Insight, analysis & opinion from Joe Paduda

May
27

Adjusters, management, and priorities

Posted by Joe Paduda on Wednesday, May 27th, 2015 | Comments

During a conversation with an industry executive this morning I was reminded of the rather different perspectives, priorities, and incentives for adjusters and managers.

Faced with a virtual pile of incoming mail, messages, bills, documents, and voice mail, adjusters are tasked with determining compensability, closing claims, resolving litigation, getting claimants treated as quickly as possible – but only for covered services, dealing with vendors, catching fraud, setting and managing reserves, taking CEUS, communicating with employers, spouses, lawyers, and judges, approving drugs and medical services, directing to network providers, setting IMEs…the list is both endless and growing.

This while being measured on claim closure rates, three-point contacts (!?), reserving accuracy, litigation rates, network penetration, claimant satisfaction, and whatever the most recent metric du jour happens to be.

Home office folks have somewhat different priorities; managed care execs are evaluated based on network penetration, “savings” rates, staff productivity for bill review and medical management and various other process measures.

While there’s some alignment between the field and home office, what’s really important to one may be much less lower on the priority list for their counterpart.

For example, field folks’ priorities are to get claims moved along, claimants treated/examined/assessed, claims closed, reserves set.

A conflict can, and often does, arise when a network provider can’t see a claimant for a couple weeks, but another treater has an opening tomorrow. What’s the adjuster to do? In most cases, they will go for the quicker appointment as it moves the claim along more quickly.  This holds true for IME providers, PTs, dentists, you name it.  Time is of the essence.

The conflict here is obvious and happens all day every day, forcing adjusters to balance what are conflicting priorities in what can be a no-win situation.

What does this mean for you?

Clear priorities known and understood by all affected parties can remove a lot of unnecessary stress while eliminating much unneeded back-and-forth.

May
21

The future isn’t coming; it’s here. And we are so unprepared.

Posted by Joe Paduda on Thursday, May 21st, 2015 | Comments

Inspired by a stunning presentation by Accident Fund Director of Innovation Jeffrey Austin White and a terrific session at NCCI by Salim Ismail, I’m going to be posting occasionally on the future of workers’ comp.  This future is one that is rarely discussed, mostly ignored, and often pooh-poohed.

I’ve been involved in comp since 1988 – some 27 years, and focused on work comp almost exclusively for 20+. There have been some changes over the last two decades, but these changes have been incremental, minor, relatively insignificant, and certainly not disruptive.

The next two decades will make the last look stagnant, stuck, frozen.

We aren’t talking offshoring of nurse case management to Manila, or document management to Ghana, or IT to Ukraine, or radiology reads to India.  That’s tweaking around the edges to arbitrage labor costs – but certainly not disruptive.

What is coming is DISRUPTIVE – disruptive like gunpowder was to warfare, steam to transportation, mechanization to industrial production, internal combustion to transportation.  

Driven by massive and almost free computing power, faster and better 3-D printing, incredibly cheap data storage and speed-of-light access to that data, artificial intelligence that in many ways is already far smarter than we biological beings, the future is:

  • automated logistics drastically reducing the number of humans “driving”
  • construction costs dropping just as rapidly as construction speed is increased, with ever-decreasing need for human participation
  • the all-but-disappearance of humans working in agriculture
  • computers doing accounting, sales, marketing, planning, customer “service”

Before we get too deep into this, let’s start with something that is directly affecting workers comp today – prostheses.

The science is evolving so rapidly that there are now prostheses that are controlled by nerves firing in the brain, prostheses that can essentially replace human limbs.  These are far better than your muscle-controlled artificial arm, which was a huge step up from the wooden leg and hook-for-a-hand “technology”

Think about this.  A worker loses an arm in a crushing accident.  The new arm is:

  • immensely capable, able to do anything the biological arm can, and 
  • extremely expensive
  • serviceable and upgradable, albeit at a hefty cost.

A few top-of-mind implications.

  • is the worker “disabled”?  one could argue absolutely not.
  • can this claim be “settled”? only if future maintenance and upgrades are covered.
  • is there a payment for “disfigurement”?
  • if the arm is more capable than the human arm, who pays for that additional capability and why?

This is already an issue in workers’ comp as judges are dealing with medical necessity issues related to prostheses every day.

And that’s just one thing – prostheses for amputees.

Future posts will scratch the surface of automated driving, big data-driven risk assessment and underwriting, return-to-work, and myriad other topics.

What does this mean for you?

