Author: Joe Paduda

Jun
15

Workers’ comp’s “profitability”

Posted by Joe Paduda on Monday, June 15th, 2015 | Comments

If workers’ comp is so profitable, why is Liberty Mutual de-emphasizing the business?

Because contrary to what NPR and ProPublica have reported, comp is NOT very profitable.  In fact, over the past decade or so, it’s barely a breakeven proposition.

Today’s Boston Globe reports that the former industry leader (and my former employer and consulting client) has significantly cut back its work comp exposure over the last few years,

  • greatly ramping up personal lines and other business lines,
  • reducing WC premiums by over a third,
  • dropping to the 4th largest underwriter of WC,
  • selling off WC subsidiary Summit Holdings, and
  • paying Berkshire Hathaway $3 billion to take over a big chunk of its exposure for legacy WC and some environmental claims.

These moves have dramatically increased profitability; Liberty’s overall profits increased from $284 million in 2011 to $1.7 billion last year.

(thanks to CompToday’s TJ Allen for the tip)

Yes, the work comp insurer that dominated the industry for decades, consistently leading in market share, is moving away from the work comp business. The reason is simple, work comp just isn’t very profitable.

Or even moderately profitable. 

The “reporting” from ProPublica and NPR on the work comp system and all its ills grossly distorted many things, but perhaps most egregiously the industry’s financial returns, stating:

“In 2013, insurers had their most profitable year in over a decade, bringing in a hefty 18 percent return.”

What utter bullshit.  The reporters took a single NCCI graph way out of context, mislabeling the “finding” and grossly mischaracterizing the slide’s import.

I discussed this at length with NCCI’s Chief Actuary, Kathy Antonello; Ms Antonello was kind enough to send over the graph in question…I’m going to dig into that in detail tomorrow.

For now, ponder why the industry’s dominant player is slashing its work comp business if it’s so darn profitable.

 

 

 

Jun
12

Friday’s here…

Posted by Joe Paduda on Friday, June 12th, 2015 | Comments

at long last.  Here’s a quick review of what happened this week.

Health care costs

Predictions for health care costs indicate a decrease in the rate of increase for those with private insurance, with PwC calling for a 6.5% increase dropping to 4.5% due to higher deductibles and copays.

While costs continue to escalate, one has to wonder what we’re buying for all those trillions.

According to the Commonwealth Fund, not much – when comparing US health outcomes to those enjoyed by other countries, we are well down – if not at the bottom – the “quality” list on indicators such as life expectancy, disease burden, medical errors, avoidable deaths…the list just goes on and on.

A good part of that is due to the lousy-to-nonexistent care for the poor, exacerbated by states that have refused to expand Medicaid.  Kansas is but one example; the stories of people with jobs and no health insurance bankrupted, disabled, and suffering due to this short-sighted and cruel decision are all the more heart-wrenching because they didn’t have to happen.

You’ll note that many of the individuals dying from lack of insurance are now or have been employed – but don’t have insurance thru their employer.

This is NOT because they aren’t hard working solid citizens.  These are NOT lazy, shiftless, burdens on society.  These ARE people victimized by unaffordable health insurance and politicians who value demagoguery over compassion.

American exceptionalism indeed.

The jump in drug prices, specifically in generics continues to amaze, with the latest a huge increase in oxycodone/acetaminophen 10/325; from $1.29 up to $3.55. Thanks to a colleague for this tip; notably this is a Redbook AWP price; AWP is the basis for essentially all work comp drug fee schedules.

Workers’ comp

Had a conversation with two Concentra execs looking to provide a bit more perspective on the company’s plans.  The focus is on growing their work comp business via acquisition and by taking share from other providers.  Parenthetically, I also spoke with a colleague very knowledgeable about occ med in the northeast; he noted many health systems and hospitals are shutting down their occ med clinics as they focus on accountable care and other ACA, Medicare, and Medicaid – related priorities.

Sounds like a good opportunity for Concentra and other pure-play occ med enterprises. Expect to see Concentra somewhat less interested in urgent care opportunities; I don’t see the company doing anything that isn’t primarily occupational medicine.

