TPA transparency – another warning

A report on TPA transparency from the New Jersey Office of the State Comptroller (OSC) on transparency “found that workers’ compensation third party administrators (“TPAs”) may be utilizing undisclosed side agreements with third party vendors which require payments back to the TPA, resulting in hidden (and potentially increased) costs to public entities.” [emphasis added]

The report, issued in August, 2012, should be required reading for any risk manager, especially those working for governmental entities.  An extensive quote from the report reveals why.

A government entity informed OSC that it had discovered that its workers’ compensation TPA was receiving money back from the managed care and bill repricing vendors to which the TPA had referred claims, pursuant to undisclosed side agreements (referred to as “revenue share agreements”). The government entity informed OSC that it settled this and other potential legal claims against the TPA in return for a substantial payment, after informing the TPA that it was planning to commence legal action against it based in part upon the existence of this undisclosed, shared revenue. (The TPA noted to us that it disputed the claims and that the settlement of the matter was without any admission of liability or wrongdoing.)

OSC’s Review

Upon reviewing this TPA’s contracts with other public entities, OSC found other examples of these undisclosed revenue share agreements. In fact, industry experts claim that this practice is pervasive among TPAs, indicating that numerous other public entities in New Jersey may have incurred these hidden costs.

Our review found that the public entities we examined did not obtain information during the TPA procurement process as to whether prospective TPAs were a party to any revenue share agreements with third party vendors.

 This certainly isn’t new news. However, the fact that this is 2012 and employers are still unaware of their TPAs’ side deals is troubling indeed, especially in these days of brutally tight budgets.  Here’s what to do.

1.  require full disclosure of any and all side deals, marketing agreements, commissions, administrative fees, etc involving any and all claims.

2.  require reporting of funds transfers between and among parties working on or involved in your claims.

3. understand that these deals often generate a lot of dollars for the TPA; that is NOT necessarily a bad thing, as long as you know about it. Many employers have squeezed their TPAs so hard on claims fees that the TPAs have had to go elsewhere to generate enough cash to keep functioning.  Therefore don’t be surprised if your TPA agrees to eliminating their side deals in exchange for higher admin fees.

What does this mean for you?

Better for you to find out what’s up before your Comptroller does.



That’s the theme of Louise’s edition of Health Wonk Review – she has a terrific lineup and calls them like she sees them – with all the attention on health care after the recent conventions, the post provides an excellent review of the parties’ competing positions.
it is refreshing to read real journalism again!


The case for Aetna’s sale of Coventry’s workers comp business

I’ve heard from several folks contending that Aetna will sell Coventry’s workers comp business, all making essentially the same points.
1. Aetna already has exited comp twice – once when they sold their workers comp insurance business to the Travelers, and then when they shut down AWCA, their comp PPO and PBM.
– True. However what this has to do with future plans is unknown.
2. Aetna bought Coventry for reasons other than work comp.
– True – that doesn’t mean they don’t like the $250 million in free cash flow from the comp business.
3. The CFO at Aetna doesn’t want anything to do with comp.
– Not having knowledge of the CFO’s perspective I can’t address this. I’d hazard a guess that the cash flow is kinda nice.
4. Comp revenues at <$800 million annually are small potatoes.
– But cash flow of $250 million is anything but.
5. Comp is a potential distraction.
– As are dental, life, disability, PPOs…
6. Aetna needs the cash from a sale to pay down Coventry’s debt.
– I don’t see it. With debt service costs at an historical low (and likely to decrease with Aetna’s lower interest rates, and Aetna needing cash to pay for preparations for health reform, selling an asset and using the cash to pay down debt doesn’t make sense.
Finally, as I said yesterday, despite my carefully reasoned arguments to the contrary, Aetna may want to sell the work comp business. To do that, they would have to uncouple the workers’ comp provider contracts in such a way that the buyer would get perpetual access to those providers at current discount rates.
That’s just not going to happen. No provider is going to agree to that.
And without the network, the value of the business goes way, way down.
I’d be remiss if I didn’t make the following statement (thanks to a heads up from a confidential source). Despite losing the ACE/ESIS business early this year, Coventry WC’s top line only decreased $2.2 million for the first half of 2012, driven by increased sales to new and existing customers.


