Women in Work Comp

The first Women in Work Comp Forum took place today.  As Healthcare Solutions CEO Joe Boures said: “long overdue.”

The good news is there was a similar meeting held a block or two away, so we’re catching up quickly.

Some are focusing on the “conflict” between these two meetings, a focus that is misplaced.  Rather, it’s a good thing – two separate sets of people motivated to bring attention to an ongoing issue/opportunity.  There were about 300+ in attendance, indicating there’s a big demand…

A few observations from panelists worth remembering.

  • Danielle Lisenbey, CEO Broadspire – be flexible and adapt; be true to yourself; know the numbers too
  • Nanette de la Torre – VP Zenith – embrace opportunities as they come; don’t take things so much to heart, not everyone’s going to like you and that’s OK.
  • Nina Smith-Garmon EVP Mitchell Int’l – have sponsors who will support you and mentors who will provide direction – and don’t worry about titles.
  • Michelle Weatherson – Director Claims Medical and Regulatory Div, State Fund of CA – take risks, temper what you do when necessary
  • Eileen Ramallo EVP Healthcare Solutions – don’t ignore conflict, address it and seek to understand issues

An impressive group with some very useful insights.  As the father of two smart, motivated, successful professional women, I was wishing the younger Padudas were in attendance.

Kudos to Healthcare Solutions for taking the initiative.

And the first real news in Vegas is…

While no one from Medata will comment, word is the company has just implemented their bill review platform for AIG.

This has been very long in the making; we first heard rumors about the deal a couple years back.  It was all over the room at last night’s Medata event; evidently AIG went live within the last week or so.

There are at least two significant implications.

First, bill review application firm Medata is a force to be reckoned with.  Long a relatively small player, this relationship clearly moves them into the top tier with Xerox and Mitchell. No disrespect to Tristar, PMA, Amerisafe, and Medata’s other customers, but adding the 5 million plus bills flowing thru AIG is a whole different ballgame.

Second, AIG moved from Coventry.  This is a major loss for Aetna/Coventry’s bill review business; with Liberty Mutual likely switching over to Xerox the writing is on the wall.

Expect Coventry to either make a major investment in bill review (highly unlikely) or outsource the application to a third party (highly likely).

The Comp Conference begins…

I’ll be blogging from the NWCDC this week – here’s what we’ll be looking for…

  • latest and greatest new thing on the Exhibit floor.  In the past (waaaay past), it has been MSAs, drug testing, PBMs, disaster recovery, security.  What’s big now?
  • new announcements that are actually “new” and worthy of announcement. Every year we (pseudo) media types get flooded with press releases announcing hugely exciting events/deals/breakthroughs – many of which are not a) exciting or b) news.
  • best, most useful, and well-done presentation - looks like there will be several potential ones
  • wildest rumor on the floor. What will it be this year?
    • Aetna decides to invest in workers comp?
    • Examworks and MES are actually the same company?
    • Bob Wilson is a closet liberal?

And of course, we’ll be hoping the Latin Grammys are in the Mandalay Bay again this year. Gotta have some really exciting new stuff!

Bringing a knife to a gun fight

Employers, taxpayers and insurers got a very loud wake-up call last month. If there was any doubt about the financial power of dispensing companies and their owners (we’re talking you, ABRY) – and the unbelievable profitability of dispensing – that has been put to rest.

Physician dispensing companies spent over a half-million dollars on lobbying efforts to allow physician dispensing to continue in Pennsylvania.  Unlike battles in other states – Maryland, Florida, Hawaii come to mind – doc dispensing opponents were able to prevail despite an overwhelming disadvantage in financial resources.

In most other battles, we have lost, lost repeatedly, and lost badly.  That’s what happens when you bring a knife to a gun fight.

indy-vs-gun-with-big-knife

Yes, employers, injured workers, and taxpayers did win in PA, but only because we were there early, in force, and coordinated – an unfortunately uncommon event.  We managed to overcome dispensing companies’ overwhelming financial resources only with a concerted effort on the part of many, many people and organizations coupled with strong leadership from key influencers and committed and persistent legislators.

