Oct
5

For work comp, Lyft and Uber aren’t the answer

Transporting work comp patients to and from medical visits, PT, IMEs, hearings and the like is a big business – big for worker’s comp that is.

At first blush, it looks like a perfect opportunity for Lyft and Uber (L/U)- they’ve got a gazillion drivers everywhere, a great service model, and they are much less expensive than the traditional work comp transportation services.

In fact, OneCall and Lyft announced a partnership over two years ago (interested to hear how that’s working out; if you know please comment below).

Here’s why I don’t think they’ll replace work comp-specific transportation companies.

  • the big one – being late for or missing an IME is really, really expensive – the payer has to pay the IME doc the $1000 – $2000 anyway, rescheduling an IME incurs more indemnity, attorney, and other expense, and it makes adjusters nuts. The same is true for PT or other medical treatment – although not quite as bad.
  • WC patients don’t all have smartphones, so figuring out which patients can access L/U is a necessary first step
  • L/U drivers wait a maximum of 5 minutes – this doesn’t work for patients:
    • with limited movement ability trying to get ready
    • who aren’t really interested in making that IME appointment
    • whose doctor appointments may run late
  • L/U drivers aren’t going to go up to the patient’s door and help them get into the vehicle
  • L/U drivers’ vehicles typically aren’t accessible for patients with limited physical ability
  • Some WC patients aren’t native English speakers, and may require drivers to speak their language
  • If you try to schedule a pickup for a time in the future, L/U typically don’t reach out to drivers until a few minutes before that pickup time – which may well not work for patients in remote areas
  • which brings us to location – L/U work really well in metro areas, and not so much in more rural/suburban settings. So, schedulers may find L/U doesn’t have available drivers
  • you can’t talk to a person at L/U – ever. Many WC transportation services involve a three-way call between the scheduler, driver, and patient; this is just not going to happen with the ride-sharing services.
  • Some states regulate transportation fees, which may not work in the L/U pricing model.
  • Finally, while the dollars are significant in WC, they really don’t amount to that much compared to other opportunities in Medicaid and Medicare. If you’re L/U, you’re going to focus on those payers and ignore WC.

This is not to say L/U won’t be part of the answer – I’m just suggesting that “part” may be pretty defined and not nearly as big as we may have thought a while back.

I’m sure there are other reasons – as well as arguments for L/U as successful disruptors. I look forward to hearing them.

What does this mean for you?

Once again, what looks simple isn’t because of the inherent complexities of work comp.


Oct
3

Chronic opioids can be solved

That’s the key lesson from today’s session on Dealing with legacy opioid claims at IAIABC’s 104th Convention.

BWC Ohio’s Nick Trego PharmD, State Fund of California’s Chief Medical Officer Dinesh Govindarao MD, Washington L&I Medical Director Gary Franklin MD MPH, and Sedgwick Pharmacy Director Paul Peak all documented significant reductions in long-term opioid usage in their patient populations.

That means many fewer moms without kids, husbands without wives, and kids without grandparents.

Among the takeaways…

Prevention is critical – we’re doing a very good job of preventing more Opioid Abuse Disorder (OAD) patients.

Flexible treatment options are critical – every patient is different, with some responding to Medication-Assisted Therapy and others not.  The same is true for exercise, yoga, cognitive behavioral therapy, acupuncture, and PT.

Closed physician networks, formularies and UR with teeth are critical – it’s tough to get bad docs to become good ones, so kicking them out of your panel is necessary.

Analytics are critical – to identify patients at risk of OAD, to monitor progress, to evaluate success, to learn what works and what doesn’t and why.

Full payer access to Prescription Drug Monitoring Programs is critical – but only available in a handful of states. Access to PDMPs that require physician usage would go a long way to reducing inappropriate prescribing and polypharmacy.

Results – Across the board we heard of dramatic reductions in the volume and potency of scripts prescribed and the number of patients taking opioids over the long term.

What does this mean for you?

It can be done, it is being done, and it must be done.


Oct
2

What are work comp bill review “savings”

In the last few days of our Survey of Bill Review in Workers’ Comp and Auto, and once again the question that won’t go away is…

What exactly are bill review “savings”?

Are they:

  • below fee schedule/UCR?
  • below billed charges?
  • inclusive of negotiations or is that separate?
  • inclusive of clinical edits or are they separate?
  • derived from rules as well as dollar reductions
  • inclusive of duplicates – either full or partial, and what defines each?
  • net of fees or gross?
  • inclusive of network discounts?
  • inclusive of of adjuster denials of specific service lines?

