Sep
27

ACA to Trumpcare, and the path along the way

Andrew Sprung has posted this month’s Health Wonk Review, highlighting a broad spectrum of perspectives on the Trump Administration’s ongoing efforts to emasculate the ACA, along with research into effectiveness of medical care, drugs, and a deep dive into Republican claims to protect those of us with pre-existing medical conditions.

Reinsurance, catastrophic plans, Texas v United States, are all covered in Andrew’s edition.

 


Sep
26

The trade war should scare you

Here’s why.

China can outlast the US.

China’s leaders aren’t afraid of public pressure to give in to Trump.

Despite claims to the contrary, the impact of tariffs on US consumers is being felt – and the pain, while minimal today, is growing.

The tariffs, intended to bring back manufacturing jobs to the US, are actually forcing US manufacturers to find other Asian countries that will make the same stuff China currently exports.

Agriculture is getting hit hard. China used to buy about $20 billion of our agricultural exports; that number is down significantly.  Retaliating against the Administration’s initial and follow-up tariffs, China increased tariffs on pork to 70%, effectively locking US producers out of a very lucrative market.

The price for soybeans, one of our largest exports, is down about 20% over the last six months.

source Nasdaq

The US is the largest soy producer in the world,  and China used to be our biggest export market.

As a result of the Trump tariffs, China is buying its soy, pork, corn, and other products from other countries, entering into long-term contracts with planters in Brazil and Argentina and elsewhere. While some will claim they’ll switch back when the trade war is over, that’s highly doubtful given the unpredictability of the Trump Administration.

The trade war is a double whammy for ag equipment manufacturers; steel and aluminum prices are up substantially, while demand for their equipment is down because farmers’ finances are on shakier ground. Certain types of steel commonly used in ag equipment is only made in Canada or Mexico, so equipment manufacturers have no choice but to pay the 25% tariff.

It’s not just agriculture.

The US imports more steel than any other nation; over 34 million metric tons last year alone. When manufacturers have to pay more for steel and other materials, they pass that on to their customers. So, prices are up, which may well drive down demand.

A Federal Reserve analyst looked at the impact of the tariffs on manufacturing; the results are troubling.

“all industries within the U.S. manufacturing sector source at least 10 percent of their intermediate inputs internationally. And, at the high end, the motor vehicles, trailers, and semitrailers industry sources about 30 percent of their intermediate goods from abroad.”

Here’s the takeaway.

U.S. firms that can will pass these higher costs on to the consumers of their products, leaving those consumers less money to spend elsewhere after paying higher prices for the goods affected by tariffs. Firms that cannot pass the costs on will, at best, have less cash flow to invest and expand in the U.S., or, at worst, will become unprofitable, lay off workers, or potentially go out of business. These tariffs increase production costs for U.S. manufacturers, placing them at a competitive disadvantage, and will, on net, destroy more output, wages, and employment in the United States than they create. [emphasis added]

What does this mean for you?

The trade war will likely:

  • drive down manufacturing profits
  • hurt the entire agricultural industry
  • reduce consumer demand for all goods and services

For work comp folks, we know that recessions lead to higher initial claim frequency, followed by longer-term disability duration.

Things look good now, after a 10 year economic expansion.

That will not last, and when it ends, it will be ugly.


Sep
21

Work comp/Auto medical bill review – initial takes

We are about a third of the way thru interviews for the third Survey of Medical Bill Review in Workers’ Comp and Auto; here are a few initial takes.

  • Bill review has progressed a lot in the last decade, with key advances in:
    • Auto-adjudication of more bills
    • Better coordination/integration with document management
    • Ability to more readily connect with other key systems e.g. treasury/finance, state reporting, claims
  • One area that still needs a lot of work – automated integration with UM/UR applications
  • E-billing is leading to more auto-adjudicated bills, but headaches as well.
  • In general, respondents don’t see a lot of differentiation among bill review vendors.
    • But some respondents point to key differences between vendors and application providers that should be top of mind for payers
  • The most common pricing methodology? so far, it’s a flat fee per bill for bill review and the old percentage of savings for everything else.
  • that said, there are some pretty innovative approaches to pricing out there that bear watching

The last time we did this survey was six years ago.  We will be comparing and contrasting results to document what’s changed and where things are going.

If you’d like to participate, shoot an email to infoAThealthstrategyassocDOTcom.  Substitute symbols for the caps.


Sep
19

Paradigm Outcomes acquired

Paradigm will be acquired by investment firm Omers, a Toronto, Canada headquartered company. Sources indicate the price was approximately 14 times earnings; by my calculation, the total valuation was above a billion dollars.