Meanwhile, we’re finding that the measures taken in Connecticut to reduce costs of physician dispensed repackaged drugs aren’t working out so well.  A just-released WCRI study indicates that, while prices are down from pre-reform days, doc-dispensed drugs still cost 30 to 60 percent more than the same drugs bought from a retail pharmacy.  In my view, there are a few reasons…

  • Docs are dispensing a lot of over-the-counter drugs at prices far higher than the OTC retail price.  We’re talking generic Tylenol(r), Prilosec, etc.
  • Dispensing companies are likely sourcing their drugs from manufacturers with high AWP prices; these manufacturers give dispensers a big discount, allowing them to make more money on the “spread” between their cost and what they charge work comp payers.
  • The “contract” manufacturers that have targeted the work comp dispensing industry are selling direct to dispensing companies at prices very close to – if not more than – the repackagers. This allows them to get around the “original manufacturer” price that’s set as the cap in CT.
  • PBMs get a hefty discount below the fee schedule which reduces employers’ costs rather dramatically – this discount isn’t available from doc-dispensed drugs.

What does this mean for you?

1.  Employers, insurers, and their allies need to get serious about physician dispensing.  It is costing taxpayers and employers about a billion dollars a year.

2.  Regulations/legislation based on “original manufacturer” language, while helpful, are readily circumvented by dispensing companies.

3.  Banning dispensing outright – as Texas, Ohio, Washington, North Dakota, Massachusetts, and New York do – is by far the best answer.

 

More on asbestos and workers’ comp

After reading last week’s post on asbestos and work comp, a good friend and colleague sent me the following.  As he is far more knowledgeable about this than I, his view is well worth consideration.

Interesting points you bring regarding the overlap in the asbestosis/mesothelioma latent injury litigation.
The individual states have always relied on the WC statutory time bars for reporting latent disease injuries.  The true reason why the plaintiff’s attorneys have historically chosen the general liability path to litigation is because the claim for conscious pain and suffering is excluded from workers’ compensation.  Also—the trigger theories for liability in GL permit the plaintiff to assert that he could not have known that he was injured until the long-gestating disease was “discovered.”  Hence, the trigger for coverage was extended until that point when the disease manifested, often some 30 to 40 years after actual exposure began.  Those characteristics and the chance to assert punitive damages were the catalysts for asbestos litigation in Federal courts; bigger damages and bigger awards.
That is also why some of the earliest asbestos-related work injury cases were filed in industries like rail, ship-building, steel and glass/insulation fiber industries.  Specifically with the rail employees—WC never applied.  Interstate commerce required FELA to be applied (the Jones Act and US Longshoremen & Harbor workers Act are built off the FELA model).  As a federal statute FELA permits conscious pain and suffering to be considered compensable.   Those claims are litigated under common law, hence a judge and—more specifically–a jury determine the facts of the case and render verdicts.  Juries determine if conscious pain and suffering were applicable in their jury verdict awards.  They also determine if punitive damages apply.  The verdicts can be gigantic.
The exhaustive litigation discovery over the course of the past 30 years of asbestos litigation demonstrated that manufacturers, distributors and users of the product (employers) in the “stream of commerce” knew of the dangerous characteristics of asbestos products—which always created a risk to them that punitive damage awards could be tacked on by jury trials.  That is principally why asbestos litigation defendants negotiate settlements rather than risk adverse jury verdicts.
One other note—of the two claims you cite—the defendant in the PA case is AK Steel—-which is a relatively “young” company.  Without doing any research, my guess that AK Steel is the successor to one of the old line Pittsburgh-based steelmakers.  In that case, the worker would have to demonstrate that his exposure while working for the steelmaker was latent and long-gestating.
Asbestos litigation has been troublesome for the insurance industry for more than 30 years now so the new rulings regarding WC create interesting discussions.

Monday catch-up

Here’s what happened last week.

First, the election.  A thorough butt-kicking to be sure.

Now, we will see if the two very distinct wings of the Republican party can work together.  With almost all of the moderate Dems losing their elections, projected majority leader McConnell will have to figure out how to keep his fractious caucus together while adding a few liberal Democrats if he is to have any hope of getting the 66 votes needed to overrule any Presidential vetoes.

This will be entertaining.

Reform implementation

Rates for most 2015 plans on the Exchanges are not going up much, and in some areas are dropping.  Average premiums are going down in 6 states, rising by 5% or less in 10, and increasing by >5% in only 2.

Obviously this somewhat discredits the warnings of rate shock, but we’ll have to wait for the expiration of the “3Rs” (which reduce insurers’ risks) before we’ll see fully market-based rates.

Healthgare.gov has released a web app for shoppers to quickly compare plans and benefits - without the registration requirement.  Should have been out earlier, but better late than never.

BTW, an excellent piece in The Economist provides objective insight into the goods, bads, and uglies of PPACA - along with solid recommendations on how it can be improved.

