Watch out for “innovation”

In any very mature industry – and workers’ comp is certainly that, certain truths are immutable. Scale, margin compression, consolidation are all inevitable – or at least two out of three are.

Innovation – mostly “small i” innovation – can and will help smaller entities compete with goliaths, and large companies maintain and even grow margins.

The innovations I’m speaking of are the tweaks, efficiencies, streamlined processes and smoother customer interactions that make vendors easier to work with. Front-line customers benefit from these small innovations, sometimes almost without noticing them.

  • What used to take two phone calls now is done automatically.
  • Medical services are scheduled, visits conducted, and progress reports prepared and delivered with no action by front-line customers needed
  • Bills that had to be reviewed line-by-line are now auto-qdjudicated, with only those lines or bills that qualify via a rules engine hitting the front-line person’s queue.
  • Medical services are automatically authorized, with relevant guideline language attached.
  • Medical service reports are auto-uploaded to the claim file, with only those issues needing attention highlighted for review.

What’s easy to lose track of is the purpose of automation and innovation. The primary purpose is NOT to make the vendor more efficient and reduce vendor costs; it should be to deliver better service to the end user, be they provider, patient, front-line customer.

Therein lies the trap. In a mad dash to strip out cost and improve “efficiency”, many service companiess don’t pay near enough attention – if they pay any attention at all – to how those changes affect the end-user.

For a while, those “improvements” will reduce costs and add to profits. Then, as front-line users suffer in voice-mail hell, or can’t find anyone to answer their questions, or have to ask for another password to enter a “portal” for the umpteenth time, revenues will start to decrease.

Instead, focus your innovation efforts on those that will make your end users happier, less stressed, and less busy.

Take work off their desk/workstand and put it on yours.

That’s innovation that delivers long-term results.

 

 

 

Why the Foresight deal is different.

There are two big takeaways – the price, and why Paradigm paid so much.

Sources indicate Paradigm has bought Foresight for around $150 million, a huge multiple for a relatively small company with trailing earnings of less than $5 million.

Foresight’s niche is narrow but important – the company’s core business is negotiating prices for implantable surgical devices. More recently the company entered the surgical services business with Encompass, a network of surgeons and facilities.

The announcement was pretty much what you’d expect, but the real news is why Paradigm paid what it did. First, a little history.

I’ll admit to wavering between being impressed with Paradigm and thinking it won’t ever become a significant force in the industry. As noted previously, the company has been around for the better part of three decades, and throughout that time has seemed to be just a year or so away from really breaking out.

Today’s no different.

That’s not to say Paradigm doesn’t have deep expertise and hasn’t produced excellent results for some clients – it most certainly has. The problem is two-fold; the original marketing message is tough – we can manage the really tough claims better than your claims staff can. Hard to see how a claims exec would jump at the chance to show a third party is better at a critical core skill than her or his staff.

The second is what Paradigm missed back then, and I’d suggest still doesn’t understand., Payers don’t like vendors that only solve part of their problem. What I mean is this – Paradigm asks a payer to give them data on claims that meet specific criteria. Then, Paradigm winnows thru those claims, picking the ones it can fix, and sending the rest back.

Wrong approach.

If a payer sends you a big bunch of problems, you should figure out a way to help with ALL OF THEM.

That may be one reason Paradigm recently bought a couple of case management companies; in addition to diversifying revenue sources and adding customers, the deals bring more ownership of nurses who will likely be used to service the cat claims that are Paradigm’s core business. That said, case management is a declining business under strong price pressure – just what you’d expect in a very mature industry.

Which brings us to Foresight.

Diversification, technology, and data on surgeries are all going to help Paradigm diversify even more.  And, the surgical network may provide a consistent and growing revenue stream to complement the case management and somewhat-less-predictable catastrophic case business.  It’s likely margins in the implant and surgical businesses are going to be much higher than case management and more in keeping with Paradigm’s cat case business.

From this outside perspective, this is the reason Paradigm’s owner Summit paid what it did. They’ve owned Paradigm for almost 2.5 years, and it’s time to get things ramped up for another equity event in the next few years.

What does this mean for you?

Good news indeed for anyone looking to sell their workers’ comp business!

 

Costs and benefits of disasters

Disasters are good for the economy – sort of. They are also very likely to be really bad for people.

Combined, Harvey and Irma will cost about $200 billion – or 1.5% of US GDP.  That’s a huge infusion of capital and cash into the economies of Florida and Texas – and the other affected southeastern states.