Till now, Omers had not been visible in the work comp services investment space. And, Paradigm was not “shopped” in the usual way; an investment bank is hired, books go out, bids are accepted, etc. The price is even more remarkable as there wasn’t an auction; the valuation continues what’s become the new normal pricing for work comp assets.

If it seems like you were just reading about a Paradigm acquisition…you were. The company just completed a deal to buy pain management network company AdvaNet.

Omers does own Premise Health, a worksite clinic firm, as well as two outpatient rehab and physical therapy companies – however sources indicate there are no plans for any collaboration or combination of assets.

What does this mean for you?

If you own a work comp services business – sell now!


Aug
24

King v CompPartners – good news, but another shoe to drop?

Yesterday California’s Supreme Court fully supported the State’s workers’ comp UR/IMR process.

That is excellent news.

First, here’s the key takeaway – the Court ruled that workers’ comp remains the “exclusive remedy” for resolving disputes related to treatment approvals/UR/IMR.

Second, the California Legislature may well take up the issue and require payers to take into consideration the potential medical effects of a treatment decision, perhaps including weaning off medications that are no longer approved.

The Ruling

UR/IMR is an inherent part of the workers’ comp process, and therefore falls under the exclusive remedy provision of work comp. So, the plaintiff could not sue the IMR reviewer for an allegedly adverse treatment decision.

(Any treatment arising from the plaintiff’s medical care – which in this case was allegedly due to the suddenly stopping a medication – is part of the work comp claim.)

Here’s how CWCI General Counsel Ellen Sims Langille put it:

We have long contended that exclusive remedy was the beginning and end of the discussion in this case, inasmuch as the URO was acting in the capacity of the employer, and as a statutorily required part of the claims process, and now the Supreme Court has agreed.  The URO was acting as the “alter ego” of the employer, and the utilization review itself is a statutorily required part of the claims process.  That is the very definition of exclusive remedy.

The Court of Appeal had made an obvious error in finding that the seizures suffered by Mr. King were compensable outside of the workers’ compensation system because there were no allegations that he was working at the time he suffered the seizures.  That is a fundamental misunderstanding of how compensable consequences work.  As our Amicus brief argued, the injuries alleged by Mr. King were derivative of a compensable workplace injury, and the new compensable consequences injuries fall within the scope of the workers’ compensation bargain — and within exclusive remedy.

But there’s more, which may lead to additional legislative action to address the underlying event behind King…again from Langille:

Concurring Opinions were filed by two justices, and may prove to be the enduring legacy of the decision.  Justice Liu frankly invites the Legislature to examine whether existing safeguards provide sufficient incentive for competent and careful utilization review, pointedly noting his skepticism that “a care plan… appropriate for the medical needs of the employee” was established before the Klonopin was discontinued.  Even the Majority Opinion referenced the same language from §4610(i)(4)(C).  Unfortunately, it does not appear that any of the justices understood that this subsection applies only to cases of concurrent review, which is defined under Reg.  §9792.6(d) as “utilization review conducted during an inpatient stay” and thus inapplicable to the facts of this case.  Be that as it may, it is likely that the next legislative session will include some effort to expand the safeguards for the injured worker under utilization review.

What does this mean for you?

Consider the impact of medical treatment decisions on the patient’s future condition. 


Jul
20

The big story – work comp rates continue to drop

Spent most of this week doing a long bike ride with two great friends – riding thru a 90 minute downpour, falling into a mud puddle, and marveling at two century-old engineering feats.

Glad I missed the poison ivy and horse poop…

Work comp premium rates keep tumbling

This is one of those very big stories that isn’t getting near enough attention. This morning’s WorkCompCentral had two stories that highlight just how much the world is changing.

WCC’s Greg Jones (one of the more diligent reporters I’ve read) noted that California may lose it’s place as the state with the highest work comp rates. 

Ohio’s public employers are looking at a 12 percent drop, capping off a seven-year run of decreases that have slashed premiums by almost 42%.

Meanwhile, despite high medical costs and lots of litigation, Louisiana’s rates have also declined some 30 percent over the last decade.  (thanks to LCTA’s Troy Prevot for the head’s up). While the reduction in employers’ and taxpayers’ costs is a very good thing, too-high medical costs and too-long disability duration are problematic indeed. But the story here is rates are dropping despite these significant cost drivers.

The biggest driver appears to be claims volumes – frequency declined 6 percent last year alone. While some argue that frequency is not a number, and therefore isn’t relevant, as we get very close to full employment, the “gap” between frequency (claims per 100 FTEs) and the actual volume of claims becomes pretty meaningless. (cue disagreement, which is welcomed)

What does this mean for you?

Lower rates will force insurers to reduce administrative expenses, overhead, staff, investments in technology.

Lower rates reduce premium taxes, a funding source for regulatory entities.