The execs did note that prior owner Humana had split off the primary care operations from Concentra’s occ med operations some time ago.  The health plan’s strategy and implementation thereof evolved considerably over the five years it owned Concentra; it doesn’t appear that Humana took full advantage of Concentra’s in-house M&A expertise early on, choosing instead to develop its own capability. This may (emphasize MAY) have been one reason the acquisition didn’t evolve quite the way Humana wanted.

There is a lot going on in the worker’s comp bill review world:

  • Coventry has yet to announce the winner in the bidding process to handle their clients’ bill review needs; word is it is between Mitchell and Xerox/Stratacare with Mitchell rumored to be in the lead
  • A major municipality in California is in the bid process; several other large payers are as well
  • Mitchell is said to be increasing its focus on work comp as execs look to the long term future of auto claims and see a rather steep decline in future claims due to automated vehicles.

AIG’s implementation of Medata’s work comp bill review application is said to be all but complete.  Word is the switch from Coventry’s BR 4.0 system, although not flawless, is going well. While Medata CEO Cy King would not comment, other vendors indicated the Medata application and support thereof is particularly good at maintaining and applying fee schedules.

I’ve also heard reports that Medata is all but consumed with the new client, but I’m thinking this may be competitor carping as a major specialty network is said to have recently decided to use Medata’s application.

[note – Medata is not a client]

Finally, look for more news next week on the ongoing PT coding clustermess. While on the surface things seem to have quieted down considerably, that quiet is misleading. There are several ongoing audits/reviews/investigations in process, involving both payers and treating providers.

Jun
11

Another one of workers’ comp’s good people

Posted by Joe Paduda on Thursday, June 11th, 2015 | Comments

Welcome to the second in an ongoing, occasional series about the good people in work comp; Bruce Wood led off the series and today’s exemplar of all that is good in workers’ comp is Medata’s Todd Brown.

Todd’s been in the business since, well, since forever.  He is expert – and I mean really knowledgeable, completely locked-in, unbelievably well-connected in the dense, complex, convoluted world of workers’ comp regulatory affairs.

Formerly Executive Director of the Texas Workers’ Compensation Commission, Todd has been tracking and reporting on changes in legislation and regulation in all fifty states for years.  Not only that, but he’s been good enough to share that with key stakeholders, an invaluable service that has made Todd perhaps the nation’s leading expert on the subject of WC regulatory and legislative changes. If something is happening, he knows about it; understands the implications, can relate the history of similar changes, and forecast the likelihood of adoption or passage.

Simply put, Todd’s a wealth of knowledge.

All that’s well and good, but what really sets Todd apart is he is one of the nicest, most approachable, decent people one could ever meet.  Patient and incredibly generous with his time and expertise, he’s one of those people everyone likes and respects.

I’ve been fortunate to count Todd as a friend and colleague for several years now; kudos to Medata for recognizing his talents and bringing him on board.

Jun
10

Health care cost drivers, or, Here’s where you’re getting screwed

Posted by Joe Paduda on Wednesday, June 10th, 2015 | Comments

Forgive the vulgarity, but it seems apt when considering two articles just published in the venerable journal Health Affairs.

First, as physician practices consolidate, markets become more concentrated.   A study indicates orthopedic fees paid by private insurers are measurably higher in those markets with higher concentration.  As “Physician groups are growing larger in size and fewer in number”, expect this trend will affect other, currently-less-concentrated markets, thereby driving up the price of orthopedic services.

While the research by Alex Sun and Laurence Baker focused narrowly on knee arthroplasty, it’s likely an examination of other orthopedic procedures would yield the same finding.

A couple key quotes that should resonate among workers’ comp payers:

  • Our results suggest that the potential for reduced costs [due to larger physician groups] may be outweighed by providers’ ability to negotiate higher physician fees.
  • the ACA encourages further concentration to some degree by incentivizing physician groups to form ACOs to provide care. Again, our results suggest that the potential benefits of the formation of ACOs must be balanced against the potential for these organizations to negotiate higher physician fees.

I’d suggest that if private insurers are paying higher rates, workers comp payers are likely paying way higher rates.

