Author: Joe Paduda

Jun
18

The Good, the Bad, and the Ugly

Posted by Joe Paduda on Wednesday, June 18th, 2014 | Comments

Who else but Clint Eastwood could fairly describe the current state of the workers’ comp services industry’s relationship with its employees.

People like Sandy Blunt, Mark Walls, John Plotkin (and many others) and a few service companies are the Good; doing the right thing, serving their customers, working with their employees to continue to improve, grow, develop.  I single out Mark because he spoke to this yesterday, making a plea for service companies to hire as many recently-terminated workers as possible.

If that were only possible – but we’ll get to that in a minute.

There’s also a Bad side; the folks who suddenly find themselves out on the street after working for years to help build a company.  Sure, some of them deserve to be out of a job – not everyone’s a star, and there are certainly more than a few knuckleheads in our business (just as there are in every industry and profession). But this is an inevitable if really bad effect of our business economy, and one hopes these folks can move on and perhaps even move up.

Except there’s the Ugly.

And oh is it ever.

Scores if not hundreds of work comp professionals have become collateral damage from the recent spate of mergers and acquisitions.  Forced/required/strongly urged to sign non-competes after which some were summarily discharged, now unable to find work in a business they actually know something about, they are forced to seek employment in areas where they have few contacts, little knowledge, and less hope.

Why?

Does a billing clerk, or recruiter, or intake specialist, or sales rep or account manager really represent that much of a threat to mega-huge-giganta-enormous-corp?  Sure, a sales rep or account manager might be reasonable expected to sign a non-compete for a limited time in a narrowly-defined niche, and a senior exec with lots of stock and a generous severance package isn’t going to elicit much sympathy.

But the effort on the part of some companies to prevent regular staff workers from getting a job in this business is way beyond the pale.  Many don’t fully realize what they are signing, and shame on them (and sympathy for them, too).  Others feel like the have to in order to keep the paycheck flowing, not realizing that signing a non-compete doesn’t provide them any guarantee that they will keep getting those checks.

Regardless, this isn’t the right thing to do.

Nor is it the smart thing.

Those clerks, sales reps, account managers, billing folks, intake staff all work with payers’  adjusters, case managers and other folks all day every day.  Once they’ve been laid off and their former contacts find out what happened to them, how are they going to feel?  How are they going to relate to mega-huge-gigantic corp? How motivated will they be to do all the little things necessary to get cases referred, bills processed, invoices paid, authorizations completed?  Especially when their fellow staffers read every day about how much money is being thrown around by the bigwigs?

More broadly, society is going thru wrenching changes as the gap between the very wealthy and the rest continues to grow.  This will be even more ammunition for those that believe the moneyed class doesn’t give a rat’s rear end about the rest.

It’s wrong, it’s dumb, and it’s mean.

What does this mean for you?

How would you want to be treated?

Jun
16

Monday catch-up

Posted by Joe Paduda on Monday, June 16th, 2014 | Comments

After spending the last few days on vacation – the boys’ annual mountain biking trip – plane time is needed to catch up on all that happened while I was getting lost in the high desert west of Fruita, Colorado.

Fruita

CWCI’s June 10 missive listed the top ten work comp writers in California; in addition to indications that premiums will keep increasing, there are a few other takeaways worth contemplating.

  • First, total premiums are above $10 billion, a big jump from 2009’s $6.9 billion – but a LOT less than the $16 billion high hit just a decade earlier.
  • Berkshire Hathaway is writing a boatload of comp, growing their premiums by 49 percent over 2012. State Fund’s premium is also up – but “only” 23.1 percent.
  • Liberty Mutual is out of the top ten, dropping four places to number 12 while reducing premiums by 23 percent. This is the largest decrease among the top 20 carriers.

