Insight, analysis & opinion from Joe Paduda


Work comp -The Innovation Prevention Industry

Workers’ comp is the Innovation Prevention Industry.

As I wrote years ago, many executives, risk managers, “thought leaders” and brokers decry the lack of innovation in workers’ comp – yet they are often the very reason innovation doesn’t happen.

There are a host of reasons – cultural, practical, financial, historical, structural – all hampering, if not outright preventing real innovation.

Fundamentally, work comp is hyper-conservative, hidebound and traditional. A few notes…

  • it’s almost entirely about musculoskeletal injuries – which haven’t changed for about a million years (no, that’s not hyperbole). Cause, treatment, and physical recovery are extremely well-understood – at least for those who want to understand.
  • it’s insurance – which by definition is risk-averse
  • it’s not important to the C-suite – work comp costs are a rounding error on corporate ledgers, account for <1% of US medical spend, and are steadily decreasing.

Structural problems  – starting with the RFP process – kill off innovation, starving it of light and energy before it can take root.

In most – but not all – cases, the RFP/vendor selection process is just stupid. The entire thing is intended to allow the committee to pick a vendor – to compare apples to apples by forcing respondents to tell how they will deliver a specific, detailed, highly-structured solution that precisely meets specs.

That’s fine – but what if you really need an orange?

Instead, the buyer should ask how each vendor will solve their problem, what they do differently, how they can deliver better results, and what the buyer must do to achieve break-through results.

Next – other barriers to innovation, and why you need to blow them up.


Thursday catch-up

Doing my best to avoid work on Fridays…so moving this occasional catch-up post to Thursdays…


Promising news on the effectiveness of a drug to help infected patients fight off the virus was reported by the Economist. The good news – Regen-Cov:

saved the lives of many of those unable to make their own antibodies in response to SARS-CoV-2. Such “seronegative” individuals constituted about a third of the 9,785 hospital patients in the study…compared to a control group given standard treatment … 20% more patients survived

The bad news – it’s stupid expensive, and supply chain issues are hampering production.

A study conducted by the National Institutes of Health indicates COVID may have been in circulation earlier than originally thought. Blood samples from Illinois, MassachusettsMississippi, Pennsylvania and Wisconsin indicate the virus was in those states in December 2019. An earlier CDC study found similar evidence in California, Oregon, and Washington.

These findings indicate a better and more thorough process to identify disease outbreaks may well be warranted.

Comp drugs

WCRI is hosting a timely webinar on Interstate Variations and Trends in WC Drug Payments on June 24. Register here. Gotta say I’m darn impressed by the researchers’ ability to obtain, analyze, and report on payments as recent as Q2 2020. This makes WCRI’s information much more actionable for regulators, clinicians, and payers alike.

Dr. Vennela Thumula and Dongchun Wang of WCRI will be guiding us thru their findings; the webinar is free.

I am finishing up the latest Annual Survey of PBM in WC which will have 2020 and 2019 data; last chance to participate and receive a detailed, respondent-only version of the report. If you want to participate let us know in the comment section below (there’s no cost to participants).

Couple interesting – and very preliminary – takeaways…

  • growing interest in transparency, along with an increased awareness that this isn’t a simple issue.
  • spend continues to decrease, with respondents attributing some of the decrease to COVID.
  • opioid spend continues to drop, but most respondents are still struggling to help chronic pain patients/long-time users of opioids reduce usage.
  • there’s a growing awareness that the PBM pricing model needs to change. With spend declining and a push for transparency, knowledgeable payers understand that paying PBMs less year after year is not sustainable.

Previous public versions of the Survey Report are available here for download at no cost.








Hospital pricing

Hospitals are supposed to be publishing their prices – at least Federal regulations require them to. But those smart, sneaky administrators are figuring out all kinds of ways to avoid telling you how much it will cost for that MRI, drug, band-aid, or lung transplant.

From JAMA:

hospitals must publish discounted cash prices (applicable to uninsured patients) and payer-specific negotiated rates. Second, hospitals must display price data, including expected out-of-pocket costs, for “shoppable services” that can be scheduled in advance (eg, office visits) in a consumer-friendly manner that facilitates service-specific comparisons across hospitals (eg, price estimator tools). [emphasis added]

As of early March, only 17 of 100 randomly selected hospitals were complying with the regulations. The penalty for non-compliance is…wait for it…

$300 a day.

Perhaps if the Feds charged hospitals the same way hospitals they charge us, we’d have a bit more compliance. 

How about…the Feds tell the hospitals after the fact what the cost will be, based on a “compliance chargemaster” that takes into account the hospital’s margin, quality scores, number of collection suits it has filed, and medical error rate.

Thanks to the estimable David Deitz MD PhD for the head’s up.