Which is an excellent segue to the companion article on hospital markups (hat tip to Richard Krasner for getting to this a day before I did). The authors identified the 50 hospitals with the highest charge to cost ratios; this is a simple analysis comparing their chargemaster, or published price list, to Medicare’s assessment of their allowable costs. Here are a couple enlightening excerpts:

While most public and private health insurers do not use hospital charges to set their payment rates, uninsured patients are commonly asked to pay the full charges, and out-of-network patients and casualty and workers’ compensation insurers are often expected to pay a large portion of the full charges [emphasis added]

forty-nine (98 percent) are for profit, compared to 30 percent in the overall sample; one for-profit hospital system (Community Health Systems) operates half of the fifty hospitals with the highest markups (Exhibit 3). Hospital Corporation of America operates more than one-quarter of them.

Florida has 20 of the fifty hospitals with the highest markups; this is also a state with a fee schedule based on a percentage of “usual and customary” charges.

A notable finding; “markup varies substantially across medical services in the same hospital, and an overall hospital-level charge-to-cost ratio might not reflect the extent of markup for a specific patient. For example, among the fifty hospitals analyzed in this study, the average charge-to-cost ratio for anesthesiology is 112, for diagnostic radiology it is 15, and for nursery it is 3.”

What does this mean for you?

External forces are dramatically reshaping the health care delivery landscape; winners will be those payers who successfully adapt to those changes, not those who ignore them.

Jun
8

WC Rx Survey – early results are in…

Posted by Joe Paduda on Monday, June 8th, 2015 | Comments

We’ve finished collecting the data for CompPharma’s 12th (!) Annual Survey of Prescription Drug Management in Workers’ Comp;  working on compiling and analyzing the data now and expect to get the report out next week.

The survey uses both quantitative and qualitative questions; this enables us to track changes over time to key metrics including network penetration, mail order usage, generic efficiency, and compound drug growth.

The qualitative responses are really helpful in gaining an understanding of what’s keeping payers up at night, where they are seeing success, and how they view key issues.

Here are a few initial findings…

  • Drug management is viewed as more or much more important than other medical issues by 80% of respondents
  • 75% said drug costs will become more important over the next year
  • 2/3rds indicated compounds are the most concerning new issue in WC pharmacy

There’s a lot more analysis to be done as we dig into the qualitative responses. One key area will be the cost and quality control programs payers have implemented over the last 18 months and the results of those programs.

Once the final report is done and proofed, I’ll put up a link.

Public versions of the previous surveys are available free for download (no registration required) here.

 

Jun
5

Friday catch-up

Posted by Joe Paduda on Friday, June 5th, 2015 | Comments

What’s up?

Implementing health reform

Remember the big concern that employers would drop employee health insurance in response to ACA, and employees would lose coverage?  Looks like that has not happened. The latest data indicates that the number of employees enrolled in employer health insurance actually increased over the last two years albeit incrementally.

The 1.1 percent increase may look small, but when compared to the 11 percent drop in employer coverage seen from 2000 – 2012, it represents a considerable change in direction.

Of course, this may not continue; that said, so far the “problem” predicted by notables including Douglas Holtz-Eakin has yet to appear. (note – Holtz-Eakin’s original article is no longer available on the web)

There’s been much talk about early indications of health insurance premium changes for 2016.  Friend and colleague Bob Laszewski is of the opinion that the increases are “eye-popping”; Bob also notes that the rate changes posted to date are ONLY for those plans that will see increases above 10 percent.

Others note the story is much more nuanced.

Several caveats.

  • data is only for federally-run exchanges
  • the insurers requesting the big increases appear to insure a population that is older/sicker than average
  • data does not include increases of less than 10 percent
  • all rate increases are subject to regulatory review and approval; historically many of the requested increases have been cut during the review process

I’d humbly suggest that before you cite the report as showing ACA is a big success/abject failure, read the citations.

Work comp service providers 

Humana’s sale of Concentra is done. The $1.06 billion deal was completed Monday, with Select Medical and PE firm Welsh Carson partnering on the acquisition.