Health reform, comparing Romney and Obama

There’s no question this election presents voters with a stark choice in candidates, and nowhere is that more obvious than health care.
Colleague Bob Laszewski has written an authoritative piece delineating the differences between Obama and Romney’s plans for health reform; here are a few excerpts. I encourage you to read the entire post, it is well worth careful consideration. (emphases added)
“On his first day in office, Mitt Romney will issue an executive order that paves the way for the federal government to issue Obamacare waivers to all fifty states. He will then work with Congress to repeal the full legislation as quickly as possible.”
The Affordable Care Act (ACA) does give the President power to issue states waivers from the Democratic health plan legislation. But, not before 2017 and only if the state can demonstrate that it can cover as many people as the Democratic health care law is covering in the state… If Romney tried this, I would have to believe advocates for the ACA would quickly be in federal court.”
“…it looks like their [Republicans’] health care priorities will be to pass their Medicare and Medicaid reforms and leave dealing with the uninsured to the states.”
Romney places a lot of trust in competition in the market for solutions…
Romney would empower individuals and small businesses to form purchasing pools. I have actually run such pools–association health plans. It is perfectly legal to start one today. In all of my years running these pools, I never saw them save money–actually they tended to cost more when compared to small group plans…”
Romney would allow consumers to purchase insurance across state lines. The problem he is trying to address is that states have lots of coverage mandates…I have no doubt that some states have fewer mandates and lower individual health insurance prices. However, I know of no state that has truly affordable health insurance. It is hard to see this as any real solution.
If this provision were ever to become law it could have a very negative impact on current state individual insurance markets. Many, and many in the health insurance business, believe this provision will take us back to the days of cherry picking in risk selection. Predatory insurance companies could use this provision to offer a stripped down policy in a state with more mandates. That policy would be cheaper and cover less–and therefore attract more healthy consumers. That would leave a sicker population in the existing state risk pool with rates having to ratchet up for those who need more coverage.”
Bob’s views, as always, are on point.
I’d add that the reason health reform is so complicated, and the bill so long, is to address these – and the myriad other issues that must all be considered if we are to ‘reform’ the health care and health insurance system(s).


What will Aetna do with Coventry’s work comp business?

That’s a question I’ve been asked a couple dozen times over the last two weeks.
For several reasons I don’t see Aetna selling the Coventry workers comp business.
1. It generates a ton of cash.
While the financials are a bit murky, the workers comp business almost certainly generates more than a quarter billion dollars in cash flow. Cash is king in the run-up to 2014, as health plans desperately need funds to prepare for the post-reform world. Acquisitions, investments in IT and care management, and free funds to deploy in as-yet-unknown areas are all going to require plans have lots of cash on hand.
2. It requires no time energy or thought
While senior management at Aetna is focused on reform, the work comp business requires little attention. President David Young and his staff have shown themselves quite capable of keeping things moving along, despite almost no investment into the business. While it is unlikely they’ll be able to keep all their clients without that investment, for now the WC business is the epitome of low maintenance.
3. They can’t sell the most profitable piece – the network
The network generates the lion’s share of the margin; if Aetna wanted to sell the WC business it is hard to see how it could transfer the network’s provider contracts to the new owner as most are a combined WC/group/governmental contract. Sure, Aetna could guarantee access to their contracts going forward for some period certain, but given Aetna’s history with workers comp, any buyer would be very reluctant to bet the future of their investment on that guarantee.
4. Coventry’s WC business has been losing customers
With ACE/ESIS the latest to move from Coventry to other entities for most managed care services (Progressive Medical for PBM, ACS/CompIQ for bill review, multiple networks for PPO), a sale would likely not generate near enough cash to make the transaction worthwhile (compared to the ongoing cash flow). Yes, it’s possible Aetna would want to sell it before more customers depart, but the multiple would likely be insufficient as any buyer would discount future earnings based on projected customer losses.
(while I’m no fan of Coventry WC, there’s no question the lack of investment on the part of Coventry WC’s parent company has made it quite difficult for management to continue improving services and product offerings)
That said, it is possible Aetna will explore selling the unit off – and given the private equity industry’s newfound passion for workers comp services, it is certain Aetna CEO Mark Bertolini’s voice mail is stuffed with friendly just-touching-base messages from PE execs.
Those PE execs will likely be waiting a long while for a return call.
What does this mean for you?
Business as usual for Coventry WC.