There’s a bit more to this; Liberty has been de-emphasizing work comp as it continues to focus on personal lines. The news from the Golden State, along with changes in management wherein personal lines and other non-comp folks are ascendant, look like proof positive that the transformation of the company to one shifting its focus away from workers comp is proceeding. (note – I worked for Liberty way back in the day – 22 years ago to be precise)

Those wretches at the FDA have gone and done it again – according to the American Society of Interventional Pain Physicians (the docs that inject stuff into patients) they’ve issued a “warning that all epidural steroid injections pose a serious risk for neurological injury, paralysis and death…” And, ASIPP is urging all their docs to write letters, scream, yell, and lobby to get this horrible injustice corrected.

This, after studies documented  “a 629% increase in Medicare expenditures for epidural steroid injections in use for chronic low back pain, despite the fact that these increases have not been accompanied by population-level improvements in patient outcomes or disability rates.”

As mad as most sentient beings are about the FDA’s unconscionable decision to allow marketing of Zohydro, this is one of those times where the FDA appears to be doing the right thing.

Meanwhile, mergers/acquisitions in the work comp services world – and the fallout therefrom continues. This has been going on for so long that it feels like the normal state of affairs; if one doesn’t hear from at least a couple of analysts, research firms, or investors every week it’s strange indeed.

Finally, I’ve heard from three entities of late who are looking for data analysts.  Many insurers, managed care firms, and TPAs are increasing their investment in analytics.  The emphasis appears to be provider performance, care analytics, and other aspects of medical price, utilization, and cost.

 

Jun
10

Work Comp PBMs – it’s drug trend report time

Posted by Joe Paduda on Tuesday, June 10th, 2014 | Comments

Today’s post is authored by Jack Johnston who is spending his summer interning at Health Strategy Associates; Jack is going to be a senior at Syracuse University (my alma mater); he’s studying Health and Exercise Science.

The three largest PBMs have sent out their annual drug trend reports to tell the Workers’ Comp world what’s been going on this past year.  Instead of you having to read through each entire report and finding out what’s new, I’ve bit the bullet and gone through them for you.  Coventry-First Script, Progressive Medical-PMSI, and Express Scripts have all made much progress and developed new ways to further develop their success.  Let’s give you the skinny…

PBM Goals:

Coventry-First Script has been working with physicians to eliminate the use of narcotics  – due primarily to widely known potential for misuse.  Increasing generic brand utilization to lower costs and helping the older workforce remain healthy enough to work have also been other tasks Coventry’s been working on.

Progressive has managed to accomplish their goal to decrease opioid usage by working with physicians, prescribers, and injured workers.  Progressive Medical is working to ensure injured workers will return to work healthy, as soon as possible, while employers (payers) are getting the lowest possible costs.

Express Scripts is focused on reducing drug costs, utilization, and abuse for workers and prescribers while increasing the use of more affordable generic medication wherever possible.

Summary Findings:

With all three PBMs reporting that OxyContin is once again the most prescribed drug (in terms of dollars) on the market, they’ve been working on ways to decrease the use of opioids.  Progressive reported a 5.0% decrease in opioid usage while Express also showed a decrease of 3.0%.  Progressive also reported that the opioid cost per claim dropped by 6.0% and the workers who were prescribed opioid analgesics this past year used lower dosages compared to 2012; with MEDs diminishing by 9.6% over the year as well.  (First Script did not show any indication of an opioid usage % decrease in their report) correction – First Script indicated utilization per claimant decreased 9.1%, the biggest decline among the three PBMs.

Progressive is using a “Multiple Prescriber Service” to identify injured workers that are getting drugs from more than one prescriber.  With the main focus on multiple opioid prescribers, Progressive notifies all prescribers treating the injured worker and offers guidance to address the issue.

Express Scripts’ MED Management Program allows clients to set max levels for the amount of narcotic medication prescriptions an injured worker can fill.  Once the amount is exceeded, the program employes a review process before additional medication is dispensed. According to Express, the MED Management Program has successfully reduced drug abuse, limited addiction, and controlled costs.

Express has also continued to developed their Physician Outreach Program to encourage the use of generics, which appears to be Express’s main concern.

The First Script network pharmacies are being re-credentialed under stricter requirements including background checks and site audits to ensure legitimate dispensing practices.  The network also blocks narcotics and other controlled substances through mail service to prevent potential drug overdose, diversion, and misuse.  This reduces risk to the patient and the community.