Wellness works

Finally, HealthAffairs reports wellness programs don’t really improve population health, reduce healthcare spending, or improve employment outcomes. 

Almost 40 years ago, I was halfway through a Master’s of Science in Health/Fitness Management when it became obvious this was NOT going to be a lucrative career…quite the opposite. Not saying I was prescient, just that employers sensed this was a nice-to-have and not a got-to-have, and that lack of importance showed in salaries.

Dodged that bullet.

And really finally, congratulations to my favorite baseball team – the White Sox have the best record in baseball after taking 2 of 3 from Tampa Bay. I

know my friends in the Bay area will be heckling me when the Rays surge again…hey, you gotta take advantage of good news when it comes!


A business model in search of a problem

The workers’ comp services business is brutally competitive; a shrinking pie fought over by increasingly aggressive vendors, each striving to differentiate and demonstrate value.

Smaller players and newer entrants are pushing hard, attempting to show how their approach/service model/pricing/technology is better than more-established competitors’. This is keeping the big players on their toes, forcing them to improve, revise, deliver, respond…even innovate.

I can’t – and wouldn’t – fault any vendor for its efforts to differentiate. For buyers, the key is to discern which “differentiators” are actually useful, and which are just marketing-speak intended to make the vendor’s business model viable.

Blah blah blah blah blah…blah

A couple ideas may help separate the real from the flashy.

First – what problem does this solve? and is that your’s, or the vendor’s?

I’d suggest buyers can cut to the core if they ask:

  1. is this is going to decrease my combined ratio?
  2. by how much over what time period?
  3. at what internal cost? and
  4. how – exactly – is it better, and by how much, than my present approach.

Second, what proof statements is the vendor using to get your attention?

Are they comparing their “results” to industry leaders? If so,

  1. Where – exactly – are they getting the data re the leaders’ results?
  2. What is the basis for comparison – are the types of claims, patient demographics, injury types and severity, diagnoses, co-morbidities, employer types, and jurisdictions the same for the new vendor and the industry leaders?
  3. Does the new entrant have enough claims (that are similar to its competitors) for the comparison to be statistically valid?

Finally, dig deep into the methodology and thinking behind the vendor’s approach. Do they really understand at a deep level the problem they are solving, and can they clearly articulate:

  • the causes and origination of the problem (e.g. facility costs are increasing due to revenue maximization efforts by healthcare systems driven by financial pressures)
  • why the current solutions do not meet the buyer’s needs (e.g. broad-based WC PPOs have little negotiating leverage, don’t assess quality, and benefit from high prices and lots of services), and
  • how their solution is better, sustainable, and where and how it integrates into the buyers’ operations, processes, and technology and is consistent with regulatory requirements.

What does this mean for you?

This is not to say there aren’t better answers out there – indeed there are.

The key is to quickly identify solutions with real potential to solve your problem, as opposed to those that solve the vendor’s.




The future of telehealth

Is going to be a lot clearer when Congress finishes work on the Connect for Health Act.

The bill has Bipartisan backing from 57 Senators, and would:

  • permanently remove geographic restrictions on telehealth,
  • allow patients to do visits from their homes and
  • grant the Secretary of HHS permanent authority to waive telehealth restrictions.

It is possible a competing bill  – which would only temporarily extend telehealth waivers – will be passed instead of the Connect for Health Act. Regardless, it’s clear telehealth is going to be a major part of US healthcare going forward.

Emergency regulations that lifted restrictions on telehealth are likely to extend thru the end of this year; these were a response to COVID.

One key issue is whether phone calls will “count” as telehealth, a change that would certainly expand the availability of these services, as even today many patients don’t have access to reliable internet and/or a video-connected device.

One likely change is reimbursement; expect Congress/HHS to reduce reimbursement for telehealth visits.


I’d expect most workers’ comp fee schedules to follow Medicare’s lead – even those that aren’t directly tied to Medicare.

What does this mean for you?

When Medicare does something, everyone else soon follows. 


Low prices every day = higher taxes

Cheap stuff isn’t cheap…you always pay way more than you think…because the hidden costs of that cheap stuff are damn expensive.

Two examples…

Walmart’s slogan is “Save people money so they can live better.”

McDonald’s mission statement includes “make delicious feel-good moments easy for everyone.”

The two giants (and McDonalds franchisees) employ over 4 million workers, paying wages that are significantly higher than the Federal minimum (which is $7.65 an hour) – but certainly not a “living wage.McDonald’s shift workers make less than $10 an hour; Walmart’s was a lot higher, almost $15 an hour.

In just 6 states, 15,000 Walmart and McDonalds workers and many of their families are on Medicaid. Undoubtedly tens of thousands more get their healthcare from free clinics or in hospital ERs. This is especially true in states that did not expand Medicaid – looking at you, Florida, Mississippi, Arkansas, Alabama, and a dozen more.