Welsh Carson, one of the early investors in the workers’ comp/occupational medicine market(s), sold Concentra to Humana back in 2010 for $770 million.  While the original strategy – based on using Concentra as an entry point/primary care provider for Humana’s group insurance  and other members – made a lot of sense at the time (there were major concerns about a flood of newly-insured people overwhelming primary care docs), the predictions have not borne out.

Concentra just changed leadership – and indications are the company is returning to its roots in occupational medicine.  Former COO Keith Newton just rejoined Concentra as President and CEO.  Newton left the company after it was acquired by Humana five years ago.  While the company’s website has yet to reflect the transition, expect to hear more from the nation’s largest occ med provider as it reaches out to past customers and markets.

Humana pushed Concentra to change its focus from occ med to family practice to support Humana’s group health and other insurance business.  As a result, most of the physicians hired over the last 5 years were family practice docs, not occ med physicians. In some markets the change was dramatic; a former Concentra exec noted a key southeastern market did not have any Board Certified Occ Med physicians that treated in clinic. 

Concentra’s traditional employer customers were, understandably, not enamored with the change; there’s a multi-pronged strategy in place to win them back.  On-site clinics are dropping non-occ med services and many clinics are eliminating primary care as well. Hiring is focused on recruiting board eligible and board certified Occ Med physicians. 

CorVel had a tough quarter; net income was down 35% to $5.6 million while revenues increased 1.7% to $122 million. The stock was down 11.7% on the news, but still carries a healthy PE ratio near 22.  CorVel indicated the drop in earnings was due to investments in the company’s provider network…

Competitors opine CorVel is “giving away” their TPA services in an apparent effort to capture new employer clients.  With profits increasingly derived from managed care services (which are much harder for employers to predict, track, audit, and report), this isn’t a unique strategy by any means.

FWIW a source indicated Sedgwick recently took the North Carolina Dept of Public Instruction business from CorVel.

Finally, an anonymous commenter said my report that OCCM is acquiring MedFocus was incorrect.  If any non-anonymous reader has information, please send it to me.  I will respect your confidentiality if you email me directly.  (I responded to the commenter via email, but s/he used a fake address).

 

Jun
4

A work comp exec’s MUST read

Posted by Joe Paduda on Thursday, June 4th, 2015 | Comments

The health care “system’s” problems are even worse for worker’s comp.

That’s the conclusion I reached after I finally got around to finishing “Overkill“, Atul Gawande’s latest piece on the clustermess that is the American health care system.

The top takeaway is this – there is huge over-diagnosis of medical “problems” due to an over-reliance on fancy diagnostic technology, technology that far-too-often identifies physical abnormalities that have little to no effect on one’s health or functionality.

An excerpt makes the point:

Studies of adults with no back pain find that half or more have degenerative disk disease on imaging. Disk disease is a turtle—an abnormality that generally causes no harm. It’s different when a diseased disk compresses the spinal cord or nerve root enough to cause specific symptoms, such as pain or weakness along the affected nerve’s territory, typically the leg or the arm. In those situations, surgery is proved to be more effective than nonsurgical treatment. For someone without such symptoms, though, there is no evidence that surgery helps to reduce pain or to prevent problems. One study found that between 1997 and 2005 national health-care expenditures for back-pain patients increased by nearly two-thirds, yet population surveys revealed no improvement in the level of back pain reported by patients. [emphasis added]

More specific to workers’ comp, the good folks at Liberty Mutual’s Institute for Research found claimants with back pain with:

early or non-indicated MRIs led to a cascade of medical services in the six-month period post-MRI that included electromyography, nerve conduction testing, advanced imaging, injections or surgery.

These procedures often occurred soon after the MRI and were 17 to nearly 55 times more likely to occur than in similar claims without MRI.

“Being a highly sensitive test, MRI will quite often reveal common age-related changes that have no correlation to the anatomical source of the lower back pain,” said one of the researchers, Glenn S. Pransky, MD, Center for Disability Research, which is part of the Liberty Mutual Research Institute for Safety, in a statement.

According to Pransky, evidence-based practice guidelines for lower back pain recommend against early MRI except for “red flag” indications such as severe trauma, infection or cancer.