The last 20 years are to the next 20 years as the Middle Ages were to the 1800s…

 

 

May
20

Controlling work comp medical – Swedlow and Victor weigh in

Posted by Joe Paduda on Wednesday, May 20th, 2015 | Comments

The capstone to an excellent NCCI AIS was provided by WCRI Exec Dir Dr. Rick Victor and his counterpart at CWCI, Alex Swedlow.

Rick led off with my LEAST favorite topic – physician dispensing of drugs to work comp claimants.  The usually-very-circumspect Dr Victor said that “the evidence is pretty clear in terms of costs and likely benefits of physician dispensing.”

All the evidence indicates:

  • physician dispensing is common in big states
  • prices are higher than for the same drugs in retail pharmacies
  • even after reforms, prices are about 30% higher
  • docs write scripts for OTC meds when they dispense those meds
  • dispensing docs prescribe unnecessary opioids 
  • the price focused reforms – eliminating the upcharge for repackaged drugs – will not deliver long term results.

As great as it was to see Dr Victor and NCCI focus so much time on an issue that I’ve been harping on/screaming about for about 8 years, I – as undoubtedly you – are sick to death of this subject. It’s time to kill the beast – ban physician dispensing and docs profiting from dispensing.

CWCI’s Alex Swedlow jumped full force into a quick review of utilization review in California.

The key takeaway is the decline in medical trend observed recently – which is leading to a reduction in rates – is very good news indeed.

Pharmacy is the fastest growing component of California’s work comp medical expense, now totaling 13.2% measured at 24 months maturity, or $1.2 billion. This despite two fee schedule reforms, implementation of chronic pain guidelines, and shortly opioid-specific guidelines and perhaps a formulary via legislation now under consideration. Yet 45% of UR involves drugs, and 45% of medical reviews do as well.

BTW doc dispensed drugs account for over half of drug spend in the Golden State.

Despite all that effort 29% of pharmacy spend is for Schedule II and II drugs.

That’s just appalling.

Which led Alex to the key question – why is California’s WC medical so much harder to manage?

Alex’ take – a fundamental lack of shared risk – no supply/demand controls, no contractual language that limits care, and a dispute process that features very high levels of litigation.

Which leads to the Independent Medical Review (IMR) process – intended to speed dispute resolution while increasing consistency.  CWCI has done quite a bit of research into this area, most of which is available on their website.

Briefly – 95% of ALL treatment requests are approved.  There is NO wholesale denial of care occurring in California.

Despite what you may have heard, the IMR process is working pretty well.

CWCI’s research (on their website) indicated that the average audit score for timeliness etc was 97%.  And, IMR isn’t nearly as cumbersome as some would like to portray.  

Here’s the real data…

75% of requests for initial treatment are immediately approved.

77% of the 25% that aren’t approved initially are approved after going thru UR. – that equates to 94.1% of all treatment requests are approved initially or after UR.

91.4% of IMRs agreed with UR that the UR-denied treatment was in fact not consistent with evidence-based medical guidelines.

44.7% of services going to IMR were for drugs; those decisions were upheld 92% of the time.  And a lot of the IMR challenges are coming from one area – Los Angeles.  Similarly, the top 1% of docs generated 44% of the letters; only 10 docs were responsible for 11% of ALL IMRs.

What does this mean for you?

Drugs are a big problem, and a relatively few docs are the ones contributing to this problem. 

The IMR process is working pretty well – and would be much better if a very few docs weren’t flooding the system.

 

May
19

Is ACA affecting work comp medical waiting times?

Posted by Joe Paduda on Tuesday, May 19th, 2015 | Comments

Research to date says no.

Equian’s Glen Boyle shared some research with me that indicates there doesn’t seem to be any delays in claimants getting physician appointments.  Glen was following up on my post on NCCI’s research report at last week‘s AIS which also didn’t find any ACA-related delays.

Here’s Glen:

I tracked 10,000 claims for [an insurer client] (2012-2013 – matured 24 months with a minimum of 6 months maturity).  

The study focuses on Indiana, Iowa, Minnesota, Illinois, and Wisconsin.

The claims were placed into agreed benchmark categories and we are measuring dozens of data elements. Aside from DOI to first medical visit (and the time between subsequent visits), we are tracking the time to first major surgical service, the time to first PT (and the time between subsequent visits), and the time from the first medical treatment to the last medical treatment.  

 The 10,000 claims created our “foundational benchmarks”, and we just completed our first comparison of claims from the 1st quarter of 2014 (post ACA) with maturity through 9/30/14. We’ve also just completed another data pull with two additional quarters of new data, while updating the claims already in the mix. We were able to take our first look at some post-ACA benchmarks – many are still VERY immature, but DOI to first DOS develops immediately (FYI we show no delays to first office visit in any of the jurisdictions). [emphasis added] You had pointed me to the Robert Wood Johnson report and that seems to indicate that newly insured patients are NOT flooding into waiting rooms – so you wouldn’t expect any delays from that perspective.  

