I apologize.

I screwed up and I apologize.

Here’s what happened.

I failed to explain or provide context in my initial response to an anonymous comment on my post entitled “One Call’s doing great!“.  Here’s the relevant comments:

My initial response to “bill smith”:

“Bill” then sent in a response. I sent an email to the address he provided in the post,; the email bounced back indicating it was a fake email address. I checked the website he listed as his in his initial response; the website is the personal one of an African-American woman; she is dealing with Alzheimer’s. btw Ms Smith is a remarkable woman, handling this awful diagnosis with grace, wit, and elegance.

As “bill” was being disingenuous about who he was, i ignored his response.

Next, he sent in another comment. “bill” was one of several anonymous commenters trolling me (and you), using fake emails and contact info. Getting tired of their antics and disgusted with their cowardice, I responded. The relevant conversation is below.

Here’s where I should have been more clear. I should have posted the actual website address “bill” used in his original post so you, the reader, could see for yourself that what this troll was up to.

In what used to me normal times, this wouldn’t be a big deal as I detailed “bill’s” dishonesty in a subsequent comment.

We aren’t living in “normal” times, and the casual reader may well have interpreted my response as a racist slur. I’m embarrassed by my mistake and apologize for it.

I’ll be more careful in the future. 

As a reminder, here’s my policy on commenters…

This post was triggered by reader D. Gregerson who sent in a comment yesterday about this. I thank D. Gregerson for his comment.

Hey Joe! Great insight as usual. Keep them coming. I do have a question though. As I reviewed the comment section (which has now been closed) I noticed that you replied to someone saying:”unless you are an African American with Alzheimer’s, your website is fake”. Now, one would argue that the statement could be deemed inappropriate and demeaning. Especially considering that the topic at hand was One Call’s financial debacle. Care to expound?


The latest data on opioids in work comp

We’ve just about completed the 16th (!!) Survey of Prescription Drug Management in Workers’ Comp, and there are two key findings you need to know.

First – total opioid spend in 2018 dropped 23.2% across all 27 respondents (ranging from very large TPAs to state funds to insurers to small state-specific payers). The average decrease among respondents was just over 22%.

That dramatic reduction comes on the heels of a 16% reduction from 2016 to 2017, and a 13% decrease in 2016.

From last year’s Survey; each numbered column denotes a respondent’s results (2019 Report will be out in August)

Over the last few years, payers and PBMs have cut the amount of opioids dispensed to work comp patients by more than half.

While cost reductions are good news for employers and taxpayers, when you talk with payers its mostly about patient safety and return to functionality. Patients taking opioids over long periods aren’t getting better, aren’t going back to work, and most (but not all) are not functioning very well. That means they aren’t the parents, friends, daughters or sons, grandmothers or grandfathers they can or want to be.

Second takeaway: payers are anything but satisfied or complacent. All the 27 people I’ve talked with to date remain focused, committed, and completely engaged in continuing to fight the good fight against overuse of opioids. They’ve asked me what other payers are doing, what they can do differently, what works and what doesn’t.

That’s a great relief. One would understand if payers’ focus was shifting to other issues, now that they’re seeing massive progress in the battle over opioid over-prescribing.

With some exceptions, the knottiest problem remains how to help chronic opioid patients find other ways to handle their pain, to help them function at a higher level even with chronic pain. Payers are very creative and dedicate lots of dollars and time to solving chronic opioid usage. This focus will continue to help patients get better, while reducing costs for employers and taxpayers.

I’d be remiss if I didn’t note – once again – that work comp is leading the rest of the world on solving the opioid issue. You knew about it sooner, took drastic action much faster, and are delivering much better results than Medicaid, group health, or Medicare. 

Yeah, the workers’ comp industry is often maligned for its many faults and challenges. But this is one area – and a damn important one – where you’ve got much to be proud of.

What does this mean for you?

Well done. Stay focused. 




Yesterday’s executive order by President Trump requires HHS to develop regulations requiring healthcare providers and insurers to publicly post the prices paid for healthcare.

According to Trump, this is “a giant step towards a heath care system that is really fantastic.”

Let’s talk about what this means for you.

First, there’s enough wiggle room in the order to make the slinkiest of snakes comfortable. For example, there are no specific requirements about what information doctors, hospitals and insurers have to disclose.

Second, the executive order itself has no force of law.

Third, if prices are ever posted, patients won’t know what they – the patient – have to pay. The order discusses posting what insurance companies have agreed to pay for a procedure – not what the patient owes.