 

And how do you pay for them?

Are the charges for bill review fair, transparent, logical, consistent with contractual terms, and consistent across bills?

Are they based on a percentage of savings, and if so, savings compared to what benchmark?

Why are some vendors’ fee schedule savings so much lower than others? Could it be because FS savings don’t incur additional charges, but all other savings types do?

We’ll have some answers in a few weeks.

 


Sep
28

Research Roundup – Friday edition

So, hard as it is to believe, there was some non-Supreme Court hearing stuff going on this week.

I know…I missed most of it too.

So, here’s some of the most important research we all missed while overloading incoming web servers watching yesterday’s hearing.

Drugs, Opioids, and profiteering physicians

The fine folks at WCRI continue to do lots of stuff so we don’t have to. Two things stand out this week; a compendium of every state’s work-comp pharmacy-related regulations, and a webinar on the effectiveness – or lack thereof – of regulations designed to address the should-almost-never-be-allowed practice of physicians dispensing drugs for profit.

Out in the real world, we learn that in many cases it’s harder to get access to drugs to deal with Opioid Use Disorder than to get the opioids that cause OUD. 

14% of plans do not cover buprenorphine/naloxone, a preferred medication for OUD maintenance treatment. Only 11% of plans cover implantable buprenorphine and 26% cover injectable naltrexone, both of which may facilitate adherence for patients with OUD. Seventy-three percent of plans cover at least one abuse-deterrent opioid pain medication, while 100% of plans cover at least one short-acting opioid pain medication.

Hey P&T committees, get with the times!

Making sense of data

myMatrixx’ Cliff Beliveau has an excellent piece on using data visualization to help explain complex issues. Well worth a read.

Dumb things companies do

Roberto Ceniceros’ column on Lockton’s denied-claim research has been on my desktop for weeks. I’ve read it twice, and you should too. Net is this – denying claims is often a really bad idea.

Finally, from the professor who teaches what may be the only most important class in business school comes an eye-opening look into how work is bad for you. The logic and rationale is not what you may think. Here’s just one excerpt, which I would label Companies are not smart:

Companies do not act on the basis of the best evidence. They merge even though much research shows that mergers destroy value. They use forced-curve ranking systems for performance reviews even though extensive evidence documents the harmful effects. There is no reason to believe they would behave any differently with respect to their human capital.

Evidence shows work hours are negatively related to productivity, that giving people more autonomy leads to higher motivation, and that layoffs often harm performance, including profits. So in making employees sick, employers have created a lose-lose situation.

Enjoy the first weekend of fall.


Sep
27

Genex and Mitchell to merge

Consolidation in work comp services continues with the imminent announcement Genex and Mitchell will merge in the very near future.

Stone Point Capital owns both companies, so it is no surprise that the two are becoming one.  Mitchell was acquired a short five months ago, Genex a couple months earlier.

While initial reports were the two would remain separate, that didn’t make much sense. By combining the two, expenses will be reduced by (I’m speculating here, but it’s educated speculation) eliminating duplicate headquarters functions and reducing total sales and marketing headcount.

It’s worth repeating what I wrote back in April when Stone Point bought Mitchell:

According to internal sources, Genex and Mitchell will NOT be combined or integrated or even work together. They were pretty adamant about that.

Allow me just a bit of skepticism; private equity (PE) firms don’t often buy companies with similar capabilities and services and leave them alone. That’s inefficient: they own two separate entities – overhead, management, systems, staff,  – that do the same things. Especially when those two businesses are aligned as closely in many areas as these two are.

While Mitchell also operates the nation’s third-largest work comp pharmacy benefit manager, and provides a wealth of services to the auto claims industry, Genex’ offerings sort of “fit in” to Mitchell’s portfolio.  Genex’ utilization management, peer review, case management, and related offerings are very similar to Mitchell’s. And, Mitchell provides Genex’ bill review application.

Sources indicate there’s a lot of leverage (debt) on the Genex deal – as there is in pretty much every acquisition – so cost-saving moves and elimination of redundant functions is likely a priority.

It is certainly possibly the two companies will operate completely independently – but I’d be surprised if that lasts very long.

Stone Point is one of the two major stakeholders in work comp services, with Carlyle the other. Stone Point’s assets include:

  • AmTrust
  • Genex
  • Mitchell International
  • Oasis (not a work comp-only entity, rather a PEO with significant work comp business)

What does this mean for you?