(this references a previous post on the RWJ study; excerpt below)

A Robert Wood Johnson Foundation report (thanks to AthenaHealth) report indicates docs are not getting swamped with newly-insured patients seeking primary care.  Key findings include:

  • New patient visits to primary care providers increased from 22.6% of all appointments in 2013 to 22.9% in 2014.
  • The percentage of visits with patients with complex medical needs decreased from 8.0% of appointments in 2013 to 7.5% in 2014.

So far, doesn’t look like primary care providers are overwhelmed – HOWEVER that is national data, and things certainly vary from region-to-region.

While primary care isn’t being overloaded, the health care delivery system is undergoing wrenching changes – with small, safety-net hospitals probably the most affected. Expect to see closings, consolidation, and takeovers as these most-vulnerable providers lacking scale, resources, and brand find they can’t survive.  For a glimpse into the near-term future, track what’s happening in California.

What does this mean for you?

17 months into full ACA implementation, there’s no indication that WC claimants are seeing delays in getting medical care.

May
15

Where’s the economy going?

Posted by Joe Paduda on Friday, May 15th, 2015 | Comments

In MCM’s ongoing effort to help you, dear reader, know things that will likely greatly affect your work world, here’s a quick review of economic predictions and implications thereof.

Moody Analytics is pretty optimistic about the future of hiring, employment, wage growth and the economy in general.

However that optimism is somewhat dampened by concerns overseas as key players in Europe and the BRICs are entering or going thru recession.

One key data point is the “quits rate”, which is simply the rate at which people are leaving jobs.  This is tracking higher, indicating people are moving among employers – according to Moody’s Adam Kamins this presages higher wages as employers have to increase compensation to attract and keep good workers.

Housing starts are a very big part of the recovery, and part of the reason things haven’t gotten better faster. There’s a good bit of pent-up demand, driven in part by millennials living with their parents at historically high rates. Obviously, houses can’t be built without construction workers (at least until 3-D printing of buildings gets a lot more prevalent – which it will…). According to Kamins, we are about 40% below the level we should be for housing construction – which equates to perhaps a couple million workers.

Expect this to be most heavily felt in the west and south, where construction permits have moved up nicely over the last few quarters.  Not surprisingly, the west has led in job creation for several years, with the south catching up over the last year.

Internationally, China’s economy is slowing – which isn’t surprising as it has been growing at a breakneck pace for several years.  Interestingly, Kamins said (I’m somewhat paraphrasing here) “Fortunately, the Chinese government has pretty tight control over the economy.”  With other countries’ economies in a bit of trouble, the dollar is strengthening leading to problems with trade – our stuff is really expensive, while their’s is cheap.  In turn this could hurt domestic manufacturing as demand for US goods drops off.

The dollar’s strength hurts tourism too; it’s really cheap to travel abroad for us but the US is a pretty pricey destination for Europeans and Asians these days.

May
15

NCCI outtakes

Posted by Joe Paduda on Friday, May 15th, 2015 | Comments

This morning began with Ted Koppel – not a workers’ comp expert, but a terrific speaker and highly entertaining.  So, while listening to Mr Koppel, a few things worthy of note are coming to mind.

First, while my original thought was this was, while fun and interesting, pretty much a filler, I have to say that was short-sighted.

We workers comp folks spend far too much time navel-gazing, and the chance to engage, really engage, with a very thoughtful, highly experience, and deep thinker was valuable indeed. Topics addressed included India, Pakistan, the energy infrastructure, Edward Snowden, Putin, Nixon at the Great Wall and where to find good sources for information (Mr Koppel’s favorite is John Oliver’s This Week Tonight on HBO – and yes, it is for the news content, not just the terrific delivery).

While Mr Koppel was impressive, what was perhaps more impressive was the depth and interest level of his questioners.

Kudos to each and every one who posed a question – you enriched the experience for all of us.

What does this mean for you?

It’s not about the urgent; it’s about the important.  Look up, read, listen, and not just to those who think just like you.

 

 

May
14

NCCI’s PM sessions – hard core research geeks only

Posted by Joe Paduda on Thursday, May 14th, 2015 | Comments

NCCI, with the assistance of payer medical directors (shout out to Employers’ Dwight Robertson MD and David Deitz MD among others) presented on 4 research topic areas late Thursday afternoon.

