Author: Joe Paduda

Sep
16

Medicare Set-Asides and Workers’ Comp

Posted by Joe Paduda on Tuesday, September 16th, 2014 | Comments

I’m gingerly stepping into a topic I’ve mostly avoided to date – MSAs.  I avoid it because it is mind-numbingly complex, seemingly illogical in application, and served by often-contentious vendors.

NCCI’s Barry Lipton et al just released an excellent synopsis of the MSA situation (opens .pdf) and summary of where things are today. The report focuses on the feds’ review process, wherein they examine payers’ proposed MSAs.  Based on an analysis of data submitted by Gould and Lamb and NCCI’s Medical Call database, a few of the Research Brief’s highlights include:

  • most MSAs are for Medicare-eligible claimants, with 45% over 60
  • MSAs make up 40% of the average total proposed settlement
  • Drugs make up fully half of the MSA amount
  • CMS’ processing time for MSAs has declined of late to a median of 41 days
  • The gap between submitted and approved MSAs has shruck dramatically.
  • 29% of settlements are for amounts over $200,000, while 45% of the MSA amounts are less than $25,000.
  • Most MSA settlements are paid as a lump sum.
  • More than 90% of MSAs completed in December 2012 were approved as submitted.  That came after CMS changed approval vendors in July 2012.

The report is stuffed full of great information and, for those of us who are relatively ignorant of MSAs yet encounter them on occasion, well worth a read.

What does this mean for you?

If you don’t have the time right now, put it in your research file so you’ll have it when you need it.  And you will need it.

Sep
12

Friday catch-up

Posted by Joe Paduda on Friday, September 12th, 2014 | Comments

Today’s catch-up is pretty workers’ comp-centric.  Lots going on, so here we go.

The ACOG (APAX-Coventry-OneCall-Genex) conglomeration continues.  A couple of items of note; APAX is out recruiting several execs to add depth and experience to the senior management ranks.  They are looking for case management pros, and word is at least one former Coventry exec is being targeted for a return.

On the Coventry network side, a well-informed source indicates a couple hospital providers in TN and GA recently renegotiated a new contract with Aetna……and with a significant decrease in the discount % below fee schedule.

On top of the news that the Geisinger and Washington hospital system contracts did NOT include workers’ comp, it is not surprising that payers are seeing a decline in “savings” from the Coventry network.

Cheers from here for former Oregon SAIF CEO John Plotkin; an Oregon court just ruled that former CEO Brenda Rocklin is NOT entitled to a state-paid defense of Plotkin’s suit against her and others.  Rocklin was allegedly involved in ousting Plotkin based on what I can only describe as ludicrous, made-up, laughable charges based on statements by Plotkin that, if they were actually made – which is highly doubtful in some cases – merit no punitive action at all.

Seriously, asking an actuary to speak English is “culturally insensitive”? Since when are actuaries a “culture”? Warning a colleague that your dog is a “humper”? talking about a goats “teats”? Even this liberal progressive Democratic ACLU member Obama fan can’t fathom how anyone could possibly construe those comments as “offensive”.

Kick their asses, John! (and so I am not misconstrued, “asses” means their butts, not their donkeys)

At another state fund, things continue to spiral down.  The latest news (courtesy of WorkCompCentral’s Ben Miller) from North Dakota regards WSI’s (state fund) use of “Independent” medical examiners – which look anything but.

 

Fully three-quarters of the IMEs support the WSI adjuster’s position.

So, no big deal, right?

Wrong.  Those (very) few who follow WSI know long-time and highly-regarded Medical Director Luis Vilella recently resigned.  Why?  Well, it appears his concerns about medical decisions were a major factor; evidently adjusters and their legal department used “outside” medical experts instead of Dr. V.  The full story on this rather distressing – and all too common) lack of judgment by WSI senior management is here.

Notably, David DePaolo noted just yesterday that state requirements around IMEs may have made it difficult for adjusters to locate in-state physicians able and qualified to perform IMEs.  HOWEVER, this is a separate issue from the Dr V problem as it pertains to IMEs and not peer reviews.

Meanwhile, Karen Foshay has produced a three-part series on the California compounding mess.  The FBI is involved, an infant has died, and one of the alleged participants was recorded saying ““I’m a behemoth, I make 8 to 10 million a month.”