Those dollars will go to pay workers, buy new equipment, replace ruined houses, buildings, furniture, technology, and infrastructure.

What’s not accounted for in the $200 billion figure is the cost – both personal and financial – that these disasters will levy on people involved in rescue, clean-up, and re-building.

One example – the bacterial and chemical stew pervading many areas in Houston will lead to immediate and long-term health problems for residents and clean-up workers alike. Living rooms, offices, factory floors, nursing home rooms, healthcare facilities, schoolrooms and firehouses – many will be polluted, requiring thorough cleaning and decontamination.

The real concern here is will the workers tasked with this job have the training, equipment, and clothing required to do this safely.

caption from photo reads: The #HurricaneHarvey clean up crews at our homes that were hired by management number about 200 and notice that none of them were given #Hazmat suits

Several factors are greatly concerning.

  • Texas doesn’t require workers’ comp
  • Companies are desperate to find workers, any workers, who will go into dangerous places and do very hard work in brutally hot and humid conditions
  • Labor brokers are notorious for subcontracting work like this, shaving every possible corner, and in the process hurting workers and dumping the cost of their medical treatment on the public sector
  • There are far too few documented workers available in either state to get the necessary work done quickly, so labor brokers are going to be recruiting undocumented workers.
  • Given today’s political climate and past history, those undocumented workers are far less likely to report and injury or illness
  • Lastly, an illness brought on by exposure to chemicals or bacteria takes days, weeks, months or even years to present, making it a lot harder for any injured worker to prove it was work-related.

What does this mean for you?

While responsible non-subscribers in Texas will do the right thing, many other non-subscribers will not.

Florida’s a different story, but both states must be vigilant to catch unscrupulous labor brokers.

MedRisk is back on top.

Big doings at work comp physical medicine management firm MedRisk.

(MedRisk has been a client for over a decade)

Most significant, MedRisk is likely now the largest firm in the sector, passing OneCall’s Align Networks in total revenue. Two factors driving this result; Align dropped the ball on customer service, and MedRisk upped its game considerably.

As I wrote last year,

For years, [MedRisk] had the niche almost to itself, focusing its sales and service attention on corporate buyers. Along came Align Networks, a start-up that concentrated on the desk-level user, delivering stellar service to each and every adjuster and case manager.  Align was quite successful, eventually becoming the largest vendor in the PM management space.

A misstep by MedRisk helped Align.  Some years ago, MedRisk chose to outsource key functions, including some aspects of IT, billing, and outbound call center functions including patient scheduling. This did not go well, and the resulting dissatisfaction among desk-level users led some customers to switch from MedRisk to Align.

Confronted with the loss of business, MedRisk got back to basics.  The lesson was apparent; a dramatic change in customer service was critical. That involved a major shift in understanding about the central importance of the desk-level customer, the provider and the patient, and a recognition that those customers required, above all, personalized service.

MedRisk’s results prove the back-to-basics approach worked; the company has taken major market share from Align, and continues to add new business. Operations expanded, and the company had to lease new space to accommodate the hundreds of new workers.

Now, One Call is all-in on a technology solution, investing millions in a customized application intended to deliver on the “One Call” promise (currently the seven different services offered by OCCM have separate systems and processes). “Polaris” is slated to be “fully implemented” in Q1 2018, although it’s not clear what “fully implemented” means.

I don’t believe “automating” and off-shoring key customer-facing functions is the right answer, not in a high-touch business where adjusters, therapists, physicians, and patients all are key parts of the rehabilitation process.

While many MedRisk people made this happen – including COO (and fellow Syracuse grad) Michelle Buckman, CIO Vic Pytleski, and EVP Marketing Rommy Blum, the effort was led by President Mike Ryan.

Mike is one of the best-liked people in our industry, and most respected as well. Today, MedRisk will announce he is taking over as CEO from founder and Board Chair Shelley Boyce.

I’ve known Mike for years, worked with Shelley and her team for almost two decades, and am delighted for all. They traveled a long road and it is truly gratifying to see MedRisk back on top.

What does this mean for you?

It’s all about customer service.

Thursday catch-up

Genex acquires Prium…

Good move by Genex, as Prium’s portfolio of services including physician review and pharmacy management ties in well to Genex’ current offerings. I’m a big fan of Prium CEO Michael Gavin – he’s one of the most thoughtful, intelligent, and measured people in our business…good news is he’s sticking around.

Kentucky’s making big progress on opioids

Thanks to WCRI’s Vennela Thumula PharmD for her study on how new legislation (HB-1) helped to reduce the number of new work comp patients receiving opioids.