After a long day of great talks (this NCCI has been the best I’ve been to in a dozen plus years) it was time for the real dense, pithy stuff.  I’ll summarize so you don’t have to write your own notes…There’s some really good stuff here.

Joint injuries

Barry Lipton discussed an analysis of knee surgery across six states; you may be surprised to hear costs, even after correcting for price variations, ranged rather dramatically across the six – by around 60 percent.  What’s a lot more surprising is the variation in diagnoses, particularly among strains.  The percentage of knee injuries that were attributed to strains varied by somewhere around 20 points from highest to lowest state.

Shoulders exhibited differences as well, however there were similarities between the two joints.  Namely, the variation in utilization for both was driven by surgery and physical medicine.  A question from the audience asked why there is such variation when treatment should be uniform…

Therein lies the issue.  According to the handout, “Utilization differences across our selected states are driven more by differences in the treatment for given diagnoses than to the mix of diagnoses.”

There was quite a bit more to Barry’s presentation; check out NCCI for more.

Next up, Drug Fee Schedules

NCCI looked at differences in the prices paid for drugs in an effort to assess the effect of fee schedules [FS] on prices paid.  Some quick highlights from Natasha Moore’s talk…

  • Just because states have similar fee schedules doesn’t mean the prices paid for drugs will be similar.
  • Prices in high FS states are generally higher than states without fee schedules
  • There’s quite a bit of variation in prices paid even a) after correcting for drug mix and b) among states with similar fee schedule levels.
  • However, lower fee schedules are correlated with lower prices paid.
  • Brand drugs are 22% of scripts, but 56% of cost

Time from injury to treatment – preliminary results

NCCI is workign on a long term study on the impact of the Affordable Care Act; their first effort focuses on time from injury to treatment.  Highlights are from data between 7/1/2010 – 12/31/2012:

  • 85% of trauma cases are treated within 3 days from date of injury
  • there are longer “delays” in seeing some specialists in some states

My view is this is not likely to bear much fruit; looking at time to treatment by specialist as a way to somehow evaluate the impact of ACA is likely to be confounded by multiple issues, including:

  • practice pattern variation
  • supply of various provider specialties
  • expansion of Medicaid – or not
  • state support of ACA enrollment e.g. California vs those antipathetic to ACA e.g. Texas

Perhaps an analysis holding provider populations level and using the uninsured rate would be more illuminating.

Impact of report lag on claim severity

Following on the ground-breaking work by the Hartford’s Glen Pitruzzello fifteen years back, NCCI looked at the impact of claim reporting lag on claim severity.

There’s a wealth of data shared; the net is the longer the delay, the more likely the claim will cost more – HOWEVER, the correlation is by no means linear and varies by type of injury (e.g. the most expensive fractures are those reported on the actual date of injury, next is during the first week).

A long day indeed…

May
14

Listening fast to Bob Hartwig

Posted by Joe Paduda on Thursday, May 14th, 2015 | Comments

The estimable Bob Hartwig President of III breaks pretty much every rule re presentations – way too many slides, with way too much information on each,  mixes fonts and graphics and colors and pretty much everything, often on individual slides, talks way too fast…

…yet he’s really good.

A few takeaways I plucked out of the torrent while somehow not spraining any fingers typing…

The P&C industry…

  • P&C profitability is both cyclical and event driven (e.g. hurricanes)
  • for 25 years the industry didn’t turn a profit in any year – yet the last two years we’ve seen profits – totaling $12.3 billion in 2014
  • the last three years have seen premium growth of around 4% each year…
  • as a result, P&C industry is in a very strong financial position with deep reserves
  • is the world’s single largest institutional investor

Work comp specifics…

  • Florida lost 27% of WC premium from 2007 to 2013 due largely to a collapse of the housing industry
  • More so than in other P&C lines, WC returns are driven by investment income, so the longer the Fed keeps interest rates low, the harder it is to generate returns.
  • As WC is heavily invested in interest-rate sensitive instruments, the historically-low-interest rates that have been held down for a historically-long time are dramatically affecting returns.
  • The number of workers not seeking jobs has decreased rather significantly; the forecasted unemployment rate drops below 5% in the next few quarters.
  • 3 million jobs were created last year. New jobs plus slightly higher wages led to increased payroll and thus higher premiums.

Employment

  • Look for big bump in construction due to under-supply of new homes – but it’s still picking up too slowly
  • Manufacturing employment growth has leveled out due to high value of dollar
  • Oil & Gas extraction employment down slightly since peak in September 2014
  • Numer of temporary workers is at an all time high – due in part to the slow recovery, but also driven by the “sharing economy”…

The Sharing economy was the closing part of Bob’s talk – noting Washio, Handy, TaskRabbit, WeddingWire as apps to do pretty much anything via your phone – using task-specific “workers” who are often independent.