Hospitals are going to be screaming.  Even louder.  A research piece in HealthAffairs details the impact of Medicaid non-expansion on hospitals in poor financial shape. Briefly, PPACA ended subsidies for those hospitals, anticipating they’d benefit from higher Medicaid enrollment.  As an example, DSH payments to struggling hospitals in Texas will decline about 52% in 2018.

State officials determine what hospitals get how much money, so the lobbying will be intense.  Facilities without strong relationships with state governments may well not survive.

Methinks more cost-shifting may be in the offing.

Workers’ comp

In WorkCompCentral last week Greg Jones’ article on the California State Fund provides a brief summary of the huge changes at the State Compensation Insurance Fund over the last few years; premiums and employment have both dropped by about half, operations have been dramatically streamlined, and a new rating program developed that makes the State Fund a viable competitor in good times as well as bad.  There’s much work to be done, but credit should go to former CEO Tom Rowe and his colleagues for these notable accomplishments.

A great piece in Insurance Journal by Safety National’s Mark Walls on that bane of our existence – physician dispensing in work comp. The conclusion:

There is overwhelming evidence to support that physician dispensing increases costs, lengthens disability, and produces poor outcomes for injured workers. It’s time to end physician dispensing in workers’ compensation.

In yet another deal, Apax/Genex bought case management firm MHayes. Congratulations to owners Melinda Hayes and Helen Froehlich; they built a pretty solid company with an interesting affiliate approach.  With revenues in the $15 million range and an EBITDA likely a bit more than 10%, this isn’t one of the bigger deals done by Apax on their way to building an ever-larger behemoth.  However, it does remove a competitor that was successfully competing with Genex and had service niches (that may prove valuable.

Perhaps MHayes will help Genex resolve their long-standing billing issues.

It’s the last week before many lucky souls head to Las Vegas for the gathering of the work comp tribe.  Shameless plug – I’m moderating a session on Private Equity and Workers’ Comp; Thursday at 10:45, principals from three of the leading private equity firms will be giving their insights into:

  • the impact of outside investors on comp,
  • the reasons this is such a hot investment opportunity,
  • what investors look for, and
  • what we can expect in the future.

We’ll have a lot of time for Q&A too.

 

The GOP wins big – now what?

With big wins in the Senate, House, and governors’ races, the GOP is poised to push its policies – here’s a brief review of potential moves.  For the next two years the GOP will be in charge of Congress where it can do a lot to hamstring PPACA via budgeting procedures and incremental changes.  Then, GOP candidates can point to the failure of PPACA as proof of the incompetence of Dems.

Pretty neat.

First, let’s not jump to the conclusion that this race was all about “Obamacare”. Polls indicate ACA and implementation thereof was a secondary issue - if that - in almost every race.

Second, the next two years will be mostly political positioning in preparation for the 2016 election.  Republicans will seek to show Democrats are “the party of no”, offering up a plethora of bills for President Obama’s veto.  Dems will lick their wounds and take heart in the favorable Senate electoral landscape, which is pretty much the opposite of this year’s.  Whether that will remain the case two years’ hence remains to be seen.

Changes to ACA -

There will almost certainly be yet another effort on the part of the House to repeal PPACA, and the Senate will likely go along – subject to a filibuster. That will be political theater, laying the groundwork for incremental moves.

Expect an early effort to dramatically alter, if not repeal, the mandate for employers with more than 50 workers. It has been delayed already, is anathema to conservatives, and if combined with other “fixes” may force a signature.

There may also be a movement to overturn the individual mandate; this will also be veto’ed.

Copper plan – some have advanced the idea of a cheapo health plan that would cover about half of an insured’s medical costs.  While this doesn’t make much sense, it does have the backing of a couple Democrats in the Senate which may be enough to get it past the filibuster hurdle

The risk management program (the “3 Rs”) program that shifts ‘excess’ profits from insurers with low claims to help insurers with high claims costs cover their expenses (full explanation here) is particularly distasteful to conservatives who want insurers to rise or fail on their own.  It is scheduled to expire at the end of 2016; expect the GOP to push to end it sooner.  That said, the insurance industry and their allies will push very, very hard to keep the 3Rs in place.

The much-despised medical device tax will face repeal; not for good policy reasons but because the device industry is loaded with cash and spends it lavishly on lobbyists and politicians.  Washington at its best…

There’s a push to release more data on outcomes and pricing so consumers have a better idea what treatment costs and who has what outcomes.  Don’t expect this to get very far; for some good, and some not-so-good reasons, physicians don’t want this information out there – primarily because some will look bad.