The legislation required prescribers to check the Prescription Drug Monitoring database prior to prescribing opioids, limited opioid prescriptions, and implemented mandatory educational and patient treatment practices.

Key Takeaways

HB-1 immediately reduced opioids prescribed to patients in the first 12 months after the date of injury.

Both the percentage of patients receiving opioids and the amount of opioids decreased by more than 15 percentage points.

Major surgical patients weren’t significantly affected by HB-1; not much change in prescribing to these folks.

Patients with back sprains and similar diagnoses had far fewer opioid scripts.

Thanks to Andrew Kenneally, Communications Director of WCRI, for the head’s up…

Opioid marketing practices

Kudos to Sen Claire McCaskill, D MO, for publicizing opioid manufacturer Insys’ alleged efforts to get approval for fentanyl product Subsys through misrepresentation. McCaskill’s report included an:

audio recording of conversations between an Insys employee and pharmacy benefit manager representatives related to a Subsys prescription for Sarah Fuller, who later died from an alleged fentanyl overdose. This recording suggests the Insys employee in question repeatedly misled Envision Pharmaceutical Services to obtain approval for Ms. Fuller’s Subsys treatment—heavily implying she was employed by the prescribing physician and misrepresenting the type of pain the patient was experiencing.

Sarah Fuller

This follows other reports of Subsys’ unethical and potentially illegal marketing practices, where other Subsys reps said they called payers, saying they were from doctors’ offices and were seeking approval for the drug.

Hell is too cold for these people. 

Finally, a very revealing piece in HealthAffairs provides more insight into just how powerful big healthplans are:

insurers with market shares of 15 percent or more (average: 24.5 percent)…negotiated prices for office visits that were 21 percent lower than prices negotiated by insurers with shares of less than 5 percent.

Differences in providers’ and insurers’ bargaining power are a major contributor to variation in commercial health care prices

Workers’ comp folks – you’re lucky if a generalist work comp PPO’s market share at a practice is 3 percent…

Back out onto the campaign trail!

Big changes a-coming in workers’ comp.

Here’s what I see coming.

Quick take – what happens this fall and winter will bump up premiums, injury rates and claims costs.  

Insurers will see rising premiums, claims service entities more work, and some insurers and re-insurers’ bottom lines will be hit hard.

Companies focused on servicing work comp patients in Texas and Florida are going to be very busy.

Hurricanes are the “why”

Harvey, Irma, and as-yet-unnamed storms are likely to make this the worst of all hurricane seasons – and we’re nowhere close to the end of the season.

Harvey alone may cost close to $200 billion. With Irma – now a Category 5 hurricane with winds over 175 miles per hour – storm tracks favoring a Florida landfall, we could be looking at a second blockbuster bill. (note cost projections are all over the map

There are huge implications for the workforce – starting with public safety workers, moving to clean-up crews and workers making emergency repairs. Then comes re-building: residential, public, commercial, and industrial construction, plus repairs to infrastructure.

Remediation will follow and take years. The huge petro-chemical operations around Houston mean waterways and land will be seriously polluted.

And, hopefully, big changes to storm and climate change mitigation planning, which will require major investments as well will mean billions in spending and lots of work for construction workers

Roads, water and sewage systems, rail, power generation and transmission, pipelines, ports and terminals, communications infrastructure all were hammered by Harvey and Irma may be just as brutal.

Implications.

Higher payrolls – Hundreds of thousands of workers will be needed today, next month, and for years to come. They will be working in high-frequency, high-severity jobs, and many may be poorly trained and supervised. And good, experienced workers will be costly due to supply-and-demand.

It’s highly likely tens of thousands will be undocumented; our governmental leaders will have to decide whether they are going to strictly enforce immigration laws or turn a blind eye. 

Labor fraud – I’m betting a large percentage of clean-up and construction workers will be undocumented, which means a likely explosion in labor fraud. Unscrupulous employers will bid on clean-up work, knowing they can screw immigrants out of pay and those workers have no recourse.

Higher injury rates – inexperienced workers putting in massive hours in dangerous places doing dangerous work = lots of bad injuries, plus exposure to nasty chemicals and pollutants.

What does this mean for you?

We’re about to see the most significant change in workers’ comp in decades.

Will Harvey be a disaster for recovery workers?

Friend and colleague Peter Rousmaniere penned a terrific piece in workerscompensation.com on how and why Harvey may expose huge holes in the workers’ compensation “system” in Texas.

here it is in its entirety- thanks Peter and WorkersCompensation.com!