ScripNet’s been sold – yet ANOTHER deal in workers’ comp

Healthcare Solutions announced yesterday that it will acquire work comp PBM ScripNet, a transaction that will add significant share to HCS’ Cypress Care PBM business. ScripNet is particularly strong in the ‘central southwest’ market, with substantial share in the governmental entity market in Texas as well as a long-term relationship with Texas Mutual, the dominant insurer in the Lone Star State.
The deal will push HCS’ annual revenue above $400 million which includes pharmacy, ancillary services, networks, and other operations.
Both companies use the same pharmacy processing platform (SXC) and sources indicate there will be some significant “synergies” that will make the combined entity more profitable. ScripNet’s current customers will greatly benefit from Cypress Care’s strong in-house clinical management programs. (full disclosure; although I helped develop Cypress’ clinical program years ago, that program has been significantly enhanced since then)
HCS joins several other companies in the workers’ comp services business with revenues above that level:
– Coventry’s WC unit
– OneCall/MSC
– Express Scripts
– ExamWorks
– Concentra
– Progressive Medical/Stone River
I’d expect others to join the $400 million club. The workers’ comp services business is consolidating: smaller companies are being snapped up by their larger competitors and private equity firms and multiples look to be edging up (which will drive more privately-held companies to test the market).
Broadly speaking, there are a couple different models emerging here. The ‘vertical model’ is one in which a company seeks to add share in their current space. ESI’s purchase of MSC’s pharmacy business some years back is one example of a company seeking additional share in one sector – in this case pharmacy.
The ‘horizontal model’ is the one employed by Odyssey Investments, current owner of OneCall/MSC. They are putting together an entity with a broad product offering, delivering imaging, DME/HHC, dental, and transportation/translation services (with others likely to follow).
There are pros and cons with each approach; on balance I’m more a believer in the vertical strategy (as my consulting clients hear on a regular, if not continuous basis).
That said, any strategy can succeed – if it is executed well.
What does this mean for you?
Fewer options for services, likely better systems and reporting, opportunities for innovators to exploit slower-moving larger competitors.


Changes to Managed Care Matters

It is time to upgrade, and update, this blog. To that end, we’ll be switching to another platform – WordPress – which has several advantages over our current one.
The move will take place next week, and you’ll get plenty of notice.
This will likely require subscribers to renew their subscription – no need to do anything now. The ‘renewal’ will be very simple, merely requiring you to enter your email address on the blog’s front page.
The new platform will make it much easier to add video, images, and files to posts; manage subscribers; handle spam comments (we get about 50 a day!); and speed up the posting process.
I’m often asked how much time it takes to maintain and post on MCM; short answer is about 45 minutes a day, but that’s only because I have excellent support and guidance from Julie Ferguson and hosting handled by Chris Miller (owner of Artefact Design).


How physician dispensing companies promote their product

Why do physicians dispense drugs to workers comp patients?
To hear them tell it, it’s all about convenience, better outcomes, lower cost, faster return to work – all assertions made without a shred of evidence.
The reality is rather less noble, but best to use their own words to show how they pitch their programs to docs…
MedX Sales
“Workers Compensation (Incredibly Profitable)
Physicians that work in occupational medicine and pain management typically handle workers compensation cases and therefore submit claims to workers compensation insurance. Unlike the other scenario where the physician collects cash for prescriptions, in the case of workers comp, the physician would submit claims to the insurance company for payment of the drugs. Here the physician’s payment reimbursement is based upon Average Wholesale Pricing or (AWP). Each repackager creates their own AWP for each drug that is sold by the physician. Each state also has different reimbursement policies relating to AWP but rest assured the potential profitability is staggering. A physician paying $6.00 for a prescription could be reimbursed as much as $100.00 or more based on AWP.
also from MedX
You could be losing $50,000 or more each year by not dispensing today!

Physician Dispensing Solutions

Learn how to generate over $100,000 annually with our physician dispensing program.
Do you treat workers compensation patients? Unlike regular patients, dispensing medication to workers compensation patients requires submitting a claim to insurance in order to get paid. Physicians that dispense medication to their workers compensation patients earn revenue base [sic] upon the state’s insurance reimbursements schedule and the Average Wholesale Pricing (AWP) for that drug. It is not unusual for a physician to earn over $100,000 or more every year by dispensing medications to workers compensation patients.
Clinical Rx Solutions