Smart money is looking to reduce overhead expense and duplication – the right focus in a very mature market.  Other entities would do well to think carefully about whether that makes sense for them as well.

 


Sep
26

The trade war should scare you

Here’s why.

China can outlast the US.

China’s leaders aren’t afraid of public pressure to give in to Trump.

Despite claims to the contrary, the impact of tariffs on US consumers is being felt – and the pain, while minimal today, is growing.

The tariffs, intended to bring back manufacturing jobs to the US, are actually forcing US manufacturers to find other Asian countries that will make the same stuff China currently exports.

Agriculture is getting hit hard. China used to buy about $20 billion of our agricultural exports; that number is down significantly.  Retaliating against the Administration’s initial and follow-up tariffs, China increased tariffs on pork to 70%, effectively locking US producers out of a very lucrative market.

The price for soybeans, one of our largest exports, is down about 20% over the last six months.

source Nasdaq

The US is the largest soy producer in the world,  and China used to be our biggest export market.

As a result of the Trump tariffs, China is buying its soy, pork, corn, and other products from other countries, entering into long-term contracts with planters in Brazil and Argentina and elsewhere. While some will claim they’ll switch back when the trade war is over, that’s highly doubtful given the unpredictability of the Trump Administration.

The trade war is a double whammy for ag equipment manufacturers; steel and aluminum prices are up substantially, while demand for their equipment is down because farmers’ finances are on shakier ground. Certain types of steel commonly used in ag equipment is only made in Canada or Mexico, so equipment manufacturers have no choice but to pay the 25% tariff.

It’s not just agriculture.

The US imports more steel than any other nation; over 34 million metric tons last year alone. When manufacturers have to pay more for steel and other materials, they pass that on to their customers. So, prices are up, which may well drive down demand.

A Federal Reserve analyst looked at the impact of the tariffs on manufacturing; the results are troubling.

“all industries within the U.S. manufacturing sector source at least 10 percent of their intermediate inputs internationally. And, at the high end, the motor vehicles, trailers, and semitrailers industry sources about 30 percent of their intermediate goods from abroad.”

Here’s the takeaway.

U.S. firms that can will pass these higher costs on to the consumers of their products, leaving those consumers less money to spend elsewhere after paying higher prices for the goods affected by tariffs. Firms that cannot pass the costs on will, at best, have less cash flow to invest and expand in the U.S., or, at worst, will become unprofitable, lay off workers, or potentially go out of business. These tariffs increase production costs for U.S. manufacturers, placing them at a competitive disadvantage, and will, on net, destroy more output, wages, and employment in the United States than they create. [emphasis added]

What does this mean for you?

The trade war will likely:

  • drive down manufacturing profits
  • hurt the entire agricultural industry
  • reduce consumer demand for all goods and services

For work comp folks, we know that recessions lead to higher initial claim frequency, followed by longer-term disability duration.

Things look good now, after a 10 year economic expansion.

That will not last, and when it ends, it will be ugly.


Sep
21

Work comp/Auto medical bill review – initial takes

We are about a third of the way thru interviews for the third Survey of Medical Bill Review in Workers’ Comp and Auto; here are a few initial takes.

  • Bill review has progressed a lot in the last decade, with key advances in:
    • Auto-adjudication of more bills
    • Better coordination/integration with document management
    • Ability to more readily connect with other key systems e.g. treasury/finance, state reporting, claims
  • One area that still needs a lot of work – automated integration with UM/UR applications
  • E-billing is leading to more auto-adjudicated bills, but headaches as well.
  • In general, respondents don’t see a lot of differentiation among bill review vendors.
    • But some respondents point to key differences between vendors and application providers that should be top of mind for payers
  • The most common pricing methodology? so far, it’s a flat fee per bill for bill review and the old percentage of savings for everything else.
  • that said, there are some pretty innovative approaches to pricing out there that bear watching

The last time we did this survey was six years ago.  We will be comparing and contrasting results to document what’s changed and where things are going.

If you’d like to participate, shoot an email to infoAThealthstrategyassocDOTcom.  Substitute symbols for the caps.


Sep
20

Research Roundup

Trying a new idea out today – a post that is

a) a quick overview of the latest research on stuff that’s important (at least to me) and

b) my thoughts on what it means to you.

