Recently I had the honor of meeting the nation’s foremost expert on disability – Glenn Pransky M.D.  What a wonderful gentleman.

Glenn is the Director of Liberty Mutual’s Center for Disability Research; he is an occ med physician and has his Master’s in Occupational Health as well and has authored over a hundred articles, research papers, and book chapters.  That’s all quite impressive; what really struck me is how approachable, genuine, and open Glenn is. [my use of his first name is intentional, Glenn is completely without pretension or ego.]

His passion is disability; reducing its occurrence, mitigating its impact, improving the lives of those with physical limitations.  The research Glenn and colleagues have conducted includes seminal work on low back pain’s impact on disability; age and job tenure and their relationship to disability duration; the impact of pain on disability; the effect of supervisors’ leadership on return to work for workers with back ailments.

And that’s just what he did last year; if you want to fully grasp the depth and breadth of Glenn’s work, peruse this list.

He will be the first to note that there are a lot of co-workers at the Center and co-authors and fellow researchers that have also done yeoman work, and that’s true.  But Glenn’s contribution is second to none, and its clear that his leadership, focus, and keen intellect has had a wide, deep, and overwhelmingly positive impact.

Kudos to Liberty Mutual for its foresight in setting up the Center almost two decades ago, and for continuing to support its work.  The Center’s contribution to the betterment of America’s workers, in fact to all of us, has been significant indeed. [full disclosure – I was employed by Liberty for several years back in the 1990’s.]

Examworks released their Q4 and 2015 earnings report last week, while Clinical Solutions boss Ken Loffredo and several of his colleagues left the company rather abruptly, with Ken departing ten months before his contract was up.

First, key takeaways from the earnings call, followed by my take.

1. organic growth in the US increased by 0.7%
   ManagedCareMatters – Given work comp claim (Exam’s core source of business) frequency continues to decline, that’s not surprising.
2. Execs claim they’ve signed a “national account” and another will close later this year.
   MCM – From talking to investors, there’s a misconception about so-called “national accounts.  Namely, this just gives Exam a license to hunt; their field sales force still has to go out and beat the bushes to get adjusters to refer cases to Exam. Notably, I know of NO national payers that use ANY IME provider exclusively; most have several.
3. Exam execs believe that they are killing off small mom-and-pop IME firms that can’t compete w Exam on price or service
   MCM – I’ve spoken with several IME firms of varying size; all claim to be competing effectively with Exam
4. Exam claims it has 15% of the US IME business.
   MCM – Let’s dig into the math…
   1. 2015 US revenues were $511 million.
   2. Estimating the clinical solutions group business accounted for, say, $60 million of the $511 million, IME revenues totaled somewhere around $400 – $450 million.
   3. So, EXAM believes the US IME business totals between $2.7 – $3.0 billion
   4. That’s around twice as high as my best estimate, which is based on actual interviews with major payers. [happy to have you check my assumptions and math]
5. “We estimate that only 20% of claims require IMEs.”
   MCM – Interested in hearing from folks in work comp or disability; what percentage of total claims have IMEs?
   UPDATE – from a former WC Insurer CEO:
   “20%? 20% of what? There is no way we ever had that volume of total claims with an IME, ever. We would have been in perpetual litigation…to have 20% of all claims in a standard carrier go to IME … just seems crazy to me.”
6. don’t expect many more acquisitions of IME firms
7. document management firm ABI was acquired six weeks ago; execs seem to think they’ll be able to convince their IME customers to use ABI for “the vast majority of their claims”

Other observations

• Net income from operations dropped by almost half from 2014 to 2015.
• Pricing is a complex issue.  Often there is a “flat” price which gets inflated with add-ons such as rush fees, documentation prep fees, nurse review fees, complexity surcharges and the like.  Thus, unsophisticated buyers often think they are getting one price – and end up paying much more.
• Not sure I understand management’s thinking re ABI; almost all P&C insurers currently use a document management firm; Xerox is a major player in this business and is the industry leader.  If Exam is intending to compete with Xerox for broad-based document management, that will be a big challenge.
• Sources indicate the Clinical Solutions Group (acquired about 18 months ago) isn’t doing so well.  Those who follow the Medicare Set-Aside business aren’t surprised; Exam’s pricey acquisition of Gould and Lamb was seen as a head scratcher.  The ASN/MedAllocators purchase a few months later may have been an attempt to fix G&L by bringing in experienced management and complementary business lines. With the departure of Loffredo, chief lieutenant Kevin Mahoney, and others the future of Exam Clinical Solutions seems rather cloudy.

Perhaps the new ABI business will turn out better than the Clinical Solutions venture. And that’s no slam against Loffredo et al; my take is they were brought in to patch a very leaky ship while sailing it in a very competitive race.

It would have required a ton of resources to patch, bail, and sail, resources which weren’t made available.

