You’d think I’d learn not to make public predictions that may come back to haunt me, providing ammunition for folks who think I don’t know diddly.
But I subscribe to Teddy Roosevelt’s philosophy” “The only man who never makes mistakes is the man who never does anything.”
Here, in no logical order, are what I believe will happen in the work comp managed care world in 2010.

1. Acquisitions will accelerate.
We’ve seen an upsurge in the number of deals of late, with FairPay and One Call Medical the two biggest and most recent. I’d expect this to continue; Bunch may be next to go, but ownership’s demand for a 9x + multiple isn’t likely to fly. If they manage their expectations and get a bit more realistic, it could happen.
2. Coventry (the big Coventry, not the WC entity) will be acquired.
OK, I predicted this last year and was wrong (or more generously premature). But now that the health reform picture has cleared up, credit markets are (somewhat) functional again, and stock prices of other healthplan companies are up, I’d expect Wise et al to sell their company, perhaps to United HealthGroup.
As to what happens to the WC group if it does get bought, that’s worthy of another post – and some deep thinking by big WC payers tightly tied to Coventry WC.
3. The basis for WC Drug fee schedules will start to move away from AWP.
This is a ‘gimme’; AWP is disappearing in early 2011, leaving regulators and legislators little choice. The big question is obvious – what replaces AWP, and how will the ‘new’ fee schedules compare to current ones.
I do know regulators in several states are already deep into this, and are looking at multiple options. Where they end up will have a dramatic impact on WC drug costs (NOT just prices, but TOTAL cost), payers, and PBMs.
Lots more to come.

4. (Some/Many) WC physician fee schedules will change significantly
Congress is very likely to change the Medicare physician fee schedule, which is the basis (to a greater or lesser degree) of all WC physician fee schedules except California’s (which may adopt a Medicare-based fee schedule). When that happens, some state fee schedules will change immediately, some will probably not change at all, and others will go thru a process that may well result in modifications.
5. The WC insurance market will harden, bringing more business to case management, UR, bill review, and network vendors.
As the economy recovers and the jobs picture brightens, hiring will pick up and so will the raw number of injuries as well as frequency. That, along with rising medical expense, is the ‘cost-side’ driver. The ‘supply side’ of insurance is somewhat cloudier, as there still appears to be excess capacity; Fitch and others believe the fundamentals point to an extended hard market well into 2011, and there’s still a lot of capital sloshing around looking for a home. All that said, the current hard market has been around far longer than most, and when things can’t continue they won’t.
6. The rise of the Medical Director
Several large payers are re-visiting the role of medical management, examining medical costs in detail from multiple angles. What they will, and some are, finding is a need for better medical management of claims. A lot better.
The stuff that passes for ‘medical management’ in work comp is mostly driven not by a desire to better manage medical care, but a need for revenue – medical management programs have become a revenue and margin generator, a role that has come to supersede their original purpose.
As medical costs rise despite payers’ ‘investments’ in managed care, more payers are revisiting the role and results of their programs, and some are finding there’s precious little ‘medical management’ going on; outdated guidelines, bill review driven by throughput rather than accuracy, networks constructed to deliver phantom savings, case management that is more highly paid secretarial work than anything else. Payers are turning increasingly to their medical directors for more guidance; the M.D.s can be forgiven if they respond grumpily, as many have been all but ignored for years. That’s going to change, and is changing fast. I’d expect to see the ‘market’ for assertive, data-driven Medical Directors heat up considerably in 2010.
7. Drug costs will return to the fore.
Drug prices are up over nine percent so far this year, on top of a 7.5% increase in costs in 2008. After five years of decreasing trend rates, the monster is back. Fortunately we know a lot more today than we did years ago about drivers, due to the great work by Swedlow et al at CWCI and the excellent analyses by NCCI. Unfortunately, there are still far too many payers choosing their PBMs on the basis of price per pill rather than drug cost per claim.
But that’s OK, as the price-driven buyers will find their costs go up, while the cost-aware will find the opposite.
8. Florida’s attempt to redo facility fee schedules will continue to plod along
The ongoing battle over the work comp hospital fee schedule in Florida continued last month, as challenges to the pending changes were filed by two hospitals, the Florida Hospital Association, and FairPay Solutions. These challenges prevent implementation of a dramatic revision to existing fees pending further action by an administrative law court. This is good news, as the changes will result in dramatically higher costs…
Here’s hoping payers get off their collective duff and get focused on this before it is too late. I’m not hopeful.

9. TPAs will continue to try to make up lost margin by internalizing managed care services
This is an easy one, as it simply acknowledges a continuation of a current trend. As employers have abandoned self-insurance, TPAs have struggled to compete, with many forced to slash claims admin fees to hold on to business. They’ve got to get the dollars to keep the doors open from somewhere, and that ‘somewhere’ is increasingly their managed care department. What started out as demands for commissions and fees from managed care vendors has evolved into TPAs increasingly internalizing those functions.
This isn’t ‘good’ or ‘bad’, it is simply an industry dealing with a market reality. Employers who complain should be ready to pay higher admin fees…
I welcome your predictions.