Is there a place for compound in workers’ comp? Yes. HOWEVER, the legitimate use of compounds is all too rare as crooks, thieves and liars are using compounds as the route to huge profits, regardless of the consequences for patients, employers, and taxpayers.

Hope your weekend is excellent!

Sep
9

Exchange health insurance premiums in 2015 – the real story

Posted by Joe Paduda on Tuesday, September 9th, 2014 | Comments

Shockingly, there’s a good deal of confusion out there regarding what will happen with health insurance premiums in 2015, more specifically what’s going to happen in the Exchanges.

Let’s leave aside (for now) the possibility that we’ll have another enrollment mess like we experienced last fall (CMS officials are likely still twitching over that disaster…).  Instead, here’s what we know now.

  1. Health insurers are pretty much guessing what the P&L on their Exchange business will be; there’s just not enough data, many didn’t fully enroll until late spring, and individual health plans’ enrollment is too small to be statistically valid (in many cases).
  2. So, they are pretty much guessing what their rates for 2015 should be.
  3. Some very big players – notably United Healthcare – didn’t participate in Exchanges last year, but will be this fall.  In some instances, their rates are very competitive, in others not so much.
  4. The number of insurers participating and the number of plans they are offering in most exchanges is either level or increasing slightly.
  5. A quick check of rates (thank you Kaiser Family Foundation) in a number of markets indicates prices for the benchmark Silver plans are decreasing by about 1 percent on average.
  6. As Bob Laszewski pointed out in a recent blog post, many of the insurers that were the benchmark Silver plans in 2014 will not be benchmark plans in 2015 – either their prices went up or in some cases they may actually have decreased – either way they no longer qualify to be the benchmark plan (the second cheapest Silver plan).
  7. Bob’s point – and it is certainly valid – is that the federal reinsurance program essentially protects Exchange insurers from significant losses.  No wonder the number of plans participating is increasing.
  8. With that said, from a pure pricing standpoint, 2015 consumer insurance prices declined in a number of markets, and in those where they did increase it was in the single digits.

We won’t know if that will continue for a couple of years, when the federal reinsurance program expires.  The hope is market dynamics, competition among insurers, increased experience with narrow networks, ACOs, and other cost saving mechanisms is able to drive down costs and the federal program is no longer needed.

What does this mean for you?

Consumers love low rates.  Health plans that figure out how to keep them low are going to win big.

Sep
5

Friday catch-up

Posted by Joe Paduda on Friday, September 5th, 2014 | Comments

The first week of September marks the start of the busy season in health care, insurance, and workers comp.  This week certainly maintained that tradition.

here’s what I noticed this week.

Health care costs

The news this week was pretty good – current health care cost trends are significantly lower than earlier projections, although predictions for future increases remain higher than we’d like.  That said, recall past predictions weren’t that accurate.

While we don’t KNOW what the impact of ACA, recovering employment, and health care system chances will be, we can look to Medicare – which isn’t affected much by the economy.  Jonathan Cohn’s take: “the slowdown in Medicare spending (which has little to do with the economy or changes to private insurance) is a powerful indicator that health care really is becoming a more efficient enterprise.” [emphasis added]

Another perspective is from the Washington Examiner – you can tell their bias as they lead with “President Obama’s health care law” – which PPACA decidedly wasn’t. Disregarding the Examiners’ disregard for accurate reporting, they cite a CMS actuary study which indicates government spending on health care will increase from 41% of the total to 48% in 2023.  That is accurate – however recall that CMS’ past projections for Medicare and medicaid growth have been shown to be too high.

 Health reform implementation

One of the concerns about PPACA was the employer mandate would encourage smaller employers to move workers to part-time status.  Early indications are there isn’t much of a shift – if any – to part-time work due to PPACA.  Rather the slow recovery of the economy seems to be the key factor.

A great piece by Incidental Economist Austin Frakt (a long time Health Wonk Review contributor!) in WaPo’s Upshot blog finds that the more competition in local markets, the lower the insurance premiums are.  Specifically, Austin notes the absence of United Healthcare from markets led to premiums that were 5.4% higher than they would have been with UHC participating.

Another take is that premiums in less competitive states were higher than in those with more health plans participating in the markets.