Summary:

  • Opioid use is the main focus of these PBMs.
  • PBMs are having success with decreasing opioid usage through a variety of targeted programs.

What Does This Mean For You?

  • Claimants have a lesser chance to become addicted to their medications (Yay!).
  • Medication costs have lowered over the years.
  • If you’re not using a PBM, sign up and reap the benefits!
Jun
6

Examworks has bought MedAllocators/ASN

Posted by Joe Paduda on Friday, June 6th, 2014 | Comments

It’s official – in a press release that hit the wire just after 5 pm EST, Examworks announced that they have bought MedAllocators for $80 million.  Cash.

That’s a pretty hefty price, as MA’s revenues were less than half that amount.

It’s going to be a great weekend for Ken Loffredo; he almost certainly got a big payday (and well deserved); he will also be running ExamWorks Clinical Solutions, a new division at Exam.  Ken was smart enough to take his payout in cash, rather than stock.  Exam’s management folks recently sold off a big chunk of their holdings, and the stock dropped rather dramatically at right about the same time.

The weekend will be a pretty crappy one for many MedAllocators/ASN workers.  Word has come from several sources that the layoffs have already begun, and they may have started at Solomon Associates, the Pennsylvania IME company also bought by Exam today.

 Yet another big company getting even bigger.  Seems that’s a trend these days…

Jun
6

Friday’s catch up post

Posted by Joe Paduda on Friday, June 6th, 2014 | Comments

Here’s my quick take on other interesting/important news of the week…

There’s been a good bit of chatter about and fallout from Apax’ acquisition of Genex.

Yes, the specialty networks (NSI and MDN) will be part of OneCall, while the case management and bill review will be operated separately. HOWEVER, a single Apax fund purchased all parts of Genex, so the financial ownership is the same. Is it possible that Genex and OCCM will operate independently? Highly doubtful; big investment firms don’t invest hundreds of millions of dollars then ignore opportunities to drive revenue to their other companies.

On a personnel matter, I’ve been inundated with LinkedIn requests and other contacts from current Genex and NSI staff.  According to two individuals, they’ve been asked to sign non-competes by early next week.  If they don’t, they have been told they will be terminated. Ouch.

NCCI published an excellent review of the underwriting cycle, one that is a lot more worthy of a read than that trashy novel tucked into the beach bag.

The on shoring movement, where manufacturers are moving their operations back to North America, appears to be gathering momentum,  Big potential impact on workers’ comp, altho it is important to remember that a) injury rates and severity in manufacturing have declined precipitously and b) a lot of the returning work is going to Mexico.

The rapidly-changing hospital market is dramatically affecting prices, costs, and utilization.  Two excellent pieces in Health Affairs dig into this in detail; the link takes you to one.

Lots more, but time to get to work!

Jun
5

HWR’s not taking any time off!

Posted by Joe Paduda on Thursday, June 5th, 2014 | Comments

Nope, the wonkers are hard at it while the rest are vacationing…we know you’re busy, so we’ll do this one quick – but NOT dirty!
This biweek’s edition of Health Wonk Review starts with the big question – we all know there’s a shipload of waste in the health care delivery and reimbursement system.  So, what do we do about it?
David Cutler and host Harold Pollack discuss what it might take to reduce wasteful spending in the healthcare system and what makes healthcare organizations successful. Is healing the system as simple as treating patients well?
Maggie Mahar brings us an excellent piece on the issues inherent in living longer – dealing with the medical conditions that arise as we age, and paying for them.  A thoughtful and comprehensive discussion.
The most expensive health insurance in the nation is in…a group of mountain towns in Colorado.  Louise explores this as only she can – discussing all sides of the issue, and asking if people who live in less well-to-do areas should be expected to essentially subsidize the cost of living for people who live in resort communities?”
My contribution is a piece on a new tool for folks interested in tracking health care costs, spend, and related matters.  Detailed, specific, and user-friendly, its a welcome addition to the geek’s armamentarium.