Fourth, there’s no conclusive research finding that publishing prices reduces overall cost – or even affects consumer behavior. But there is research indicating patients don’t use data to find lower cost care.

Fourth-and-a-half, despite what the President claims in his Executive Order most healthcare services aren’t “shoppable”. If your spouse has chest pain, you aren’t going to wade thru some government database to find the lowest cost heart surgeon. Plus, you aren’t walking in with a shopping list of specific procedures – you’ll get the procedures your doctor orders, and you won’t be in any position to go to one hospital for an MRI and another for anesthesia.

I see you want an MRI, an appendectomy, one assistant surgeon, 2 units of blood, and 5 visits from random doctors.

Want proof?…about one healthcare dollar out of twelve is spent by patients on shoppable services. 

Fifth, pricing agreements are proprietary, negotiated between insurers and providers. Both are now arguing that publicly disclosing those private, confidential contracts will result in higher prices as providers – who now have pricing power over insurers in many markets – find out how much their rivals are getting paid.

Sixth, credible research shows that prices increase when suppliers and buyers have to disclose prices. From the NYT:

The Danish government, in an effort to improve competition in the early 1990s, required manufacturers of ready-mix concrete to disclose their negotiated prices with their customers. Prices for the product then rose 15 percent to 20 percent.

The reason, scholars concluded, is that there were few manufacturers competing for business. Once companies knew what their competitors were charging, it was easy for them to all raise their prices in concert. They could collude without the sort of direct communication that would make such behavior illegal.

Seventh, most healthcare spending is for patients with multiple chronic, and expensive, health conditions.  Think high blood pressure, asthma, depression, diabetes, cardiovascular disease.  These folks blow thru their deductible in March. After that, their healthcare is free to them, so they don’t care what the cost is.

Eighth, any regulations will take years to develop, and will be subject to endless lawsuits. Too bad the attorneys don’t have to post their prices…

What does this mean for you?

This is political grandstanding and will have zero impact on healthcare costs – or what you pay for insurance premiums.

But is sure is easier than actually doing something to improve our healthcare system and lower your costs.

Spoiler Alert – Oh, and the Executive Order adds a whole new layer of bureaucracy and reporting requirements, which will increase healthcare administrative expenses.





Marketing drives product – not vice versa

With rare exceptions, work comp services companies don’t get marketing, don’t fund it adequately, and then complain when “marketing’ doesn’t work.

They build a product/service then try to convince buyers they need it.  Example – “buyers want to buy all ancillary services from one vendor!”

That’s bass ackwards.  Instead, they should identify an unmet need, then build their products/services to meet that need. 

Okay, you’ve already got products and services, so you aren’t looking to create any new ones.  Same rule applies –

  • figure out what the market wants,
  • adjust your offering so it meets those needs, and
  • package it such that potential buyers see how it solves their problem(s).

More broadly, services companies must understand what drives buying decisions in work comp.  I’d suggest “fear” is a much more potent driver than “greed”.  Note these terms are very general and are not meant to connote actual fear or greed, but rather concern over lack of performance vs desire for optimal performance.

Buyers want to be assured the problem will be solved, the risk of non-performance is vanishingly small, and the cost will be borne by policyholders/clients/assignable to claims. They want as close to zero risk as possible – more for reasons of personal survival than corporate objectives.

And, understanding there are at least two “buyers” is critical – the exec in the home office who signs the contract and the desk-level person who actually uses the services. Both have to be comfortable that your product/service meets their individual needs, which are usually quite different.

The corporate buyers want solutions that deliver cost reductions with no compliance issues and minimal-to-no IT resource requirements.

The desk-level folks want seamless connectivity, proactive communications, and service that handles any and every issue.

What does this mean for you?

It isn’t about you or your products. Start from your customers’ perspective and not from your’s.  And stay there.




Happy Friday! It’s Research Roundup time.

Here’s my quick takeaways on new research – and how it affects you.

WCRI on the interaction of health insurance and workers’ comp

Bogdan Savych PhD of WCRI has provided an excellent review of the interaction of health insurance coverage and workers’ outcomes post-injury. 

The percentage of workers with health insurance increased from 84% in 2008 to 90% in 2017, driven primarily by the ACA.  Notably Medicaid expansion was responsible for most of this growth. Overall, workers who had private health insurance:

  • got an initial non-ER evaluation a little earlier;
  • recovered a little faster;
  • were more  likely to return to work; and
  • were a bit less likely to hire an attorney.

Note these differences were slight – but real – for workers who had employer-based coverage, NOT Medicaid. (Dr Savych separated out workers covered by these two payers.)