A physician who dispenses medication to their workers compensation patients earns revenue based upon the state’s reimbursement schedule and the average wholesale pricing (AWP) of that medication. It is not unusual for a practice to earn over $100,000 or more in additional income per year by dispensing to workers compensation patients.
[check out the income calculator, a tab pops up when you hover your mouse on the “Workers Compensation Dispensing Program” button top left]
Physician Partner
Benefits to the Practice
Maximize Profitability
Reduced Claims Processing Workload
Increase Monthly Cash Flow
Can I really earn $50,000 or more each year by dispensing? Yes but that all depends on the size and type of practice as well as the number of patients seen each day. Based upon averages, the average physician will see 100 patients and write 100 prescriptions or more each week. Asking yourself simple questions such as how many patients you see per day or per week will quickly give you an idea how much money you could be earning by dispensing. Wholesale cost per drug and what you charge the patient is the final determining factor on calculating potential earnings. Most of the generic drugs will cost you about $5.00.
A-S Meds
7. What is the profit potential for my practice?
The new revenue source can be very significant. As with any program, utilization is the key. We provide you with a personalized Proforma based on your customized formulary, number of daily patients and number of prescriptions per patient. This will more accurately predict your potential profit. We have clients ranging from $1,000 to $50,000+ profits per month, with an ‘average’ profit of around $7 per script.
The practice earns all of the cash profit, the workman’s compensation profit and the managed care profit.
[emphases added]


How NOT to use social media for business

While I don’t profess to be an expert in the use of social media for marketing/brand development, there are a few things I’ve learned in the eight years I’ve been blogging.
1. Don’t inundate bloggers with press releases that are, at best, tangentially related to the blog’s subject matter. I don’t need nor want to know which institutions are the top ten for dental hygiene nor do I care that your company just convinced another company to use your electronic self-care product.
2. Don’t swamp LinkedIn and other groups with posts and topics clearly intended to market your firm. I’ve seen some marketers post a couple times a day to LinkedIn groups – all that does is get you labeled as annoying and your company a reputation for mindless mailbox filling.
3. Don’t use comments on blog posts to pitch your company or tout your services. Sure, you can opine and sign your name and your company affiliation, but don’t use someone else’s blog as your marketing forum.
4. Be mindful of the potential to offend. I know, shocking that someone who’s demonstrated a well-honed ability to do just that has the temerity to advise others, but note I did not say “don’t offend”, just be conscious that your words may have that effect.
5. Don’t disagree without citing some support for your position; the corollary is to not opine without providing links to material upon which you base that opinion. Opinion based solely on personal belief is not likely to convince anyone of the merits of that opinion or belief.
6. Be respectful – when that respect is merited.
7. Recognize that the social medium you use has to correspond to the audience you seek. Few executives in the health plan or insurance world spend their days trolling (pun intended) Facebook or Twitter, but more and more are reading blogs. While younger folks are definitely moving in the Facebook/Twitter/media du jour direction, people who write the checks aren’t there yet. And may not be for a good while.
8. If you begin a social media campaign, be patient, be persistent, and manage those expectations. It has taken me eight year to reach almost 3500 subscribers, and the work has absolutely paid off. That said, it is infinitely harder to build a brand these days than it was back in the 00’s, so be creative, be smart, and hire someone who really understands social media.


What’s a “conservative”?

This isn’t a rant, a polemic, a diatribe. It’s a question.
I had breakfast yesterday with a highly-regarded executive at a top-shelf TPA, and during the course of our conversation we got to talking about the Republican convention.
From there the talk turned to the current GOP platform of small government and government-controlled social engineering and then to a discussion of how the party has evolved from small government, low taxes, controlled entitlements and social libertarianism to where it is today – using entitlement expansion to schmooze specific constituencies (Part D, pharma, and senior citizens), using social issues to motivate groups (abortion, immigration), and what can only be described as fiscal irresponsibility (current antagonism towards any increase in taxes despite huge deficits).
As a self-described Democrat, I long for the “olden days” of the GOP, the party of adults who trusted individuals to make their own decisions about their lives, relationships, religion, sexual choices, procreation. The GOP of the sixties railed against Medicare as an intrusion into the private health insurance/care industry, a principled stand (OK, with a bit of pandering to the AMA, but pandering consistent with their ethos of the time) that stands in sharp contrast to the GOP passage and promotion of Part D.
Part D is moment the GOP went completely off the rails. A sop to seniors passed by Republican Congress and signed by a Republican president, Part D has added $16 trillion to the ultimate deficit.
The party of Goldwater would no more have passed Part D than substituted la Internationale for the Star Spangled Banner. It would have been unthinkable.
Now that same party condemns the opposition for its own expansion of health coverage, citing a (highly inaccurate) projection that Obamacare would add a trillion dollars to the deficit (a projection that is directly contradicted by CBO figures).
Sure, that’s politics, and this is convention time, and it’s all about winning the election.
But at what cost? The GOP has strayed so far from their fiscally-responsible roots as to be more like the Democrats than the Democrats are these days.
What does this mean for you?
When thoughtful, educated, influential executives like my breakfast companion are gravely concerned about the party that used to be their’s, one wonders where the GOP will be in the future.