Historically low injury rates are continuing to drop, reducing the number of claims – which reduces the need for case management, claims adjusting, bill review, UM, peer review, IMEs…pretty much all claims services.

Insurers seeking to cut fixed costs to reduce Unallocated Loss Adjustment Expenses are moving claims to TPAs, a trickle that may become a flood.


Jul
12

Health Wonk Review’s July edition is up!

July’s Health Wonk Review has:

  • intel on how Purdue deceptively marketed OxyContin;
  • the ACA’s role in tackling the opioid crisis via expanded coverage for mental health
  • a great review of so-called “faith-based” alternatives to health insurance

Just in time for your lunch break too.


Jun
29

Friday catch up

Happy last June Friday – going to be a blistering weekend here in upstate New York with temps likely to blast thru records.  Hope you’re cooler than we are…

Here’s a few newsworthy items that crossed my virtual desk this week.

First up – WCRI’s got the latest on perhaps the biggest cost driver in work comp medical – outpatient facility costs.

Couple quick takeaways:

  • States without fee schedules had significantly higher prices
  • States with percentage of charges fee schedules were way more costly than those with fixed fee schedules
  • Medicare’s reimbursement scheme is becoming more pervasive – my view is this is a very good thing.

Speaking of cost drivers…Health systems are buying up physician practices at a record pace. But does this make good business sense? “…some larger health systems’ physician operations are generating nine-figure operating losses, which are major contributors to the deterioration in hospital earnings. ”

Best line in a news article this week goes to the Economist; in a great article about why meetings suck.

MOST workers view the prospect of a two-hour meeting with the same enthusiasm as Prometheus awaited the daily arrival of the eagle, sent by the gods to peck at his liver.

The solution? “the best solution to tedious gatherings is to have far fewer of them.”

Excellent discussion of the Infrastructure issue – how it affects local business, why tolls should only cover operating and not capital expenses, and why Dodge City didn’t become Dallas – Forth Worth – and DFW did.

Health status is driven by many things – but perhaps the most important is food. One out of six Medicaid recipients surveyed who are working didn’t eat anything for the entire day. Details here.

In the Road-To-Hell-Is-Paved-With-Good-Intentions department, we bring you Medicaid work requirements; they make sense, right? Well, most of the recipients who would lose coverage are actually working today – but they’d be kicked out due to the administrative hassles of complying with reporting requirements.

Prescription Drug Monitoring Programs  – when effectively and intelligently implemented – are associated with reduced opioid prescribing. The best results appear to come from Kentucky…

Ok, time to get to work.

Don’t forget the sunscreen, eh?

 


Jun
25

HWR’s Midsummer Nights edition is up

Thanks to the estimable Hank Stern, we bring you the June edition of Health Wonk Review, a fast read of the latest intel on health policy and related matters.

Hank’s summary includes notes on the CVS’ donation kerfuffle; a very readable review of the Trump Administration’s Association Health Plans plans; what may happen if the Trump folks kill off ACA; and how Medicare might be expanded.

Read on!


Jun
22

After a spate of mega-deals and “tuck-in” acquisitions, things seemed to have calmed down in work comp services M&A.

In reality, there’s a lot going on – for reasons I’m not sure make sense.

There’s been consolidation throughout work comp services; every niche from pharmacy management to MSA vendors to networks to IME firms to case management to TPAs has gone thru this. There’s been both vertical (companies in the same business merging (e.g. EXAM buying IME companies) and horizontal deals (companies in dissimilar areas joining forces (e.g. Mitchell buying MCN).

While your take on this depends on where you sit, (e.g. fewer vendors bidding on a payer’s business), there’s another, arguably more important issue here.

I’m going to caution buyers to not conflate scarcity with value.

I’m seeing renewed enthusiasm among both strategic and financial buyers in companies that weren’t that exciting just a couple of years ago. Those heretofore-not-exciting companies seem to have gotten much more attractive now that there are far fewer potential acquisition targets available.

This is just human nature; we tend to value things more when there are few of them.

For example, I give you the Ford Pinto…

A horrifically crappy car rushed into production during the gas crises of the early seventies, thankfully there are few left in circulation.

Even worse, the AMC Gremlin (why a company would name a product after a manufacturing defect is one of the great mysteries of the Universe).

Yet people still spend stupid money on Pintos and Gremlins

Why? because there are few of them left. That doesn’t make these awful examples of design and engineering incompetence any better, it doesn’t make the build quality less than horrific, and it sure doesn’t make them any more visually attractive.

What does this mean for you?

Before you plunk down your (or your investors’) hard earned cash on some company you passed on or wouldn’t have given a second look at a few years ago, you may want to ask if it passes the Gremlin Test.