Today, about 7% of the US population are “providers” in these areas, with the average making less than $50k.  (there are over 300,000 signed up to be Uber drivers…)

The big question is – how will the sharing economy, with its different “use” of “employees” on demand affect workers comp?

The answer is TBD.

 

May
14

The State of the Workers’ Comp Line – 2015 ed.

Posted by Joe Paduda on Thursday, May 14th, 2015 | Comments

Chief Actuary Kathy Antonello gave the state of the line at AIS: here are the top data points on a calendar year basis for work comp, the P&C industry numbers were also presented and should be available later here.

  • private carrier combined ratio of 98%; state funds at 115%
  • private carrier pretax operating gain of 14%, down from 17.7% in 2013 (this is NOT equivalent or even similar to profitability or returns)
  • state fund operating gain of 5%
  • private carriers saw a 4.6% jump in direct written premiums
  • claim frequency is down 2 percent for NCCI states; CA is actually seeing an increase in frequency.

Key claim cost data points

  • Indemnity cost per lost time claim was up 4% in 2014, continuing the trend for claim costs to go up faster than the average weekly wage.
  • medical trend for LT claims was also up 4% in 2014; average cost per LT claim is $29.4K. (medical CPI was up 2.4%)
  • these data points vary widely by state from an average annual 2% decrease over the last 5 years to a 10% increase

Ms Antonello was careful to clearly explain the factors driving financials, what the descriptions mean – and don’t mean, and how today’s results compare to historical averages.  She noted that the big jump in investment gain seen in 2013 was largely driven by a single corporate entity’s capital gain; adjusting for this dropped the return – and the operating gain – dramatically.  In fact, actual investment gain was almost dead even with the 20 year rolling average of 14.2%.

Who cares?

Well, mis-understanding these data points has led others – notably ProPublica – to claim the WC industry is delivering a historic return, and infer that return has been due to reduced benefits for injured workers and a system slanted to favor employers.

More on that in a future post…

Antonello and her colleagues have done yeoman work in an apparent effort to help laypeople better understand the work comp system’s financial performance.  Using videos, data maps and graphics, and clear and concise language, presenters illustrated correlations, noted there is a $10 billion reserve deficiency, and clarified the system-wide decrease in premium levels set by work comp bureaus (down 4.3% for 2015).

Another graphic clearly showed how changes in the economy affected premiums in individual business sectors. The use of these visualization tools indicates NCCI is doing much more to help stakeholders quickly and readily track the industry’s evolution.  Kudos to Antonello and her colleagues for this initiative.

Today, premiums are up, despite a decrease in premium levels.  This is happening because employment has increased, and as wages are up slightly, there’s a multiplicative effect.  Compared to 2005, the payroll index is up 16%.

Simply, work comp total premiums are based on the rate multiplied by wages, so the more people working and the higher their wages are, the higher the premium dollars.

What does this mean for you?

Across the nation, work comp is pretty level, however a few individual states are seeing rather radical changes.  Medical and indemnity expenses continue to outpace overall benchmarks

 

May
14

First up at NCCI – Work comp is looking better…

Posted by Joe Paduda on Thursday, May 14th, 2015 | Comments

Workers’ comp net written premiums for funds and insurers were up substantially – 6 percent – over 2013, making for the 4th consecutive year of premium growth.

Meanwhile, the combined ratio for private carriers improved as well – down 4 points to 98, driven by a drop in loss adjustment expense, underwriting expense and loss costs.  State funds saw their combined stay flat at 115.

And yes, the industry returned a pre-tax operating gain  of 14% – NOT to be confused with “profits” or “return” – more on that in a later post.

This was driven in part by a decline in claim frequency – a continuation of a two-decade-plus downward trend in frequency.

This was the introduction to NCCI’s 2015 AIS provided by President and CEO Steve Klingel.  Klingel noted that the industry is rarely able to sustain profitability for very long; factors that may drive changes include the Feds’ moves on interest rates, employment growth, and changes in what defines “employee” and “employer”.

Noting the March OSHA document – essentially an indictment of workers’ comp, legal challenges in FL and OK, and press reports about individuals apparently mis-served by the work comp system (likely referring to the ProPublica/NPR series, much of which has been challenged here and elsewhere), Klingel’s sense is there may well be storm clouds in the near future for work comp.

Next up – the State of the Line…

 

Joe Paduda is the principal of Health Strategy Associates

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