Work comp medical: cost vs “savings”

I still have a sports jacket I bought years ago because it was a great deal. It’s ugly and doesn’t fit right, but oh, what a deal. I keep it to remind myself that it’s not about the deal.

(I know, I can’t believe I spent money on this)

Most work comp buyers focus on the deal they get on medical expenses, paying little attention to the quality of care delivered, or what that care actually costs.

Reality is, most buyers measure their performance by how much they’ve “saved”, not how much they’ve spent – or what they got for their dollars.

Some, like Albertson’s, are focusing on what matters – quality. But most don’t, relying instead on “savings” reports that purport to show how many gazillions their vendors “saved” by not paying duplicate bills, slashing charges to fee schedule (!), applying state rules to bills, assessing relatedness and using clinical edits.

These buyers are saving themselves to death.

Instead of bill reductions, payers should be looking at medical cost per claim. Replace network penetration with physician performance evaluation, based on total outcomes. Stop looking at denied procedures and start identifying the providers who do a great job, send claimants to them, and leave them alone.

What is scary is that many in the industry think they are making progress. They are plodding deliberately along, reading bill review savings reports, studying, evaluating, debating, discussing, re-organizing, considering, meeting, presenting, recommending other ways to “save”.

They are mistaking activity for progress, when they should be focusing on what matters – measure and reward quality. 

So, you may want to ask yourself, would you buy medical care for your family the way you buy it for your employees or insureds?

What does this mean for you?

If you do want to dig into medical, here are a few ideas.



Is work comp medical inflation increasing?

USI’s 2018 Insurance Market Outlook indicates workers’ comp medical inflation will hit 6 percent, a significant jump over recent years. A key driver is:

“a continued increase in cost shifting from healthcare plans to workers’ compensation due to the profitability challenges faced by the Affordable Care Act as well as other challenges”

I’m puzzled by the scant attention paid to medical cost in the report, and the superficial, and I’d suggest misleading attribution of cost shifting to ACA’s “profitability challenges”.

What “profitability challenges?”

Health insurers are doing quite well. Pharma and device companies are too. Hospitals are rolling in dough, with profits up 43 percent from 2011 to 2016. Sure, around 20% – 30% of hospitals experienced negative margins – but the average net margin was a very healthy 7.7%.

Medical costs drive a LOT of casualty insurance costs in the auto, fleet, workers’ comp, medical malpractice, and liability lines. The quote above is the only substantive statement in the 38 page report, and the statement itself is questionable.

Granted, I’m biased. As one who grew up in and remains firmly rooted in the healthcare world, I see things thru that lens.  That said, my take is the lack of focus on medical is due to a lack of understanding of healthcare, which in turn makes conclusions suspect.

NCCI recently changed its measure of overall medical inflation to a metric that more closely tracks what we’re seeing in work comp. The discussion at the link is pretty wonky; suffice it to say that the Personal Healthcare Deflator (PHC) tracks actual workers’ comp medical trends much more closely than the Medical CPI. (James Moore wrote on this some time ago)

(source NCCI) You’ll note that the PHC Deflator predicts a much lower rate of price inflation than the other more commonly used metrics; PHC does factor in a change in the mix of services, which I’m guessing is a key reason. (In group/Medicare/Medicaid there’s been a significant shift in the location of services from hospital to non-hospital providers which has reduced overall costs.)

It’s impossible to say how USI came up with their estimate of 6% medical cost inflation; it is possible they used the CPI or some other metric.  I’ve got a query into USI and will update this if/when I hear back.

In the interim, I’d suggest we would be well-served if the industry showed a bit deeper understanding of the key driver of claims costs.

After 30+ years in this industry, I’m still amazed at the superficial understanding of healthcare exhibited by most in work comp. The continued emphasis on network penetration and per-line and per-bill “savings”, the failure by most buyers to force insurers and TPAs to report real outcomes, and the resulting lack of real improvement in health care quality in work comp is appalling.

What does this mean for you?