Pennsylvania is joining the ranks of the sane states that are expanding Medicaid, and in so doing will avoid:

*   $37.8 billion in lost federal spending over the next decade

*   $10.6 billion in lost hospital reimbursements over the next decade

*   380,000 low- and moderate- income people would not gain coverage in 2016

Workers’ comp

The BIG news just came out today – a study by McClatchy found rampant misclassification of workers as independent contractors receiving money from the 2009 stimulus. This is a damning indictment of governmental oversight, and one that demands our attention.

Liberty Mutual produced an excellent study that appears to indicate back pain patients who got MRIs early on had worse outcomes than those who did not have MRIs.  Their conclusion:

The impact of non adherent [not consistent with medical treatment guidelines] MRI includes a wide variety of expensive and potentially unnecessary services, and occurs relatively soon post-MRI. Study results provide evidence to promote provider and patient conversations to help patients choose care that is based on evidence, free from harm, less costly, and truly necessary.

Kudos to Liberty for conducting this research.

Remember – no emails, no business after 5 today – unplug!

 

Sep
4

Physician dispensing in workers’ comp is killing your financials

Posted by Joe Paduda on Thursday, September 4th, 2014 | Comments

The cost of physician dispensing is far above the outrageous premiums the dispensers charge.  The real cost includes:

  • longer disability duration
  • higher medical expense – over and above the excess cost of drugs
  • higher indemnity expense
  • more and longer use of opioids

Lost in the conversation, ignored in legislation, and pooh-poohed by dispensers and their enablers, the research – real research by real scientists, not anecdotal BS by dispensers – proves dispensing is having cost implications far and above the cost of the drugs.

In addition to the ground-breaking work done by Alex Swedlow et al at CWCI, the folks at Accident Fund (kudos to Jeffrey Austin White) teamed up with Johns Hopkins to analyze the impact of dispensing on their claims.

The results – which will be discussed next week in an IAIABC-sponsored webinar – are striking.

Slots for the webinar are still available – it will be held next Wednesday, September 10 from 1-2 Central Time.

Kudos to IAIABC for their leadership on this.

 

 

Sep
4

What’s your Plan B?

Posted by Joe Paduda on Thursday, September 4th, 2014 | Comments

The pending acquisition of Coventry Workers’ Comp Services by APAX will consolidate a very big chunk of the work comp managed care services market.  The potential impact bears careful consideration.

I’ve taken the liberty of quoting below from a piece I wrote back in April of this year, long before this was on the horizon. I believe it is even more relevant today, as payers consider how the aggregation of market power under ACOG (APAX-Coventry-OneCall-Genex) may affect them. 

Without further ado…

Coventry Work Comp was built by combining the “old” OUCH network with Healthcare Compare, followed by an acquisition of Concentra’s WC services division, which had acquired NHR, which had acquired MetraComp, plus the acquisition of a few other bits and pieces.  Along the way, the company became the dominant work comp PPO.  A few years ago, it was the “must have” network for workers’ comp payers as it was the largest, had the best discounts, and had the most coverage in the most states. While other vendors may have had better networks in one or a couple of states, Coventry’s was the best (defined as largest number of providers and deepest discounts) and broadest.

Coventry’s management (since departed) used this market leader position very effectively.  They forced (yes, that’s the right term) payers to use their network – and other services – by raising their fees for payers who carved out specific states where another network was stronger.  In addition, they discounted other services (notably PBM) if the payer bought their network and bill review services.

This put payers in a tough position.  Try as they might to seek out the best-in-class network, PBM, or bill review offerings, insurers would have to pay a LOT more for Coventry’s network if they didn’t buy everything.

For Coventry’s erstwhile competitors, the playing field was anything but level.  If they built a great network in a state or two, one that far exceeded the depth, effectiveness, and discounts of Coventry, they’d often find the big buyers would tell them they’d won their business, only to learn a bit later that the deal had been undone and Coventry was going to keep it, having told the buyer that their fees were going to go up – often way up – if the state/s were awarded to the competitor.

Things got even more one-sided after Coventry bought Concentra’s work comp services business.

Coventry actually raised their prices, telling customers that the larger network delivered more value, and therefore a higher price was warranted.  Never mind that the larger network would deliver more revenue just by virtue of including more providers; Coventry management very successfully leveraged their all-but-monopolistic status to increase prices and beat out competitors.