The impact of provider market consolidation is being felt all around the country – but the effect may not be as clear as one may think.  From the good folk at Health Affairs we get two Contributing Voices pieces on provider consolidation and market power in health care:

While hospitals are consolidating, there’s also significant stress within management as many hospitals are still struggling to transform their culture from one that worked in the past to one that will thrive in the new world of health care. And some places, like Lehigh Valley Health Network, are further along in the journey. 

Despite Its Best Efforts, ObamaCare Might Improve Some Health Care Delivery is by John R. Graham, NCPA Senior Fellow; Graham finds that certain aspects of ObamaCare might be leading to unintended outcomes that improve medical care.

Kynecting the Dots on Obamacare discusses the puzzling but very real dichotomy between what people don’t like (Obamacare) and what they like (all the parts of Obamacare). Sen. Mitch McConnell’s recent comments about Obamacare and the state health insurance marketplace in Kentucky make it clear that he’s in a quandary as well…

The public debate about the price of Sovaldi (sofosbuvir – Gilead) continues, but is completely focused on whether $1000/ pill for a “miracle” cure can be justified, not on whether in fact the drug is a miracle cure.  But a third skeptical appraisal of the current evidence from clinical research about the drug concluded that the evidence that the drug cures nearly everyone, will prevent most bad results of hepatitis C infection (cirrhosis, liver failure, liver cancer, premature death), and is safer than previous alternatives is weak and questionable.  It seems that the marketing and public relations blitz for Sovaldi and other new, extremely expensive anti hepatitis C drugs has been so effective that it has prevented people from thinking critically about the evidence.  Skeptical, level-headed appraisal of clinical evidence would go a long way to addressing our dysfunctional health care system.  Fortunately, Roy Poses has kept a sharp focus on the important issues…

At Workers Comp Insider, Tom Lynch profiles Dr. Jennifer Christian, a key thought leader in the occupational health arena, focusing on some of her key initiatives aimed at changing the landscape for disability management.

Should you trust your doctor more than Wikipedia?  That’s the question posed by David Williams, who, while finding fault with the study that finds fault with Wikipedia, still believes you should probably rely on your doctor more than you rely on Wikipedia.
Addressing one of the more politically charged issues of the day, InsureBlog’s Kelley Beloff offers her unique perspective on the goings-on at the VA, explaining that it’s *not* a scandal but “business as usual.”

We conclude with a very different type of post, by Amy Berman; Updating her April 2012 Narrative Matters essay, Berman discusses her experiences since being diagnosed with terminal cancer and choosing to utilize palliative care.

Next up to bat:   June 19 when Julie Ferguson at Work Comp Insider takes the reins!

Jun
3

Just when you thought it couldn’t keep going…

Posted by Joe Paduda on Tuesday, June 3rd, 2014 | Comments

With Apax’ just-announced acquisition of Genex, the pending Coventry transaction, and ongoing consolidation in the PBM space, the work comp services industry will look much different at the end of 2014 than it did even a year ago.

OneCall Care Management, originally a one-service firm focused solely on imaging services, has become a behemoth, including in its portfolio (and among its sister companies):

  • the largest (in terms of revenue) PT network
  • the largest imaging network (OCM)
  • the largest case management firm (Genex)
  • the largest DME/Home Health supplier (MSC)
  • a strong regional PPO network (MagnaCare, owned by Apax) (note – in an earlier post I said Apax didn’t have other WC experience; this was incorrect) (edited  – Magnacare was sold some time ago)
  • transportation and translation (Stops)
  • the dominant dental network (Express Dental)
  • IME and peer review

A “big” work comp services company used to have revenues in the several hundred million dollars; now, the market has stretched out – and thinned out. One huge company has revenues of the $3 billion plus, there are several in the $250-$600+ million range, and lots of small firms with revenues under $30 million.  This is a bit of an oversimplification, but the market dynamic today is markedly different from we’ve seen at any time up till now.

And the market dynamic will undoubtedly change even more as OCCM consolidates. More on that later.  For now, the question is, what’s the strategy?