We’ll dig into the drivers of medical costs more this week. It’s a bit complicated, as most important things are.


Are you being gamed?

I’ve had a number of conversations of late with self-insured employers about their workers’ comp “savings” reports; one thing that keeps coming up is how- and why – vendors ‘game’ the numbers.

(this post is a follow up to a post I did seven years ago…)

Perhaps the greatest variation is in bill review “savings” – and the fees attached to those “savings”.

Bill review savings are reported as a percentage below the applicable fee schedule or, in states without fee schedules, usual and customary rates or billed charges (depending on the vendor and state). Savings are also attributed to application of state rules, for example a denial of an assistant surgeon’s fee or physical therapy 59 modifier. These savings don’t generate additional fees for the vendor as they arise from mere application of state regs and fees.

One would think this is an objective result, and therefore there should be little variation among and between vendors, and in an ideal world, one would be right.

However, there is almost always a bit of judgment involved in determining what the ‘right’ fee schedule amount is and what state rules apply. The complexities are many, and the justifications, while often thin, are given to payers unequipped to refute the vendor’s statements.

Then there is the gamesmanship where savings that should be attributed to fee schedule or application of state rules are put in a different bucket, a bucket that just happens to generate additional fees for the vendor.

Let’s look at the ‘why’ vendor BR savings vary.

Simply put, follow the money.

Most bill review services these days are priced on a flat charge per line or per bill; Most BR vendors also charge for additional ‘value-added’ services on a percentage of savings basis – typically 25% of savings delivered on top of fee schedule/UCR cuts. That’s where the…variation usually lies.

The financial motivation is obvious; the vendor gets the same fee for processing a bill whether they deliver $1 or $1000 in BR savings, but their compensation for ‘value-added’ services is based on the savings that are delivered – the higher the ‘savings’, the greater the fees for the vendor.

Therein lies one explanation – perhaps the most significant one – for the wide variation in BR savings percentages. In my consulting practice I’ve had access to reports from several of the larger BR vendors, and the variation can be as much as 300 percent from vendor to vendor. Yes, you read that right – one vendor’s bill review “savings” in a state can be three times higher than another’s.

Almost always the vendor with the lower FS savings delivers great results from ‘nurse review’, ‘complex bill review’, ‘coding edits’, ‘unbundling and upcoding review’, or whatever they call it – suffice it to say that the savings delivered from these ‘extra, value-added’ services – when added to the ‘standard’ bill review reductions – are usually only a bit higher than other vendors who don’t have all those extra, value-added add-ons.

That’s not to say that some savings can – and should – be derived from careful and professional review of bills – coding and clinical reviews are often helpful.

How can you protect yourself?

  1. Ask competing vendors to reprice a set of bills and provide savings numbers in aggregate and for each bill. Compare reductions from application of FS and state rules from the vendors, and on individual bills.
  2. Where there’s wide variation, ask the vendors for an explanation, and don’t accept mumbo jumbo BS.
  3. Make very sure your vendor knows you are holding them to the same standard they used in repricing your sample bill.
  4. Ask your colleagues if you can see their savings reports, and compare the savings allocations to your reports.
  5. Ask your broker, consultant, or adviser for their views, and get them to share de-identified client savings reports with you.

What does this mean for you?

The bad actors are known to many – make very sure you know who they are.


Stone Point buys Genex – again

Case management/bill review/UR/IME company Genex has been re-purchased by Stone Point Capital; Stone Point sold the business to Apax in 2014. Takeaways are:

  • Stone Point really understands workers comp and the WC services business. The company is currently pursuing insurer AmTrust and own or have owned a number of companies involved in workers’ comp including:
    • Cunningham Lindsey
    • Oasis Outsourcing
    • StoneRiver
    • Sedgwick
  • Apax’ divestiture is likely NOT a signal the firm is going to break up or sell off OneCall Care Management. OCCM is deep into a systems conversion intended to tie the disparate businesses it owns together and the company just moved most of it’s home office people into a single location. Perhaps most importantly, OCCM’s debt is still trading well below par, an indication the investment is under water.
  • CEO Peter Madeja and the core of the senior management team will stay on. Peter is one of the finest people I know, universally liked and respected in the work comp community, and he and his team have performed well, keeping Genex growing in a declining market.
  • My guess is Genex will likely keep acquiring related businesses. These could include firms in the IME and MSA space as well as the occasional case management company. Mature markets require participants to grow via acquisition, a strategy Madeja et al have mastered.
  • I’d also expect some much bigger acquisitions. I don’t think Stone Point bought Genex to get into the case management and bill review business; these folks have bigger plans.

A couple of side notes...

Stone Point’s initial investment in Genex back in 2007 was reportedly about $56 million. 

One report indicated a source said that this time around, Genex sold for three times the original equity investment (note Apax paid for Genex with a combination of debt and equity). Without any detail or ability to dig into that, I have no idea if that is accurate or even likely.




Anything but simple

To the casual observer, the work comp bill review process is pretty simple:

  • make sure the procedure codes are appropriate for the injury,
  • compare the billed codes to the state fee schedule/allowable amount,
  • apply any reimbursement rules, and you’re done.

The real story is far more complex.  It’s no longer just about making sure the claim exists, the body part matches the medical report, and the procedure makes sense for the injury.

Reimbursement has gotten enormously complicated. Coding and code modifiers, bundled payment logic, clinical appropriateness, duplicate identification, relatedness, location of service verification, surgical groupers are just a few of the issues and considerations often unappreciated – and not considered – during the bill review process.

Far from A to B, it looks more like this – and is unique for some bills…

While some will say this is “not new news”, what is new is the constant focus and attention required to stay abreast of the ever-more creative and sophisticated “revenue maximization” industry. (That’s the label for provider-focused efforts to get as many payer dollars as possible)

I’ve taken a close look at several approaches/techniques intended to help payers keep pace with provider billing. One that caught my eye is Equian’s Clinical and Coding Logic. The folks at Equian were kind enough to spend a lot of time educating me on the research behind their Clinical & Coding Logic (CCL) solution, how it is used, and where it can have the most impact.

CCL has it’s roots in a commercial health application purchased by Equian some time ago, an application that has been adapted for use in workers’ comp. Building on that application, the company continues research to identify emerging billing practices, and develop identification techniques and rules to address those practices; to date more than 100 additional rules and millions of additional edits not found within typical bill review engines are in place.

There’s a LOT behind CCL; while I can’t provide more than a superficial overview, here’s a few things that popped up for me.

  • Diagnosis and procedure codes with a “low-likelihood”of occurring in work comp are flagged; when they appear medical records are reviewed in detail
  • Experimental and Investigational services typically fall thru the cracks in routine bill review processes; these have been identified and payment logic developed.
  • CCL includes identification of services that appear to be body-part related but actually address pre-existing conditions
  • Extensive research on the notorious 59 modifier enables reductions for inappropriate charges associated with surgery

Equally important is Equian’s ongoing research and analysis to identify emerging and previously unseen billing practices, development of identification techniques and rules, and evaluation of results.

CCL is a supplement to, not a substitute for the regular bill review process and technology. It requires data transmission to and from Equian via secure link, similar to PPO pend-and-transmit processes. Results shared by Equian demonstrate CCL is most useful for high-volume bill operations. Across the board, reductions average about $45 per bill (I was not able to independently verify savings or impact, and note that results are almost certainly highly contingent on each payer’s unique situation.)

What does this mean for you?

Never stand still.


Telemedicine – where next?

MCM’s Telemedicine Week continues with a couple more use cases and a quick summary of where things are going – with the caveat that we’re only just beginning to understand what this is, how it can be used, what the obstacles and limitations are, and how accelerating technological changes will affect tele-…

First up, CHC’s white paper authored by colleague Peter Rousmaniere. CHC has a broad suite of tools used for everything from recorded statements to triage to initial clinical “visits”. The case study discussions provide a glimpse into the future, as there’s a lot of crossover between and among the use cases.