Medicaid expansion – there’s likely going to be more resistance to expanding Medicaid due largely to the extent of the Republican wins.  Kansas and Maine would have added coverage if the Dems had won; there would have been more support in other states as well.  The broad-based wins by conservatives will push expansion off the agenda – at least until the next election.

What does this mean for you?

Washington is dysfunctional now, and will be much worse.

For investors, insurers, and employers, even more uncertainty about the future of health care.  Just what we need.

Asbestos pokes its long nose out from under the workers comp tent

Judgments in two recent court cases held that long-tail asbestos claims are not subject to the comp bar.

A very good friend who spends most of his time dealing with asbestos claims for a very large carrier shared this with me in a recent email.  Here’s how he put it:

If this contagion were to spread (and that depends very much on the precise wording of the comp statutes in each state), a lot of employers who might have believed that they were protected by the comp bar will find themselves defendants in lawsuits brought by former employees, which raises lots of questions about the applicability of their GL or EL coverage, assuming they had it and can identify the insurers.  [emphasis added]

The two cases are Tooey v AK Steel Corp et al., 81 A.3d 851 (Pa. 2013) in Pennsylvania and  Folta v. Ferro Engineering, 2014 Ill. App. LEXIS 444 in Illinois.

In Tooey, the PA Supreme Court ruled that the exclusivity provisions of the Pennsylvania Workers’ Compensation Act did not bar former employees alleging asbestos exposure from bringing lawsuits against their former employers when the asbestos related disease didn’t appear until after the time limit for filing for statutory work comp benefits had ended – which is 300 weeks in PA.

In Folta, an Illinois appeals court used the Tooey citation in revisiting an asbestos injury suit filed by an alleged victim who wasn’t diagnosed with an asbestos-related disease until 41 years after leaving his employment.

There’s a lot of legal detail involved including determining which statute takes precedence, however the likelihood that the Courts’ rationales are not likely to be limited to asbestos claims may well be the most significant.

What does this mean for you?

This strikes me as one of those things that could either be very, very meaningful.  What think you?

Friday catch-up

Lots happening in the workers’ comp world these days – here’s what caught my attention this week.

WCRI released its CompScope report, which is actually 15 separate reports covering 16 states.  I’ll be reviewing it in detail next week; for those who can’t wait you can find the summary of the news on Illinois here.  WCRI will be releasing other highlights over the next couple of weeks.

The good news in IL is the change to the fee schedule has had the desired effect; costs are about 20% lower.  That’s the good news; but all is not rosy.

  • PT continues to be problematic; utilization in IL is much higher than average among CompScope states at 25 visits per LT claim.  Only PA, with 27, is higher…
  • Surgery costs per claim were also highest among the study states.

More work to do in the Land of Lincoln.

Several states are looking hard at implementing formularies; Arkansas is considering adopting ODG’s, scheduling a public hearing on that proposed change for later this fall.

There is considerable interest in Washington’s formulary.  CWCI’s analysis of the ODG and WA formularies and implications of implementing them in the Golden State has generated quite a bit of interest; with projected annual savings ranging from $124 million to $420 million that’s not surprising.

Notably, Ohio’s formulary – which is truly closed, has resulted in almost no “non-formulary’ drugs dispensed to claimants.  While it is not as well known as TX and WA, the OH formulary, adoption process, and results show just how effective a well-managed formulary and drug management program can be.

WCRI’s hosting a webinar on the potential impact of adoption of the ODG formulary in other states.  Led by Dr. Vennela Thumula, the one-hour  webinar is on Thursday, Nov. 20, 2014 at 2 p.m. ET (1 p.m. CT, 12 noon MT, and 11 a.m. PT).

For those interested in the future of the workers’ comp world – which should include anyone working in the work comp industry, a lengthy piece on the future of international labor markets by The Economist is worthy of your attention.  Very well-written (as is typical for the Economist), they key points (quoting the article) are: [emphasis added]

  • the rise of machine intelligence means more workers will see their jobs threatened. The effects will be felt further up the skill ladder, as auditors, radiologists and researchers of all sorts begin competing with machines. Technology will enable some doctors or professors to be much more productive, leaving others redundant.
  • wealth creation in the digital era has so far generated little employment. Entrepreneurs can turn their ideas into firms with huge valuations and hardly any staff.
  • these shifts are now evident in emerging economies. Foxconn, long the symbol of China’s manufacturing economy, at one point employed 1.5m workers to assemble electronics for Western markets. Now, as the costs of labour rise and those of automated manufacturing fall, Foxconn is swapping workers for robots

Time to get to work – the annual Health Strategy Associates Halloween party is tonight!