Many high-injury rate jobs that drive lots of work comp premiums and services won’t exist in ten years.  And lots of low-injury rate jobs will disappear as well.

How we prepare for this – or rather how you prepare for this – will separate the survivors from the corpses.

A bit of historical perspective; twenty-plus years ago when I worked at MetraComp, Lockheed Martin’s Fort Worth plant was a customer.  The workforce there was highly trained, averaged around 48 years old, and paid very, very well to make fighter jets.

MetraComp’s contract with LM had a big success fee baked-in.  MetraComp would be rewarded for improving disability results, and penalized – rather painfully – if future results were close to or, God forbid, below historical results.

Then the Air Force decided to stop buying new fighter jets.   The average worker had 17 years to go till retirement, was making great money, and there were zero jobs in the area that paid anything close to the hourly rate, much less provided LM’s benefits.  Add in the physical nature of the job – crawling around inside really small spaces attaching tiny parts requiring lots of repetitive movements.

The injury rate jumped, while opportunities for re-employment suddenly dried up.  MetraComp got killed.

Today, we’re looking at a future with a whole lot of Lockheed Martins.  

A robust and well-documented research project estimates almost half of US employment is at risk of disappearing.

Here’s just one industry where we’re going to see big changes.

Trucking employs 3.5 million drivers today, paid about $40k a year.  Good-paying jobs that don’t require a college degree, a rarity in today’s economy, jobs that will disappear with autonomous driving. When they do, jobs in truck stops, motels, and restaurants will dry up.  And the folks who drive the trucks and work in those truck stops, motels, and restaurants will not spend their wages in small towns, rural areas and cities.

BTW, truck driving is the most common job in 38 states…

For now, trucking is a great business.  For now.  Sure, there aren’t enough drivers today, but those jobs aren’t going to exist in 10 years.

So here’s the two questions you need to ponder.

Are you insuring/serving a thousand Lockheed Martin jet factories?

Where are you going to re-employ the truckers, hotel staff, wait staff, and mechanics? 

First, WCRI’s annual meeting is coming up quickly.  The fine folks from Cambridge Mass have added a second panel on opt-out.  You’ll hear from a regulator, employer, workers’ advocate and industry spokesman after listening to a “point-counterpoint” from two of the leading experts on opt-out.

For anyone who’s remotely involved in or affected by work comp, this is a must-do; you’ll get a solid education on one of THE key issues in workers’ comp.

Second, Tennessee’s adopted the ODG treatment guidelines and formulary; they go into effect Monday. More precisely, as of 2/28/16, the formulary applies to refills of scripts written before 1/1/16.  For newer prescriptions, the effective date is August 28, 2016.

Tennessee becomes the fifth state (after WA, OH, TX, OK) to adopt a drug formulary; perhaps a dozen others are working on formularies.

I’ve been far from diligent in posting of late – now that a couple projects are almost wrapped up, thing should get back to normal.  Thanks for your forbearance!

Back from vacation and catching up on all the goings-on; some pretty big news out of California re work comp these days…

We’ll start with the highest impact news, and that is the California Supreme Court’s “decision” to let stand a lower court ruling that the IMR process is not unconstitutional (sorry for the double negative) AND that the IMR process does not violate an injured workers’ due process rights.

While there remain constitutional challenges to the IMR process, the Court’s decision to not review the lower court’s ruling implies these other challenges may face a similar fate.

Implication – business as usual for California.  As Court rulings supporting the IMR/UR process continue to pile up, it’s becoming increasingly clear that IMR is not going away.

Serendipitously, CWCI just released its latest analysis of IMR outcomes for 2015 (they work fast out there in Oakland!).  Here’s the need-to-knows:

• IMR letters increased 19% from 2014 to 2015.
• Turn-around-time (TAT) is pretty stable – and a lot faster than in 2014
• UR decisions were upheld by IMR 88.6% of the time – essentially identical to previous results.
• Drugs were the leading category of service appeals yet again, with opioid scripts topping the list as the drug class most-commonly appealed.  88% of denials were upheld.
• Compounds accounted for 11% of requests; denials were upheld 98% of the time.
• 10 physicians accounted for 34,700 IMR decisions – 11.8% of the total

Implication – Many docs are not learning – or are willfully ignoring established precedent for medical necessity/appropriateness.  The 10 docs who average 10 letters for every calendar day are jamming the system with futile requests, knowing full well that 9 out of 10 will be rejected.

Why?

As California moves to adopt a formulary next year, we may well see a rise in IMR requests when these unteachable docs continue to prescribe drugs that are inappropriate.

Thanks to Bob Young at CWCI for the heads’ up; CWCI’s take on the Court case is here.

Another item worthy of your attention – Congratulations to Rick Victor PhD; the founder and former Executive Director of WCRI has been named a Senior Fellow at the just-established Sedgwick Institute. Rick is a good friend and one of the most honorable people I know. It is great to see he will stay involved in the industry.