Harvey brought 50 inches of rain and a thick dossier of irony to the workers’ compensation system in Texas. This natural disaster, like others have in the past, will challenge an economic safety net like workers’ comp to deliver assured and complete response.

 

Special factors at play in Texas may trigger a combination of grief, schadenfreude, and uncertainty.

 

Already hundreds if not thousands of employers in the state are gearing up for a surge of business in cleanup and repair. Can employers and workers depend on workers’ comp? Well, it depends. The catastrophe struck in the state with the greatest contradictions in how the workers’ comp system is supposed to work.

 

Are the cleanup and repair workers actually eligible for workers’ comp coverage?

 

In any other state, in any other year, the simple answer is yes. But in Texas, employers do not need to participate in the workers’ comp system. The opt-out program (technically, its non-subscriber program) covers very many small employers. How they respond to work injuries may be anyone’s guess, including themselves, since being outside workers’ comp means the employer is accountable to no one. Though they are supposed to file an intent to opt-out, the state is lax in enforcing that. The employer can drop off an injured worker at a community hospital and not pay a cent for the worker’s medical care. It need not pay a dime for wage replacement.

 

The employer can, to be sure, be sued for negligence. But what lawyer is going on a fool’s errand to sue for negligence a dry wall contractor with somewhere between 2 and 10 employees depending on the jobs at hand?

 

Further, the employer can legally threaten to fire the injured worker, or his co-workers, if anyone threatens to file a suit or so much as complain about having to make up his or her own work injury benefits. Intimidation is legal in opt-out.

 

Typically, in other states, when workers try to cover their work injury medical bills with their health insurance plan, the plan sends a team to the workers’ comp insurer to recover their medical spending. But Texas in this regard is not typical. Opt-out employers don’t have insurers.

 

And, Texas has the largest percentage of the population of all 50 states that do not have health insurance. (When almost every other state’s uninsured population plummeted due to Obamacare, Texas’ did not.) A lot of the cost is likely paid by the worker or out of hospital free care.

 

What about the undocumented workforce?

 

“Where are those undocumented workers now that we need them?” the construction industry may be asking. It has, according to press reports, grumbled months ago about Trump’s immigration enforcement. A 2013 study by the Workers Defense Project estimated that half of the construction workforce in the state is undocumented. These workers concentrate in low skilled assignments — such as hauling destroyed carpets from flooded homes, clearing out debris and carrying in building materials. In other words, the work created by Harvey.

 

We can disagree on the wisdom of stepped-up immigration enforcement and on the best long term solutions for the country’s eight million undocumented workers. But consider the facts on the ground. As Voltaire was reputed to have quipped, at 5 PM we are all economists.

 

Here is the problem: If Homeland Security continues to root out undocumented persons, how are the contractors who depend on them going to hire them? And if hired, in today’s climate of enforcement would an undocumented worker of employer covered by workers’ compensation rationally ever want to file a workers’ compensation claim out of fear of being discovered and deported?

 

Major disasters find a way to exacerbate unresolved stresses that preceded — in land use, economic relations, public policy. This was the case in the Chicago fire of 1871, the Triangle Shirtwaist fire of 1911, Katrina, and now with Harvey. Is the state of work injury benefits in Texas a model or a monster?

You can reach Peter at pfr@rousmaniere.com

There’s no BIG problem in work comp pharmacy – and that’s scary.

In the fourteen years I’ve been surveying work comp payers on their views on pharmacy, I’ve never seen so little consensus among respondents on emerging issues.

In past years compounds, physician dispensing, opioids, price inflation, and new drug introductions have all been named by at least a plurality of respondents. Not so this year.

Here are some of the 24 respondents’ concerns:

legalization of marijuana – lots of talk about it but concern is what do you do about it, how do you handle it, pay for it, authorize it, etc. so many unknowns and little understanding
state regulations and how to bring information on those changed regulations and how to operate under the new regs back to adjusters and case managers at the desk level and to PBMs
I’m concerned we’ll see branded topicals increasing over the next few years despite a lack of efficacy and inflated prices. teracyn, speedgel, etc aren’t useful
advent of all new formularies, no one has grappled with legacy claims in that environment, thinking is formularies will get docs to taper it off – docs who prescribe all this don’t know how to taper, so finding the right docs and facilities is a real issue for legacy claims
acquisition of comp pbms and consolidation of the work comp PBM industry
Physician Dispensed Drugs and non-controlled home delivery – not just cost but formulary and safety and quality of care
what interventions can they do to to affect drug pricing, especially some of the drugs that have minimal alternatives
more problematic than opioids is the combination of benzodiazepines and sleep aids
watching very closely Evzio, naloxone prescribing practices as part of CDC
still a soft market so anything you can do to reduce costs is important

While payers are seeing good success in reducing opioid utilization and total drug spend, there are a host of troubling issues out there.