According to several colleagues who worked with Coventry at the time (remember this was a few years ago), Coventry knew they had the leverage, weren’t afraid to use it, and was only too happy to let their customers know it.  Even more troubling, customer service and responsiveness got steadily worse.  Managed care execs used words like “arrogant”, “uncooperative”, and “dictatorial” when describing their interactions; many were very surprised, if not shocked, by the tone and tenor of discussions and negotiations.

…

Which brings us to the current state of the market; it is highly likely a very few vendors will hold leverage akin to that enjoyed by Coventry back in the late 2000′s.  Managed care execs at insurers, TPAs, and large employers are apprehensive/concerned that this may well mark a return to the “bad old days.”

Tomorrow, ACOG will own the largest PPO, one of the largest bill review enterprises, the largest imaging, PT, DME/HHC network, case management vendor, and lots of other stuff. They will undoubtedly promote the benefits of one-stop shopping, data integration, leakage prevention, and consolidated IT interfaces, and streamlined vendor relations and billing, all of which, to the extent they are valid, are excellent selling points.

If I were them, I’d encourage customers to see the benefit of using ACOG, specifically using my dominant position to reward payers who bought all my services, and dis-incent payers thinking about using my competitors.  But that’s just me…

This isn’t bad or good, it is the nature of business.  And this approach worked very, very well a few years back – primarily because only one major customer – Broadspire – was ready and able to tell Coventry “no thanks” when informed about the price increase.

The rest, well, they had no other plan.

What does this mean for you?

You may want to think about a Plan B.  Just in case. 

 

Sep
3

The Apax-Coventry deal – implications aplenty

Posted by Joe Paduda on Wednesday, September 3rd, 2014 | Comments

While it may be a bit premature, I’d suggest it is never too soon to being thinking thru the potential implications of a deal of this magnitude.  

Let’s do a very quick review of market changes, then jump into some detail on the network issue – we will look at other aspects in future posts.

The workers compensation medical management market is going through a period of rapid consolidation across all segments.  There are now five large PBMs; three years ago there were eight (plus two much smaller ones).  Bill review application companies now number four (mcmc, Medata, Mitchell, Xerox); four years ago there were eight.  (this does not include CorVel, it does not sell access to its application) There are now two PT firms; last year there were three.  The sector that has changed the most is IMEs; EXAM is now the biggest player, with its competitors far behind in terms of revenue and market share.  Similar consolidation has occurred in DME/HHC, transportation/translation, and other segments, and this will continue.

The work comp PPO landscape looks markedly different.

Coventry is still the big kahuna, but the gap between CWCS and competitors has narrowed considerably.  The expansion of other PPOS has been a major reason; Procura, Magnacare, Anthem, Prime, Rockport, MultiPlan are all bigger and have more share than they did a few years ago.  Other Blues plans have expanded into the comp network business (or expanded their existing WC PPO).

Simultaneously, Coventry’s PPO has weakened.  It has been increasingly difficult to get meaningful discounts from health systems and facilities, long the biggest driver of Coventry’s success.  That’s due to the consolidation of the provider marketplace and a lack of emphasis on WC on the part of Aetna (and pre-Aetna) provider contract negotiators.

For workers comp payers, big PPOs are the big “savings” driver, yet the biggest of the PPOs is losing its ability to deliver “savings” while its competitors are getting more competitive.

Way back in the day, Coventry used its leverage with the Federal Mail Handlers’ Program along with PPO HMO and Medicaid lives to negotiate discounts with providers – discount arrangements that included workers comp.  Recall total work comp spend is just about 1 percent of total US medical spend; governmental programs (Medicare and Medicaid) alone  are over a third of US health care costs.

While sources indicate Aetna has committed (not sure that is the right word, and may be too strong) to support the PPO re-contracting process for two years, this is one of those times where actions speak louder than words.  As noted yesterday, Aetna just inked a network deal with a relatively small health system in northern California which does NOT include work comp – but does cover medicaid, medicare, group, individual, and other health insurance.

More significantly, Geisinger and Aetna signed a major agreement earlier this summer that also excluded workers comp. Geisinger is the dominant health system in central PA; a very-well-regarded operation with a great reputation and outstanding quality (disclosure, I did a brief consulting stint there some years ago).