This means – health insurance coverage slightly improves work comp outcomes.

Implementation of the ODG formulary and opioid reduction

NCCI’s just-released analysis shows minimal correlation between adoption of the ODG formulary and decreased opioid dispensing. From the report:

The ODG Formulary had a limited observed impact on opioid utilization in the early period after implementation.

It appears other factors such as much more public and prescriber awareness of the dangers of opioids and general changes in prescribing patterns may have been a primary driver of the across-the-board decrease in opioid scripts.

This means…formularies are a relatively small part of the solution. Strong UR and external factors are likely much more important.

Drug prices and profits

Adam Fein’s excellent Drug Channels delivers details on where the pharmacy profits are piling up.

Dr Fein notes “many multi-billion-dollar businesses profit as drugs move through the U.S. reimbursement and distribution system.”

This means…most rebate dollars are passed thru to employers and PBMs.

Hospital prices

RAND’s research finds the gap between Medicare reimbursement for facility services and what other private health plans pay increased over the last few years; on average private insurers paid almost 2 1/2 times Medicare rates.

This varied widely among states; if you operate in Colorado, Montana, Wisconsin, Maine, Wyoming, and Indiana reimbursement is even higher, while Michigan, Pennsylvania, New York, and Kentucky’s commercial prices were only 1.5 to 2 times Medicare rates (yippee…).

This means…work comp payers are almost certainly paying way too much for hospital care.



The Arrogance of Ignorance

Your systems, savings, capabilities, and results are better than the competition.

You know that because, well, it’s true. You’ve seen reports that show it’s true, been told that by your bosses, or some independent third party said so.

I cannot count the number of times I’ve heard “we save X to Y points more than the competition.” – or something just like that. One problem – your competitors believe the same thing. All of them. They’re wrong…right?

I heard it again at the National Council of Self Insurers’ meeting in Orlando yesterday – several times. When I demurred, my demurrals were rejected out of hand.

Allow me to burst your bubble.

Utilization review should be used to ensure the medical care delivered to patients is the right care, for that specific patient, by the right provider. In most cases, it is nothing of the sort. Rather, it is done to comply with regulations, generate revenue and is almost never integrated into billing.

Bill review is merely applying relevant regulations and fee schedule edits, sending bills to network vendors, and adding in some high-cost bill audits and perhaps retro UR and clinical audit.

Network selection doesn’t account for lower cost providers – it is based on discounts not net costs.

This is really basic stuff – and compared to what happens in group health it barely scratches the surface. Fact is medical providers are way more sophisticated than payers when it comes to coding, billing, and revenue management. There’s an entire industry devoted to revenue maximization for workers’ comp.

Data point – work comp represents about 1 percent of a health system’s revenue, but more than 10% of profits.

If you’re doing such a great job managing medical, why are providers making so much money off your patients?

With the exception of the Workers’ Comp Trust of Connecticut – I’ve NEVER seen a workers’ comp medical management program worthy of an A grade. In fact, the metrics most to evaluate program results are prima facie evidence the programs can’t be succeeding. Metrics like:

  • savings below billed charges
  • savings below fee schedule
  • turn around time
  • UR denials
  • network penetration

are all process – not outcome – measures. And they measure the wrong things.

The right metrics include:

  • medical cost by claim – case mix adjusted
  • drug cost per claim
  • time from date of injury to correct diagnosis
  • disability duration – case mix adjusted – by provider and employer location

How am I so confident you’re not as good as you think?

I’ve audited dozens of programs and seen crappy data, inaccurate reporting, useless metrics, and poor analytical methodologies in almost all.

A fundamental problem in work comp medical management is complacency and an unwillingness to ask and demand answers to tough questions, borne out of today’s low medical expenses and continually dropping premiums. The result is many have grown fat and happy.

What does this mean for you?

You can do better.  A lot better.



The Golden Rule, Part Two

Back to the work comp services business…

A while ago I wrote about how some buyers’ attitudes are a bit overbearing. I know, unusual for me to be rather subtle.

The post itself generated a few comments; many more were sent to me directly with the request they not be made public. I will always honor that request.


Here are a few ways buyers mistreat “vendors”.

  1. The Jerk-Around
    This begins pleasantly enough, with lunches and dinners and meetings building rapport and “relationships.”  The buyer is really, really interested, voicing approval of the vendor’s product/service, requesting more information, discussing needs and priorities. The vendor is convinced the buyer is really interested, it’s just not the right time. Perhaps in a couple months.