HSA consulting client MedRisk launched it’s telerehab program last year, and takeup has been strong. To date, patient reaction is quite positive, driven in large part by high satisfaction from one-on-one interaction between the patient and therapist. The white paper provides a detailed review of everything from technology to applications; a wealth of references are cited for those interested in more detail.

From here, where?

  • Wearable technology has yet to be incorporated into services, but I expect it will be soon. Devices that track range of motion, force, and acceleration will be used to monitor home exercise and help assess patient readiness to return to work.
  • Other devices will assist in diagnosis and patient monitoring, alerting both patient and clinician to potential problems or conditions that may affect recovery or determine treatment paths.
  • Peer reviews can be improved by virtual visits, enabling the peer review physician to interact with the patient without the expense and hassle of meeting in person.


  • Represented patients may be loathe to schedule tele-visits if their attorneys don’t understand or support tele-services.
  • Regulations are going to be playing catch-up for the foreseeable future. Issues related to reimbursement, admissibility, liability, confidentiality and the like will take time to work through.
  • Change aversion will be the highest and toughest barrier. We all know workers’ comp can be hidebound and kludgy, with participants looking for “reasons why not rather than opportunities to.”

All that said, the more we learn about tele-services, the clearer it is that this is going to be a major change driver.

What does this mean for you?

Get with it.




Telemedicine – Concentra’s approach

Today we’re continuing to dig into what individual companies are doing in telemedicine.

Quick take is there are about as many offerings and approaches as there are companies; it’s good to see the breadth and depth of thinking, the various business models, and how different stakeholders view challenges, benefits, risks, and future trends.

Today brings an update on Concentra’s efforts (I interviewed CEO Keith Newton last summer, here’s the second of that two-part post).

Concentra was an early adopter of telemedicine; the company’s physician base, integrated information and practice management systems, and employer- and insurer-relationships and IT connections gave it a big head start.  There was also a compelling business reason; not all physicians were busy all the time, so Concentra had a ready supply of credentialed providers available for telemedicine visits.

The company recently logged its 600th virtual visit, a big jump after hitting 400 in mid-December. Things started slowly with launch mid-2017, but I’d expect a fairly rapid ramp-up after months of preparation and “beta-testing.”

I spoke with CEO Keith Newton and Ann Schnure, VP Telemedicine Operations about recent developments and future plans; Ann also provided written answers to emailed questions. (some answers edited for brevity, also some para-phrasing of responses)

  1. MCM – What tele-services is Concentra currently offering?

Briefly, telemedicine in the form of virtual visits for injured workers. Concentra’s telemedicine product, Concentra TelemedTM, was designed specifically for workers compensation and the treatment of injured workers. Patients can access virtual care from a Concentra occupational medicine clinician using their computer, tablet or smartphone. Concentra Telemed leverages the same clinical model, EHR system, and reporting used in our medical centers.

In February, Concentra will launch a telerehab product leveraging the Concentra Telemed platform. Eligible patients requiring physical therapy will be offered the option of a scheduled telerehab visit with a licensed Concentra therapist.

  1. MCM – How has adoption of telemedicine progressed?

As we expected, adoption of telemedicine in work comp has been gradual.  As telemedicine in work comp is in its early stages of adoption…(Note the average Concentra patient has 2.1 – 2.3 telemedicine “visits”, all post-triage.)

  1. MCM – What’s been the biggest challenge to getting employers to use TM?

The key challenge to overcome is the knowledge gap about how to apply and integrate telemedicine into their existing work practices. Much of our work with employers has been to inform them how Concentra Telemed easily fits into their existing processes and workflows. Their current processes to authorize treatment, service instructions, and back-end reporting remain the same regardless of whether they use telemedicine or brick-and-mortar clinics.

