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Aug
22

What’s going to drive real change in workers’ comp

It’s not regulators, employers, providers, or insurers.

It’s not judges, advocacy groups, or bloggers. Not employment changes, on-shoring, infrastructure investment or Obamacare.

It’s private equity.

There are dozens of PE firms looking hard at this business, with many heavily involved in bidding on past and present opportunities.  There are several reasons for this interest;

  • other PE firms are interested, and there’s a bit of herd mentality at play here
  • investors are increasingly leery of health care/insurance sector plays focused on care regulated by PPACA; some functionary at CMS could blow up an entire business model by changing a few words in a few regulations, and that’s just too risky.
  • the deals are getting bigger – much bigger.  Some PE firms don’t play in the hundred million to a few hundred million dollar range; as the deal size grows the mix of firms involved does too.
  • work comp is STILL seen as an aging, creaky dysfunctional industry ripe for process improvement and increased efficiency.

This last bullet is to the point.  The more that these PE firms are involved, the more they will seek to modernize the industry.  While the founders, and initial investors in work comp firms made their millions navigating thru the mess, and in many cases taking advantage of the very dysfunction that defines workers comp, the new owners have little patience for this, and a wealth of experience squeezing inefficiencies out of systems.

They will engage lobbyists and hire ex-regulators, invest in technology, build strong co-operative relationships, relentlessly reduce cost, and listen very, very hard. And when they act it will be decisive.

Of course it’s going to be difficult and time-consuming and frustrating, but these folks have done this before, and they’re about to do it again.

What does this mean for you?

Things will get faster smarter and more efficient, to the benefit of many and the detriment of some.

 


3 thoughts on “What’s going to drive real change in workers’ comp”

  1. A little fresh blood and new thinking will be good for our industry. Too many have the frustrating tendency to keep doing the same thing repeatedly and expecting different results.

  2. I think that we will also see large, sophisticated firms from outside the industry carve out chunks of business which historically would have gone to work comp insiders. The recent award of a $40 million contract for independent medical and bill review to Maximus by the State of California is an example.

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Joe Paduda is the principal of Health Strategy Associates

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