Dr. William Gaines, associate national medical director, Liberty Mutual Commercial Insurance Claims, said that the National Committee for Quality Assurance and the American Board of Internal Medicine have emphasized for years that overuse of imaging does not represent good care for low back pain.

What does this mean for you?

Our health care system is very, very good at finding physiological and anatomical “problems”.  Unfortunately, it is also very good at assuming those findings actually indicate an underlying and significant pathology.

 

Jun
3

Will Banjo be the social media app that revolutionizes insurance?

Posted by Joe Paduda on Wednesday, June 3rd, 2015 | Comments

It sure looks to be the front runner now.

Banjo consolidates all social media feeds into a single platform in real time, then maps then on a geographic grid so users can see what is happening instantly anywhere.

It’s an “event-detection engine”.

Ok, that’s cool.

What’s really useful is Banjo also establishes a baseline activity ‘profile’ (my word, not theirs) and triggers an alert when one of 35 billion geographic grid cells (each about the same size as a soccer field) goes “abnormal”.  And, users can look back in time to see what was happening just before the triggering event, and monitor how that event unfolded…

Want to track a hurricane and damage therefrom?

See where a tornado is headed?

Know instantly when a violent incident erupts?

Follow a demonstration in Egypt’s Tahrir Square as it moves and evolves?

Know which of your band’s songs are getting the most shout-outs?

See if an insured walked away from a “supposedly debilitating crash”?

The app has been used successfully to do all that and more.  Founded by perhaps the most eclectic entrepreneur in high-tech, a high-school dropout, former NASCAR crew chief, Navy veteran, crime-scene investigation expert turned coder, Banjo is now being used by a diverse group of commercial enterprises who want/need to find out instantly about key events happening anywhere – or in very specific places – around the world.

According to Inc., Banjo:

shows only geolocated public posts made from mobile devices; those posts are drawn from what [CEO Damien] Patton calls a “world feed” he’s created by aggregating more than a dozen major social networks (and counting), from Twitter to Instagram to Russia’s VKontakte to China’s Weibo…with all of the public posts in [a small geographic] area appearing as pins on the map and as cards, complete with text, photos, and video, alongside it. All this in real time.

What does this mean for you?

Early adopters are going to know sooner so they can react faster, and possibly profit more.

Jun
2

Hospital prices are up. Way up.

Posted by Joe Paduda on Tuesday, June 2nd, 2015 | Comments

And this means higher costs for those getting treatment outside of their core networks, and especially for work comp payers.

While Medicare reimbursement has remained pretty level, hospitals have been busy raising their list prices by more than 10 percent over the last couple of years. This doesn’t really affect most patients as their rates are negotiated by private insurers or set by CMS for Medicare recipients (or Medicaid on a state-specific basis).

Examples of procedures with the highest increases are:

  • Back and neck procedures except fusions – 22.5%
  • Medical backs – 17.5%
  • Most fractures – 17.3%

The impact is felt most directly by privately-insured patients seeking care outside of their network, as deductibles will almost certainly be much higher, as will copays and out-of-pocket limits.

For workers’ comp payers in states without DRG-or similarly-based fee schedules, the price increases are having even more of an impact. For example, employers in states such as Florida that base reimbursement on a percentage of charges are seeing significant jumps in the prices paid for facility-based care.

But that’s only part of the issue.  There’s a “multiplicative” effect as well.  With more and more physician practices bought out by health systems, and more and more docs working for those health systems, their services are increasingly billed as facility codes which tend to be higher and include costs that don’t show up on physician bills.

Medicare is doing an admirable job holding down costs while increasing its focus on quality.

That said, there are some pretty ugly side effects.

As facilities scramble to increase their quality ratings; staff is evaluated on “patient satisfaction” which is a pretty iffy metric. The understaffing of inner-city emergency rooms is gaining more attention, as well it should. These are just two of the unintended consequences of what are dramatic and often wrenching changes in the American health care system.

What does this mean for you?

Higher facility costs for comp payers means they will need to focus even more tightly on the amount paid, and not the network discount for facility care.