    Then, a new management focus appears, and this is on the back burner for a bit. Oops, a change in systems resources is holding things up.  It may be because the buyer is really trying to get a deal done. More likely, the buyer just doesn’t want to say “no”. While understandable, this is the wrong thing to do – for everyone.A fast No is far better than a long maybe.Yes, the sales person is at fault too. They should be asking, probing, talking with others at the buyer’s employer. But if they keep getting the wrong information and are led the wrong way, it’s easy to succumb.

  2. The Disappearing RFP
    This starts with a voluminous request for proposal asking every possible question and attestation in multiple ways. It takes weeks of work by the vendor, pulling scarce resources away from other projects.

    And then…crickets.

    Days become weeks, weeks stretch out into months, and months disappear into the void. Eventually everyone involved forgets what happened, who wrote what why, and where things stand. And the vendor has lost tens of thousands of dollars in labor costs…so has the buyer. Why payers go thru all the work to write an rfp only to abandon it, often without informing – and apologizing to – the respondents, is a mystery.

    (Actually it isn’t…there are way more service providers with way more capacity then there are potential customers, so you’ve got no choice…you HAVE to respond to every RFP even though you know your chances are miniscule…)

    What you’d LIKE to say…

  3. The Change-a-Thon
    The original specs both parties agreed to are set forth in stone. Well, still-liquid mud actually, but mud is just stone that hasn’t solidified quite yet.

    Then, there’s a Note/email/change request… “due to regulatory issues, or a change in management, or because we just forgot something, we now need your data to feed this other system/comply with this standard/include these fields that we never told you we wanted, and/or your staff has to have the following credentials, and/or we need the reports on pink paper on Tuesday.”Oh, and we can’t pay you any more for this.Then there’s another change request, and another, and on it goes.

  4. The “We Need a Better Price”
    You’ve negotiated everything, and it’s pretty much a done deal. Then the buyer – often a procurement person – says they need a better price.  You’ve been hearing for months that the customer wants better service, is leaving their current vendor because of lousy service, and places a premium on service.Except they refuse to pay for it.

    So, you’re stuck.  It’s either agree to barely break-even or perhaps even lose money, or agree to the price knowing you’re going to reneg on service once the contract is signed.Which leads to the final problem (although I’m sure you have your own list)

  5. The Procurement Problem
    Oh boy.  The business people have written the specs, delved deeply into your capabilities, certifications, experience, and results.  They fully understand that the service they want – and what you are expert in – is hugely complex, requires deep experience and highly trained staff, and will evolve over time as you work together and learn how to do things smarter/faster.

    The procurement/purchasing folks have been involved, but up till now they’ve been pretty much silent.

    Now they start negotiating price, and the dreaded Service Level Agreement (SLA). They want performance guarantees with financial penalties, but won’t agree to bonuses based on stellar achievements. They may demand you agree to specific time frames and project specs, refusing to factor in possible screwups/delays on their side of the implementation process. They negotiate price like a pitbull; in fact they focus most of their effort ratcheting down the price.Your business contacts plead with you to agree to the terms, saying they’ll work it out. Then, you’re locked in, and once again stuck in the “we can’t afford to deliver this for that price” – so it’s lose money or be accused of failing to deliver.

    (Terrific insights into marketing and procurement here.)

    (Now that I’ve thoroughly angered my friends in purchasing/procurement roles, know that some – a few – are reasonable, thoughtful professionals that seek to understand these issues and recognize the price implications.)

    What does this mean for you?

    You get what you pay for.

    Workers comp services is a shrinking business in a highly mature market. The only way vendors grow is by taking business from a competitor. Buyers have all the negotiating power, and often use every bit of it to wring concessions from suppliers.

    That’s almost always a grave mistake, leading to poor service and poor results.


NCCI – final takeaways

NCCI started with a terrific video featuring several people who suffered significant occupational injuries – and how work comp helped them recover. The video was really well done…kudos to NCCI and their partners for publicizing the good work done by many of you.

That’s the people side of things – one that the industry is doing a much better job publicizing. On the business side, the workers’ comp insurance industry has had a seven year run of increasingly positive results – measured by operating gains.

NCCI CEO Bill Donnell noted that technology may be moderating the “insurance cycle”; the hard-and-soft market waves that have bedeviled the industry for decades. The thinking is we’re more on top of indicators and track potential changes in real time, enabling players to anticipate and react quickly.

I’m not so sure.

Look at the stock market, where automated trading algorithms have led to wild swings in stock prices. Different environment to be sure, but a telling example of how tech has led to more volatility – not less.

And, we only know the metrics we are measuring. Things can move very quickly and we likely don’t know all of the factors/indicators/metrics that may – in the future – contribute to changes in WC results.