Key to understanding the OCCM strategy is the concept of “white space”, a term used to describe untapped markets.  There’s a sense among many investors that, despite the rapid growth and impressive success of OCCM (and many other companies) in capturing market share, there remains a lot more to be had.  Whether it is leakage from networks due to lack of focus on direction, poor electronic connections with bill review partners, inefficient processes, or entirely new customers previously untapped, the money folks are betting growth is a given.

I’m not quite so sanguine;  as a long-time executive in this business told me this morning, all the  easy, pretty easy, not easy, and pretty hard stuff has been done.  What remains is the really hard stuff; or, in investor parlance, the “really heavy lift.”

An example may be helpful; some payers service small mom-and-pop stores and businesses that may not have a comp claim but once in a decade. Their workers don’t know anything about work comp, much less understand claim reporting or compliance with direction. Add in states such as Illinois or New York where “direction” isn’t really possible, and the lifting becomes even more strenuous.

What does this mean for you?

I’d expect your friendly vendors to be calling a lot with helpful ideas on how to increase penetration.  This isn’t a bad thing, but their priorities may not be in the same order as yours.

Jun
2

Genex is sold, OneCall Care Management adds two more businesses

Posted by Joe Paduda on Monday, June 2nd, 2014 | Comments

In a long-rumored-but-just-verified deal, OneCall Care Management is buying specialty managed care businesses Network Synergy and MDN from Genex.

Meanwhile, Apax, which also owns OCCM, is buying the rest of Genex.

Current Genex owner Stone Point Capital had been looking to sell the entire company, and they have succeeded, albeit in a deal that looks a bit convoluted at first blush.

The vast majority of Genex’ revenue comes from case management, and some from bill review.  The valuation on these traditional, relatively low (or no) growth businesses is much lower than we’ve been seeing for specialty businesses.  That said, at the proverbial end of the day, Apax is the one writing the check to buy Genex and its component pieces however different Apax funds may be funding the two deals.

Regardless, the transaction removes a competitor from the market, and prevents an erstwhile OCCM competitor from acquiring two quite small but nonetheless functional entry points into the PT and imaging sectors.

The question is why split CM and bill review off from specialty?

Allow me to theorize. Genex has a thousand or more case managers out there who can be distribution channels for the Align/Network Synergy and OneCall Imaging/MDN product lines.  Sounds great, right?  Who wouldn’t want a thousand WC field case management (CM) nurses doing that directing for them?

Well, not so fast.

First, field CM is a shrinking industry, with most CM handled telephonically – something Genex does little of.  Second, field CMs take direction from the adjuster and/or telephonic CM, and in most cases those in-house folks are the ones directing to specific provider networks.

Third, many payers have picked specific specialty vendors which are not tied to OCCM, and these payers may not want to use CMs that are directly linked to OCCM and their family of specialty network products.  The separation of Genex CM from the specialty products gives at least the appearance of neutrality and objectivity, possibly mollifying concerns of payers who don’t want their claimants directed to OCCM providers.

Finally, there’s also a significant-if-not-huge bill review business as well, which provides potential opportunities for retrospective discounting of imaging and PT via the BR process.  This is a bit more complicated and may require re-contracting of some or all providers, but retro discounting is hugely profitable for vendors.

All this sounds good, and while complex, do-able. However, the difficulties inherent in the real world make for a somewhat different picture.

First, OCCM is by no means integrated today; some of the companies that were merged into One Call several years ago are still not integrated for billing, sales, or service.  This deal adds yet two MORE companies and their different product offerings, operational flows, contracting processes, and reimbursement rules – as well as state regulatory approval and oversight burdens.

For a conglomerate that industry wags sometimes refer to as “Five Call”, the additional work of integrating two more companies while completing work on the current efforts may well be a challenge.

What does this mean for you?

Apax is moving up and down the claim process chain as it looks to get traction both earlier and later in the life of the claim.

But it’s all about execution.

 

Jun
2

Monday morning catch-up

Posted by Joe Paduda on Monday, June 2nd, 2014 | Comments

Like many, Friday was a quasi-work day for me; rest assured this post will return to its usual Friday timing this week.

While things were a bit quiet, there were a few items worthy of note.