The median cost of Medicaid – which is NOT per employee, but the employee and dependents enrolled in Medicaid – is about $8000. If we figure just 20% of Walmart and McDonalds’ employees on Medicaid have dependents, taxpayers in those six states are paying $120 million a year for Walmart and McDonalds’ employee healthcare. 

Add to that the cost of uncompensated care for the uninsured – which is subsidized by overcharging privately-insured workers and workers’ comp payers – and its blindingly obvious cheap stuff is far from cheap.

This isn’t just Walmart and McDonalds; workers at Uber, DollarGeneral, Fedex and Amazon and many other companies get their health insurance – and supplemental food aid – from you, the taxpayer. In fact, more than half of Medicaid enrollees are employed by private companies.

Make no mistake – I’m not blaming McDonalds or Walmart or any other company for doing what they are doing – or rather not doing.  Americans are addicted to buying lots of stuff (a lot of which is redundant or really not needed) and demand low prices.

What does this mean for you?

These companies are giving us what we demand, and we are paying a hefty price for cheap stuff. 




Risk management 101

There are two selfish reasons the US should send as many vaccines as possible to other countries.

Variants.  The more the virus reproduces, the greater the chance it produces a much deadlier and more transmissible version. Each person vaccinated lessens the chances this thing becomes more destructive and dangerous.  Reducing the virus’ ability to adapt and become more deadly is a very good thing.

Leadership. Increasing out country’s influence and “soft power” around the world makes it more likely other countries will support our goals and policies – and protect our interests. For the foreseeable future our main rival will be China; if developing countries see the US as an active partner, committed to helping them battle COVID, we will be in a stronger position than we are today.

Of course there are moral arguments as well; saving lives is always a compelling argument.

Then there’s the reality here – we have way more vaccine than we need, so the “cost” of sharing what we have is minimal.

What does this mean for you?

Risk management 101 – reducing risk is always better than dealing with the consequences.  

This is one of those times where doing the right thing has lots of benefits.




Has anything changed?

The internet, smart phones, electric vehicles, 9/11, genome sequencing…a lot has changed since 1990.

But in workers’ comp…not so much.

About 30 years ago OUCH (now part of Coventry) started the national workers’ comp PPO business. Liberty Mutual execs (literally) handed OUCH a bunch of three-ring binders stuffed with contact info for the providers Liberty used, and asked OUCH to build one of those new network thingies.

OUCH did just that, then went out and marketed its network to every WC payer, merged with HealthCare Compare, became FirstHealth then Coventry Workers Comp, merged with Concentra’s PPO along the way, and got sold a couple more times.

Outside of several name changes, nothing has really changed since that fateful delivery of intellectual property. 

Sure, there’s been a lot of talk about “outcomes based networks”, but uptake has been minimal.  Reimbursement is still based on fee-for-service (the more service, the more fees), quality assessment is poor to non-existent, and buyers measure PPOs based on how deep the discounts are and how thick the provider directory is. Specialty networks have carved a big chunk out of PPOs, but many payers still access specialty services via their PPO contracts.

Networks charge payers a percentage of the discount below fee schedule/U&C – so the higher the charges, and the more charges there are, the more money the network makes. And the higher employers’ medical costs are. (I CANNOT BELIEVE I AM STILL WRITING ABOUT THIS AFTER 17 YEARS)

There were some promising attempts to do things differently…Sixteen years ago Crawford and Liberty Mutual got into the predictive analytics business.

“…Liberty Mutual uncovered what it believes are the two keys to managing workers’ comp medical costs.
First, the statistical averages for treating specific injuries in any city or state – for example, how many office visits are needed to heal a torn rotator cuff in Denver, or what does it cost to set a compound arm fracture in Pennsylvania. Second, how individual caregivers and facilities in the area compare to that baseline.”

Coventry started their Outcomes-Based Networks, some California payers (the State Fund being the leading example) set up their own tight MPNs, and the WC Trust of CT built a terrific network for its customers. While laudable, these are exceptions.

I get WC predictive analytics is really knotty for a host of reasons, but here we are, in 2021, with most payers having made little if any progress managing cost – and with the exception of pharmacy and some specialty niches – no progress on quality.

This is why lost time claim medical costs per claim have doubled since 2000.

chart courtesy NCCI

It is also why workers’ comp medical costs are set to increase this year and the ones to come.

What does this mean for you?

Until employers demand better, it won’t be.


Good luck with the truck.

Let’s get real.

You and your kids are driving 80 mph on a highway, when a truck suddenly veers in front of you.  Since you are a quick-thinking insurance person, you estimate your chance of dying if you hit that truck at about 40 percent – just a bit better than even odds.