Frequency has declined by a third over last decade.  But, we’re getting older – more of the workforce is over 55 than ever before. Despite that, frequency keeps declining. While claims counts likely are flat to slightly higher, that is due to employment. As we’re at full employment, we can only expect claim counts to decline in the future.

It’s apparent to me that there are few new issues in workers’ comp that are worth getting excited about. Medical marijuana, the gig economy, fee schedule changes, pending legislation, all generate some excitement – but really, do these things move the needle?

Structurally workers’ comp is a declining industry. Costs continue to moderate, consolidation is the overarching theme, premiums are steadily declining. I challenge anyone to find an employer up in arms about their work comp program.

Contrast that to industry news that many insurers are looking to grow their work comp books.

These two things can’t happen. The drive for growth could push some insurers to cross the stupid line and cut prices below sustainable levels.  Focused intently on their new analytical reports, they won’t see the chasm until they are in it.


What does this mean for you?

Those who don’t learn from history are condemned to repeat it.

  • Direct written premium was flat,
  • combined ratio stayed low,
  • loss costs decrease, and
  • reserve deficiencies disappeared.

Later this week I’m going to do a series of posts unpacking these findings and opining on what it means for you. For now, here are the key takeaways

The big number – the combined ratio – got a lot better – declining to 83 from 2017’s 89. That is a historically low number.

Here’s the entire presentation.

We’ll focus on indemnity and medical expenses for a moment, as these are key cost drivers. Note that these data are ONLY for NCCI states – which don’t include some big states such as New York.

The graph below shows that indemnity claim severity – the cost per claims did increase – albeit modestly.

Medical costs barely increased last year. I’ll have a lot more to say about this in a future post.

Kathy does an excellent job making really complex data understandable while making it relevant.

For example, payroll increased by 5.3% in 2018, more than offset by total loss costs (driven by frequency and claim costs) which dropped almost 9%. The takeaway – claim costs decreases are more than offsetting increases in payroll and employment. That happened despite a big increase in employment in construction, which is a higher frequency, higher severity industry.

The result, only 5 percent of surveyed respondents saw an increase in their WC premium rate this year; almost everyone had no increase or a decline.

Let’s pause here.

This has never happened in workers’ comp. We have never seen this level of financial performance, and it is clear insurers are still trying to figure out why this is happening, when it will end, what will cause a change, and what the warning signs will be.

What does this mean for you?

Life is pretty great right now. We do know it will end.  We do NOT know what will cause that event.




Explaining pharmacy pricing, part 2

Yesterday was post 2 of Pharmacy Week at MCM, an intro to drug pricing. Today we’ll get you up to speed on why the list prices for drugs are irrelevant – mostly. 

Recall that almost all work comp drug fee schedules are based on Average Wholesale Price – a metric that is three falsehoods in one, as it is neither “average”, “wholesale”, or the “price”.  Regardless, when calculating the “savings” from a PBM contract, buyers almost always use AWP as the baseline. And that’s what buyers report to their bosses and customers; here’s what we saved below states’ fee schedules…

As we discussed yesterday, brand drug manufacturers pay PBMs (and other entities in the drug supply chain) rebates on their drugs so the PBMs will allow patients to get those drugs without going thru the Prior Authorization process.

That’s quite effective in the commercial health insurance world, where insurers have complete control on what drugs are “on formulary” and drive consumer behavior by setting co-pay amounts. It’s a lot less effective in work comp, where formularies are driven by a) state regulations and/or b) treatment guidelines. In either case, work comp payers can’t encourage patients to use preferred brand drugs by setting the co-pay lower than non-preferred brand drugs.

That’s not to say work comp PBMs don’t get paid rebates for brand drugs – in many cases they do, although the amounts can be a lot lower for comp.  And, PBMs often, and with some justification, use these rebates to offset price reductions.

You’re wondering: “well, how many dollars are we talking about?” I’ve heard different things from different people, from an average of $35 per brand script to $74.  Or, in percentage terms, up to 30%. Those payments aren’t for ALL brand drugs, and it’s highly likely the manufacturers don’t even know they are sending those dollars to work comp PBMs and payers; Work comp is such a tiny piece of total drug spend that most entities don’t bother to track it.

What does this mean for you?

Rebates are being paid to work comp PBMs and payers. Some payers don’t want the rebate payments; they’re afraid those payments could be construed as affecting decisions about medical treatment.

Others look at this as a fiduciary responsibility issue; they want to know so they can better manage their customers’ dollars.