First up, the big news for the week was the announcement that Vern Steiner will be the State Fund of California’s new CEO and President.  While I’ve met Vern a time or two, I don’t know him well; those who do speak highly of him.  He’s a very experienced claims pro, well liked and very well respected.  His election to the top slot appears to indicate the State Fund board is “doubling down” on the claims process as that is precisely where Steiner’s skills lie.  A couple people who know him well told me Vern is particularly adept at leveraging technology and putting teams together.  In the ever-fractious world of CA work comp, the latter will be key.  Fortunately, word is Steiner and the other leading candidate, interim CEO Carol Newton, get along well.

My admittedly-far-away-view is that Steiner’s biggest challenge may well be dealing (or not) with a few folks who seem to delight in finding fault with anything and everything State Fund-related.  I will not give advice here other than to suggest we all give the new CEO some time to get things figured out before we start demanding things.

Word is MedAllocators will likely be sold to Examworks for something in the $75 million range.  This isn’t a done deal, as another suitor is rumored to still remain in the mix.  Regardless, the company will be sold.  Congratulations to everyone at MedAllocators, and to Ken Loffredo who oversaw significant growth of the company.  I’m still puzzling over EXAM’s strategy; they are clearly focused on the MSA business as this will be their second deal after the earlier purchase of Gould & Lamb.

Meanwhile, their stock price has dropped rather significantly over the last couple of weeks after several management folks sold off a lot of their shares.  I don’t pretend to understand how stocks are valued, but it still looks awfully pricey to me (I don’t have any position in EXAM).

PT and Imaging company MedRisk (an HSA consulting client) will be adding significant new business (significant as in eight figures) in the very near future; with the first one a “crooked number”.  Kudos to Mike Ryan, Jamie Davis, Ed McBurnie, and the rest of the sales staff – although the real reason for their success is the dramatic improvements in service levels and customer (that’s adjuster and exec) satisfaction over the last 18 months.

In what looks to be yet another re-organization of the managed care department, Liberty Mutual has posted for a Director of Managed Care. The job description talks a lot about medical case management; my take is that may be more a result of an HR person not fully understanding the job than an accurate portrayal of responsibilities.  There are some very good, highly experienced, and completely capable folks currently at 175 Berkeley Street; here’s hoping the powers-that-be don’t ignore them.

Finally, there was a good bit of news on PPACA rollout and related matters, enough to justify a complete post on that later this week.

Happy June – hope yours is productive and pleasant.

May
29

Health care cost trends – a new tool

Posted by Joe Paduda on Thursday, May 29th, 2014 | Comments

With 18% of the economy driven by health care, cost inflation rates are vitally important. A just-released white paper reviews a new approach to measuring health cost inflation rates that will help employers, health plans, and workers comp payers assess overall trends, compare their experience to a benchmark, and forecast where things are headed.

The research, conducted by S&P/Dow Jones uses a series of indices to break out various cost areas.  The white paper is available for free here; while the statisticians amongst us (that does not include your faithful author) will find much to geek out over, this amateur’s take is:

  • the methodology is sound and carefully constructed;
  • it uses payment data from commercial health plans representing about 40% of all enrollees;
  • the data is from fee-for-service plans;
  • it is state- and in many cases area-specific; and
  • it provides details on medical, inpatient, outpatient, pharmacy (brand and generic).

Any input from real analysts on the indices would be more than welcome.

Here are a few of the key highlights from the initial edition, which includes data from Feb 2010 to April 2013.

  • Overall trend has been at or below 5 percent since August of 2010
  • Trend as of April 2013 was about 4.3 percent
  • Drug trend has been bouncing between 0 percent (!) and 2 percent since October 2010, with brand cost showing much less fluctuation while generic inflation was at 15 percent when last measured.
  • Hospital trend is consistently 3 to 4 points higher than professional services trend
  • There’s a LOT of interstate variation; for example as of February 2013, IL trend was around 1 percent while Texas’ was about 4.75 percent.

What does this mean for you?

All in all, a very valuable addition to the toolset available for regulators, businesses, and health plans.