Disability

A new report documents the results of a very robust study of work comp patients done in Washington State. It found that “reorganizing the delivery of occupational health care to support effective secondary prevention in the first 3 months following injury” reduced long term disability by 30%.

Briefly, patients treated in the State Centers for Occupational Health and Education were significantly less likely to become permanently disabled than those treated outside the COHE system.

This means – find out what the COHEs are doing, and replicate it.

Hat tip tp Gary Franklin MD MPH, Medical Director of Washington L&I

Employment

We’ll need all those workers back on the job, if the World Economic Forum’s forecast that automation will create millions more jobs than it will destroy. The report claims there will be 58 million more new jobs than lost jobs as companies shift to more automation – and this is within 5 years.

HOWEVER – these jobs will go unfilled if trained and capable workers aren’t around to staff them.

This means – companies best invest in training for tomorrow’s jobs. And integrating this with return-to-work would be pretty damn brilliant.

Monday Claims

More in the string of great stuff from NCCI, this week the Boca brainiacs released a study of “Monday morning claims.” The news is..there’s no news. The implementation of the ACA (THANK YOU for not mis-calling this “Obamacare”) did not change the percentage of claims that were reported on Monday, even in those states that had the largest decrease in the uninsured population post-ACA.

This means – we need to stop talking about Monday morning claims – which aren’t a thing.

More to come next week


Sep
19

Paradigm Outcomes acquired

Paradigm will be acquired by investment firm Omers, a Toronto, Canada headquartered company. Sources indicate the price was approximately 14 times earnings; by my calculation, the total valuation was above a billion dollars.

Till now, Omers had not been visible in the work comp services investment space. And, Paradigm was not “shopped” in the usual way; an investment bank is hired, books go out, bids are accepted, etc. The price is even more remarkable as there wasn’t an auction; the valuation continues what’s become the new normal pricing for work comp assets.

If it seems like you were just reading about a Paradigm acquisition…you were. The company just completed a deal to buy pain management network company AdvaNet.

Omers does own Premise Health, a worksite clinic firm, as well as two outpatient rehab and physical therapy companies – however sources indicate there are no plans for any collaboration or combination of assets.

What does this mean for you?

If you own a work comp services business – sell now!


Sep
13

The biggest deal in work comp to date

Yesterday’s announcement that Carlyle is acquiring Sedgwick is a clear indication that the work comp services industry remains a favorite of private equity investors.

The transaction, which valued the giant TPA at $6.7 billion, far exceeds the previous record set by the ill-fated One Call deal. It also produced very healthy returns for previous owner KKR; it bought the company for $2.4 billion just four years ago.

A 180% increase in value over a brief four years speaks to Sedgwick’s successes over that period, a clear and compelling growth strategy, and strong belief in management, which remains an investor in the company. (To be clear, a big chunk of this value growth was also driven by two major acquisitions, discussed below)

Here’s my brief take on why Sedgwick sold for so much.

Management

I’ve crossed swords with CEO Dave North in the past, but no one can argue with the success he and his team has delivered. I’ve also come to know several senior management folks, and they are, to a person, impressive.

Strategy

Work comp is shrinking, and TPAs are perhaps the only segment of the industry that will benefit from that shrinkage.  As claim counts decline, more insurers are choosing to have TPAs handle more of their claims.

Sedgwick also increased its internal work comp services expertise and capabilities. One example – the pharmacy management program overseen by Paul Peak PharmD is delivering impressive results.

North et al embarked on a clear diversification strategy several years ago, a strategy evidently designed to continue the company’s growth by dramatically increasing its footprint internationally and in property adjusting. Sedgwick’s acquisition of Cunningham Lindsey and Vericlaim positioned the company to profit from climate-change driven events such as hurricanes, fires, tornadoes and the like.

Wise indeed.

Scarcity

I’d be remiss if I didn’t reprise my comments from a few weeks ago –  there just aren’t that many work comp services assets to buy these days. To be clear, Sedgwick is neither a Pinto or a Gremlin; far from it.

The services industry has bifurcated into really big companies – Mitchell, Genex, Sedgwick, One Call, and relatively small ones – MTI America, HomeCare Connect and the like. While there are several firms occupying the middle ground, overall the number of potential acquisition targets has shrunk dramatically.

Because the big companies are really, really big, relatively few PE firms have the financial wherewithal to buy them.

As a result, when assets do come to market, investors seem willing to bid up prices.

What does this mean for you?

There are ways to succeed and profit in a consolidating, highly mature industry.