higher price (that’s just a guess) or better terms while sitting across the table is the guy who knows more about their financial position than anyone left at Aetna.

In no particular order, here’s what I’m hearing about goings-on at Coventry’s workers comp division.
Coventry has told several clients it is hiring dozens of staff to improve the quality of provider data; interestingly this message has gotten to some customers but not to all. This message was out there for a few months, and has been repeated recently – but again, not all have heard the same message. If this is indeed happening, kudos, albeit belated, to the company for recognizing that bad data not only frustrates customers but reduces Coventry’s own revenues and profits.
Much more recently there seems to be movement within the provider relations/contracting units to split work comp provider contracting out separately from the other lines of coverage – group, PPO, and Medicare. There had been some indication Cvty was considering just adding WC specific contracting staff, but this seems inconsistent with senior management’s push to restrain SG&A expenses. This is a little puzzling, as the other lines added much needed bargaining power to Coventry’s efforts to get attractive work comp rates from hospitals and other providers. If it is indeed splitting the negotiations, Coventry seems to be following through on CEO Allen Wise’s stated desire to emphasize its core business – small group HMO.
There are also indications that the company is getting ready for a re-organization of its work comp business, a re-org that will likely affect operations in the [correction] Burlington MA, Sacramento, and Dallas offices. No specific word on timing, but my guess is sooner rather than later.
There’s more swirling around, but these data points are the only ones that have been confirmed by multiple sources.

My post yesterday regarding Coventry’s workers comp business generated a few emails – some asking what exactly was my point? For those unwilling to click back, my closing sentence was “The work comp business accounts for 6.2% of [Coventry’s} total revenues.”
My point was workers comp amounts to less than one-sixteenth of Coventry’s total revenue ergo it is not nearly as important/significant/vital as those in the work comp field might think. Yes, it may be inordinately profitable (helped by price increases over the last couple years, but hurt by bargain pricing on the pharmacy business), but it is still only 6.2% of total revenue.
Now lets think about that.
The new CEO, Allen Wise, has publicly stated his desire to focus more closely on the core business (small group HMO). To that end, Wise has slashed spending intended to expand Medicare networks, begun a close examination of SG&A spending in the work comp business, and asked a lot of tough questions about provider contracting, and more specifically, hospital contracting. As reported here earlier, He was quite vocal about his concern over rising hospital costs, and their impact on the HMO medical loss ratio (MLR).
In the work comp business, Coventry has committed to hire (or is already hiring) dozens more staff to help clean up their provider database – a task that is, according to some clients, long overdue. It is also working on several significant upgrades to its bill review application. They are also continuing to try to build a carve-out network comprised of expert physicians, and are reportedly marketing that to several large payers.
These efforts, while laudable and necessary, are also expensive, and will further increase SG&A expenditures.
So, the question you have to ask yourself is, if you were Allen Wise, and you were running a company that was really good at small group HMO, and had kinda lost its way, and you looked at this other business which was generating six percent of your revenue and eating up resources, and distracting your provider relations people and perhaps increasing your HMO hospital costs, what would you do?
What does this mean for you?
If you haven’t figured it out by now…

A detailed review of Coventry’s latest 10k provides a little perspective on the size of the work comp business. here are a few numbers to consider (all figures for 2008).
– Total WC revenues – $737 million
– PPO revenues – $86 million
– PBM revenues – $230 million (estimated)
– Bill Review, case management, UR, IME, MSA etc revenues – $421 million
By way of comparison, total revenues amounted to $11.9 billion. The work comp business accounts for 6.2% of total revenues.
Any questions?

NCCI’s newly released report on fee schedules provides interesting reading. If you don’t have the time right now, here’s the key quote:
“For comparable injuries, when WC pays higher prices than GH for specific services, those services tend to be used more often in WC than in GH. [emphasis added]”
No kidding.
Before you dismiss this as common knowledge, remember that (in most states) work comp hospital reimbursement is much higher than for group health. That’s why hospital costs are the fastest growing sector of comp medical expense.
Here’s another quote: “Reimbursement for care that physicians provide at hospitals and other facilities is more likely to exceed the fee schedule than care provided in their offices.”
So, physician reimbursement is usually higher in facilities, and the facility’s costs are typically higher as well.
Yet regulators in Florida are adopting fee schedules that continue, if not worsen, this situation by dramatically increasing reimbursement for outpatient services. The reimbursement scheme will pay hospitals 74% more than Medicare for surgeries and four times Medicare for other outpatient services. And the comp system in South Carolina is deteriorating daily, due in large part to overpayment of hospitals. The state adopted a Medicare+40% hospital fee schedule on 10/01/06. Now, per NCCI, there is a 23.7% WC rate increase filed and pending.
Minnesota is considering similarly suicidal behavior, specifically a hospital inpatient payment standard that would pay smaller Minnesota hospitals about 90% of their billed charges; larger hospitals would get about 85% of their billed charges on higher-dollar inpatient bills.
What does this mean for you?
Clients are reporting hospital expenses are rising faster that at any time in recent memory. Don’t look for any help from the regulators.
Tip of the hat to workcompcentral.com for the NCCI report info.

With the passage of the stimulus bill, it’s timeti consider the implications fir workers comp. I’ll get to the details next week, but there are a few broad statements we can make today.
First, the unemployment rate will not drop much more. Comp insurers, Occ Med clinics, managed care firms and TPAs started feeling the effect of a rapid drop in frequency last summer, a drop that would have accelerated throughout this year. For carriers, the decline was good news/bad news, as fewer claims meant lower claims expense, while fewer employees produced lower premiums.
The funding for COBRA and Medicaid will help keep folks insured, thereby decreasing cost shifting (below what it would have been without the bill). This is very good news indeed; although it is impossible to calculate what cost shifting would have done to comp, it would undoubtedly have driven medical costs up significantly.
Over the long term the effectiveness research funding will be a big help to payers and providers. Solid guidelines for back injuries will be most welcome.
There’s much more to come.