  1. MCM – What’s been the biggest challenge to getting patients to use TM?

The primary challenge to getting patients to use telemedicine is creating awareness. Many patients simply do not know a telemedicine option is available for the treatment of their work injury. Knowing that over two-thirds of consumers are willing to see a clinician via video, we are confident that with increased awareness the willingness to use telemedicine for work injuries will increase over time.

Once patients become aware and try Concentra Telemed, we know they consider a video visit the preferred option. Over 98% of Concentra Telemed patients choose telemedicine when they require a follow-up visit.

  1. MCM – Talk about the regulatory environment.

There is growing acceptance of telemedicine as an important health care delivery channel by medical boards and government regulatory agencies. While telemedicine is now allowed in all 50 states, regulation specific to work comp has been slow to materialize. Additionally, some states have yet to modernize regulations to accommodate telemedicine. When developing and launching telemedicine in work comp, we feel it is a state-by-state approach which requires working closely with work comp agencies.

  1. MCM – What metrics is Concentra using to evaluate its tele-services?

Our metrics for telemedicine are the same metrics we use to at our medical centers. These include measures on case duration, return to work, and key clinical outcomes.

The patient experience is also critically important to us. Patients who use Concentra Telemed are asked to rate their experience with our product at the end of each visit. Patients provide an average satisfaction rating of 4.8 stars (out of 5), with 85% of patients rating their visit with 5 stars.

  1. MCM – What will Concentra be doing with tele-services in 2019?

By 2019, we envision Concentra Telemed being a coast-to-coast solution embraced by employers and accepted by regulators as a valuable option for the treatment of work injuries. We’re evaluating over 14 potential use cases leveraging the Concentra Telemed platform, including travel health, center rechecks, and specialty services.



Telemedicine – Coventry’s approach

A few weeks ago I had the opportunity to virtually sit down with Coventry’s product development folks to hear what they’ve been doing with tele-. 

I checked in again this week, and here’s what they’ve been up to. Quick take – tele-triage is gaining traction, while patients are slower to agree to do virtual office visits.

Coventry, a provider of services ranging from networks to pharmacy benefit management, case management to durable medical equipment, is well into Phase One, of their telemedicine offering which is tied into Coventry’s Nurse Triage program, NT24.

Working with technology vendor KuraMD  Coventry’s nurse triage staff connects with the patient, evaluates the injury or illness, and, based on their findings, recommends an appropriate level of care whether it be self-care, a “live” visit with a clinician, or a telemedicine visit (urgent and emergent cases are identified at call onset). Diagnosis and other factors drive the recommendation.

While the program has been in place for the better part of a year, Coventry has found many customers have yet to embrace the telemedicine office visit. Customers have “a tough time thinking of this as an office visit.” Telemedicine providers provide initial visits where they can send patients to physical locations for physical therapy or for imaging studies. While TM follow-up visits are offered, to date most employers want patients to visit a provider for those follow-up visits.

The program is live with two TPAs; a total of 10 employers have been implemented to date nationally with 4 in single states. Employers are quite diverse, including labor, retail, temp staffing, and construction.

For those patients able and willing to use telemedicine for a virtual initial visit, Coventry uses providers contracted with KuraMD. Care coordinators initiate the tele-visit, ensuring the patient has the right technology, walking the patient through the set-up and sign-on process, then passing the patient to the clinician for the visit.

Concentra will also be working with Coventry in the future

Phase Two involves broadening the number of clinicians that can provide telemedicine and also offering telemedicine visits without the nurse triage component. As one of, if not the largest workers’ comp PPOs, Coventry is working to get information to the company’s contracted network physicians to educate them about the service and requirements, discuss compensation, and provide training. The credentialing process and standards are identical to the company’s “regular” network but there are more questions regarding state licensing to ensure compliance with state regulations.

Down the road, Coventry is looking to incorporate tele- into case management. Ideally, case managers would connect with the patient, provider, and/or employer via video conference and enter information in real-time into the company’s proprietary CM IT system. There’s much work to be done connecting with claims systems to identify the types of and format of information needed by adjusters, build data feeds, and separate out key bits of data that need an adjuster’s attention.