Here’s why this is a big issue.

Payers are all too used to getting screwed by unethical and very creative profiteers intent on sucking money away from employers and taxpayers by exploiting loopholes. Branded topicals, “independent” mail order pharmacies and novel drugs are all great examples of these tactics, often hidden under and supported by claims that these promote healing and health despite a total lack of supporting evidence.

In past years when doctor dispensing, the opioid crisis, or compounds were top-of-mind for most respondents, the industry joined together to come up with solutions. That obviously isn’t the case today, leaving patients exposed to crappy providers interested only in profits coming up with myriad ways to game the system.

What does this mean for you?

It’s not the one big problem that’ll get you, it’s the many small ones you may not even notice.

Big news in work comp pharmacy

Finishing up the Annual Survey of Prescription Drug Management in Workers’ Comp this week (I hope!).  24 payers responded this year – TPAs, Insurers, State funds, and very large employers. Each provided specific data about their pharmacy programs, data which provides remarkable insights into what’s really going on.

Something jumped out at me that I had to get out immediately…

Two big takeaways – drug spend dropped by almost 10 percent…

while opioid spend decreased even more – almost 14 percent.

Wrap your head around that.

Work comp PBMs and payers succeeded in eliminating one of every seven dollars spent on opioids; yes, overall drug spend was down a full 10 percent, driven in large part by lower utilization of opioids.

When opioids are eliminated, the drugs needed to counteract their awful side effects – everything from constipation to sexual dysfunction to gastrointestinal distress to depression – are reduced as well.

The programs, processes, analytical resources, clinical staff, research, and patient outreach that’s driven this stunning result are largely PBM-delivered (with some notable exceptions).  These services are clearly improving the quality of care delivered to work comp patients, while reducing costs for employers and taxpayers.

shipload of opioids has been taken out of circulation, eliminating the possibility of diversion, misuse, or abuse.

What does this mean for you?

Healthier patients, lower costs, reduced disability. 

 

Friday catch-up, innovation, and what kills it.

A few items of interest from around the work comp world…then a brief discussion of what works, and what doesn’t, in driving innovation.

Brian Allen’s now with Mitchell International’s ScriptAdvisor PBM operation.  A highly experienced government affairs professional, Brian’s been in the business for longer than he might admit.  Good pickup by Mitchell, which has rapidly grown its work comp pharmacy business and is likely the third largest PBM.

The fine folks at BWC Ohio have done exemplary work reducing overuse of opioids. Under the leadership of John Hanna MBA, RPh, over the last five years, BWC saw:

  • 44% fewer patients were taking opioids,
  • 48% lower opioid consumptiomn overall,
  • a prior authorization turnaround time of 4 hours (!) down from 2.5 days,
  • overall drug costs were down 7.7% year over year,

John and his folks have saved countless lives, prevented untold misery, significantly reduced employers’ and taxpayers costs, and done it all at a governmental organization. Yes, they have some significant advantages, but so do you.

John’s retiring this fall, but I fully expect BWC to continue to make progress as Nick Trego PharmD takes the reins…

And yes, I do have a man-crush on John.  I have huge respect for him. Thanks WorkCompCentral for the tip.

Innovation CAN happen in insurance – here’s a quick case study of one company’s pursuit of improvement via incremental, evolutionary, and disruptive innovation. 

Here’s the summary – but you really should read this.

Creating a culture of innovation is about much more than hiring a Chief Innovation Officer or creating a new department.  Culture change takes time and significant effort, and shifting culture toward innovation is no different. The process may start at the top, but it’s fundamentally about getting all employees involved.

But bureaucracy can frustrate innovation…

Also from Harvard Business Review, a piece on how bureaucracy screws up business and results and frustrates people.

(respondents) reported spending an average of 28% of their time—more than one day a week—on bureaucratic chores such as preparing reports, attending meetings, complying with internal requests, securing sign-offs and interacting with staff functions.  Moreover, a significant portion of that work seems to be creating little or no value.

But here’s the key takeaway – “Only 20% of respondents said that unconventional ideas were greeted with interest or enthusiasm in their organization. Eighty percent said new ideas were likely to encounter indifference, skepticism, or outright resistance.”