And this means…what?

By far the biggest contributor to CWCS’ value is the PPO.  It generates (or perhaps more accurately generated) at least $200 million in cash flow and provided Coventry with the leverage to get payers to use its PBM, case management, bill review and other services.  Clearly, that cash flow is, if not already significantly reduced, at some considerable risk.

That factor alone is why ALL the financial buyers I spoke with (several of the largest private equity (PE) firms) did not pursue the deal – they were very concerned about the long-term viability of Coventry’s PPO.  While the historical numbers looked good, none were convinced the PPO would continue to deliver those results going forward.

Without the market leverage and total commitment of Aetna, it is difficult to see how Coventry can maintain its lead over other work comp PPOs; its negotiating leverage with providers will be based on work comp, and work comp only.

APAX will pay something like $1.5 billion for Coventry’s work comp division.  I’m very sure it will have a very good communications plan, a well-developed strategy, and some talented and experienced people focused on this.  That’s all well and good, but – as other WC PPOs know very well – without the market leverage of a major national health plan, the real negotiating power will be on the other side of the table.

Sep
2

Aetna’s sale of Coventry – the deal is done

Posted by Joe Paduda on Tuesday, September 2nd, 2014 | Comments

While it may not be closed, the deal is done.

Multiple sources indicated APAX is scheduled to close the purchase of Coventry Workers’ Comp a month from now.  The long-rumored sale will close October 1 – if everything goes according to plan.

Here are the details – at least as they’ve been relayed to me.

  • The sale includes all of Coventry’s work comp services division – PPO, bill review, Pharmacy Benefit Management, DME, IME, UR, case management, peer review, and the rest.
  • Aetna has “committed” to supporting the network for two years – don’t know what this means, how it will be measured, or what the guarantees are.
  • APAX is the purchaser.

A few related items worthy of consideration.

  • Coventry’s been working on an RFP for a new bill review system/strategic partner for some time.  No word on whether this will go forward or be mothballed, and I wouldn’t expect to hear anything until October.
  • Aetna recently announced they signed a 3 1/2 year contract with northern California’s Washington Hospital Healthcare System. The contract does NOT include workers’ comp – but does include every other payer type.
  • When the deal is done, APAX will own: the largest work comp PPO, imaging network, PT vendor, DME/Home health network, and case management provider; one of the largest PBMs; a major (but faltering) bill review operation; and a whole raft of ancillary businesses.

The implications of this transaction are rather dramatic. It puts control of many payers’ medical spend squarely in the hands of a private equity firm. (more on this here).

The news also refutes my (strongly-held) view that Aetna wouldn’t sell the business because it a) throws off so much free cash flow and b) can’t.  The latter is based on the premise that the network contracts will rapidly fall apart without Aetna’s combined medical spend as bargaining leverage.

Regarding the latter, we shall see.

What does this mean for you?

Opportunity for bill review firms and niche medical management providers.

A return to the days when Coventry owned the market.

 

 

 

Aug
29

Turn off the email and thank your server

Posted by Joe Paduda on Friday, August 29th, 2014 | Comments

Labor Day is about the laborers – those whose work keeps us fed, clothed, protected, entertained, moved, housed, healthy.

It’s about taking a whole day to consider who they are, what they do, and how they are treated.

That includes us – we (you and me) are pretty much white collar middle- and upper-middle class folks; well-educated, fortunately-born, and generally well off. Sure, we are “workers”, and as such we need the time off – away from work email and texts.  So put that “I’ll be back to you on Tuesday” message on the phone and email when you leave work today, and don’t think about it until Tuesday morning.

I’d suggest that this weekend is also a great time to consider those who are, indeed, working while we are holiday-ing – and those who make stuff we use and provide services we take for granted.

Nurses (disclosure, our daughter is an ER nurse and will be working most of the weekend), waiters, cooks, police (even those enforcing traffic laws), marina and park staff, lifeguards and hotel staff all deserve our thanks and our appreciation.  As do the maintenance workers, groundskeepers, mechanics, drivers, laborers, skilled workers and construction workers that make life here pretty pleasant compared to a lot of the world.

As my lovely bride says, “we are all in this together.”  

Share the love.