Or, you can swerve off the road – where your chance of dying is 1 percent – about 1 in 100.


Or this…

What do you do?

That’s the question facing vaccine skeptics.

Vaccine skepticism is driven by memes, misunderstood data, a lack of understanding of basic math, pure laziness, demagoguing, and social media’s incredible ability to publicize nonsense.

Recently I had an electronic conversation where a COVID vaccine skeptic (my characterization, not their’s) cited “publications and VAERS” as sources for their concerns…I don’t know what publications the commenter was referring to; the only reference provided was a 14-month old TV report.

[reminder – if you discuss or debate, provide credible sources – ideally primary source – for your opinions.  Do your homework and don’t be lazy.  If you spout unsupported opinions – looking at you TJ – be prepared to be skewered.]

Leaving that aside, let’s talk VAERS, the vaccine reporting service run by the CDC and FDA. VAERS accepts reports from providers, vaccine recipients (or those who say they had a vaccine, parents, and “others” of any adverse event regardless of proof that it was caused by the vaccine. And VAERS reports can show deaths due to ANY CAUSE – could be drunk driving, hang gliding, heart attack, cancer, whatever.

Want proof ?A few years back VAERS accepted a report of a doc who felt like he was becoming the Incredible Hulk after a vaccination.  

VAERS is often misrepresented by Vaccine Skeptics lying about “problems” and deaths allegedly caused by the vaccine. [Here’s a great review of VAERS reporting issues]

Ok, the data.

VAERS received 4,178 reports of deaths (0.0017% of all who received the vaccine) between Dec. 14, 2020 and May 3, 2021. Remember about 165 million of us have had at least one shot. [source above]

Even if ALL 4,178 deaths were “caused” by a vaccine – and there is ZERO evidence that’s the case –  reality is your chance of dying from a COVID vaccine is far less than getting struck by lightning.

Compare that to your chance of dying from COVID – I ran the numbers here for a 55 year old white man from zip code 92111 with no pre-ex. The risk is .07 percent.

This person is 40 times MORE LIKELY TO DIE OF COVID than from an “adverse event” after you get a Covid vaccine.

What does this mean for you?

Science always wins…or, put another way,

Good luck with the truck.


What’s the state of work comp “managed care”?

I spend a lot of time in the weeds, digging into

That’s all well and good, but I tend to lose track of the big picture – in this case – what’s really going on in medical management these days, why, does that make sense, and what does the future hold?

So here’s where things stand.

  1. Medical costs are – generally – under control.
    NCCI’s data (see slide 35) shows medical inflation remains in the single digits, where it has been for a decade plus. NASI research is even better news.  Medical costs have declined – albeit marginally – from 2012 – 2017.
  2. Payers’ approaches to managing medical haven’t evolved much – if at all – over the last decade plus.
    Large, broad PPOs paid on a percentage of discount below the Fee Schedule?U&C are the dominant “cost containment” technique. Yes, specialty networks have made big inroads, but overall the Coventry PPOs of the world are where the big “savings” below FS originate.
  3. Those approaches are generally archaic, simplistic, too often based on the wrong metrics and don’t address quality.
    Bill review in work comp is falling further and further behind provider revenue maximizers.  Most vendors are complacent, driven by add-on fees for “savings” and “reductions” that are ephemeral at best, woefully lacking in innovation and blind to their own inadequacies.
    There is so little focus on or attention paid to quality it might as well not exist.
  4. The service entity landscape continues to consolidate, leading to fewer options for buyers and ultimately less control.
    This will accelerate.
  5. The vast majority of buyers treat service providers as nothing but interchangeable vendors, buying their services as if they were commodities; talking big about quality, customer service, partnership, and metrics and then buying on price. I’ll dig into each of these in future posts.

The good times will not last. Medical costs will increase – driven by facility expenses this year and thereafter.

I’ll dig into each of these issues, and what the future holds – in future posts.

What does this mean for you?

I can hear you thinking, “hey, we’re different and special, this isn’t about us.”

No, you’re not, and yes, it is.



It’s not about you.

Highly credible data shows today’s infection rate among the unvaccinated is as high as it was back in January.

Remember January?

Shutdown restaurants. Remote “learning”. No family gatherings. No high school sports. No fans at professional sports. No concerts or weddings or parties or fun.

80,000 of our friends, parents, grandparents, colleagues, and loved ones died of COVID in January.

If you aren’t vaccinated, don’t think you’re safe.  You are not. Your chance of getting COVID is the same as it was back in January.

But that’s not the worst of it.  Research shows the variants are more infectious, and in some states this is driving a hospitalization rate double what it was in January.

What does this mean for you>

Unless you don’t care about leaving family, friends, kids, parents, and loved ones with nothing but memories of you, get vaccinated. 

Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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