What does this mean for you?

Expect tele-visits to gain traction as patients use similar services for family members and their own care. Telemedicine is moving quickly in group health, and this will accelerate adoption in comp.



Why your “predictive analytics” program isn’t working

I’m hearing more complaints and concerns about the lack of results from projects involving “big data”, analytics, predictive modeling and the like. These have me scratching my head, as effective use of data is critical to any enterprise these days.

I think I’ve figured out why some of these projects haven’t turned out the way sponsors want.

An excellent article on the effective use of analytics identifies 6 keys to ensuring success hit my inbox a bit ago and I’ve read it seveal times, passed it on to respected colleagues, and gotten their feedback.

Targets and accountability. The Central Analytics Business Unit (ABU) was set up as a centralized profit center with ambitious targets and with direct reporting to the chief operations officer;

Support from the top. Obvious, critical, and bearing repeating.

Incentive scheme alignment. The returns generated by ABU’s analytics projects accrue to the departments, who do not contribute to the cost of the ABU. And the ABU team is paid using variable compensation, based on projects that have been fully implemented and based on their ROI.

Rigorous assessment of results. The contribution of analytics is always measured and in some cases is reviewed by the accounting department.

Communicating with strategic goals in mind.  The ABU emphasized communication

The right people. Recruited employees had:
(1) significant quantitative strength;
(2) negotiating skills and diplomacy;
(3) the ability to communicate with the business lines; and
(4) entrepreneurial instincts. Recruiting this high-demand skill set was not easy.

Most of the initial ABU recruits were external hires, and several of them had little knowledge of the banking industry.

BUT…information without action is nothing but a waste of time and money.

This from a physician executive colleague:

One of the things they don’t discuss that I see as an issue throughout the insurance industry (commercial as well as WC) is that analytics often produce counter-intuitive results, and/or suggest conclusions that are at odds with what passes for traditional wisdom.  

An example – I had 3 years of analytics (pretty good ones, too) that demonstrated a 5 or 6:1 ROI from the medical directors’ department (and that included all costs, fully loaded salaries, etc).  No one would believe it, and they dismantled the whole operation.  So, what I’d add to the HBR piece is that the CEO championing (which is one of their 6) has to include championing of business plans based on the analytics, no matter how uncomfortable that makes some people.  

Think analysis of the true costs of network discount strategies is going to be well received anywhere?





Monday catch-up

Lots has been happening, here are a few items that caught my attention.

WCRI’s been diving deep into hospital reimbursement. This is an issue I’ve been tracking closely – and I’d suggest you should too. I see hospital/facility costs and utilization as a major cost driver; hear from Carol Telles in a webinar Thursday January 18 at 1 eastern.

As we’ve noted here previously, work comp payers would do well to pay close attention to facility reimbursement and utilization; expect work comp, auto, and other P&C lines to become even more attractive to hospitals seeking revenues and margins.

Healthcare spending inflation actually slowed significantly last yearAn analysis by Kaiser Health News indicates trend in 2016 was 4.3 percent, higher than the overall 2.8 percent inflation rate, but a 1.5 point drop from 2015’s rate.  Notably, drug cost inflation was just above 1 percent (although that’s a lot higher than the double-digit drop we’ve seen in workers’ comp).

Key point – this slowdown in the rate of growth occurred after ACA implementation.  Not surprising that costs went up; we insured millions more people, most of which had pent-up demand for services they couldn’t get or couldn’t afford.

While costs continue to grow, life expectancy declines. We have the most expensive healthcare in the world – by far – yet our life expectancy has dropped two years in a row. As a result, we rank 26th out of 37 developed countries for life expectancy.

Here’s why – we’re paying hundreds of billions for low-value care…

An excellent piece on how to make analytics actually work from Harvard Business Review.  Key points:

  • attach an ROI to the analytics unit itself
  • hire experts from OUTSIDE your industry…

Enjoy your week.