On its third CEO in four years and facing a tough financial picture, it’s time to think thru the challenges facing OneCall in 2019.

First, workers’ comp is a declining business – claim counts continue to fall. When you’re as big as OCCM, structural factors tend to have a bigger impact than they do on smaller companies. The Net – Fewer claims mean fewer specialty services needed.

Second, the list and type of competitors is changing as firms including Mitchell/Genex diversify. With Genex buying PCS (Priority Care Solutions), it would be logical for Mitchell to switch customers from OCCM to Genex/PCS (where this is possible). This would make sense for two main reasons: a) increases Mitchell/Genex’ top line revenue as the entire service cost is counted as revenue (for most services); and b) increases M/G’s total margin. Word is M/G has moved/is moving specialty business from OCCM to Genex/PCS and this will continue over time. Other entities such as VGM/HomeLink, HomeCareConnect, Paradigm Outcomes, and MTI America (HSA consulting client) are also working aggressively to gain market share. The Net – OCCM will likely see additional loss of revenue and associated margin.

Third, the new CEO doesn’t appear to have any experience with or expertise in workers’ comp. Rone Baldwin’s last job was with Centene, a health plan company with deep expertise in Medicaid, Medicare and some individual marketplace business. He’s also had stints at other benefits and insurance firms, but nothing I saw in property and casualty insurance or claims. Mr Baldwin left Centene in 2016; I asked OCCM what he’s been doing since then; they weren’t able to respond. The Net – With the workers’ comp business flat to declining, OCCM owners have brought in a new CEO who is a healthcare guy.

OCCM has been trying to push into the non-workers’ comp sectors for some time now, with limited success. Come to think of it, I can’t name any work comp entity that has had any appreciable success moving into healthcare.

The Net – I’ll repeat what an investment firm asked me about OCCM – What’s the end game? And I’ll repeat my reply – Either it gets sold intact to a strategic buyer (perhaps Optum or Mitchell), gets broken up and sold off piecemeal, or creditors take it over if/when it runs out of cash.

Note – I sent several emails starting yesterday at 8 am to OCCM asking for comment. As of press time there’s been no substantive reply.

CEO Dale Wolf is no longer with OneCall Care Management.

Wolf’s departure is to be announced internally early this afternoon; word is he was informed Friday that he would no longer be needed at OneCall.

In his two years at the helm, Wolf was unable to fix OneCall; frankly that was a Herculean task against long odds. From its inception as the combination of Align, SmartComp, OneCall, and various other bits and pieces, OCCM was a business based on an ill-conceived investment thesis hampered by crushing debt that – in my view – forced a strategy that was doomed to fail and, in my view, was poorly executed.

As CEO, one could blame him for a failure to right the ship – but I’d be loathe to lay it at his door. Wolf took over a business headed in the wrong direction, tied to a faulty business plan authored by his predecessor. The actions he took had to recognize a) the reality that debt service costs were a huge limiter and b) the “whitespace” touted by OCCM buyer APAX and former management was much smaller than they opined.

While at best unpleasant and at worst cruel. the layoffs under Wolf cut expenses. (that said, the way some of the layoffs were handled still rankles.) Layoffs and the investment in tech solution Polaris were designed to reduce admin expense, increase profits, and improve customer service, thereby allowing OCCM to continue to pay its debt costs while hopefully gaining revenue and margin to, perhaps, one day, allowing owner APAX to sell at a profit. (That looks increasingly…unlikely.)

Polaris is still months away from full implementation at all customers, and consuming lost of free cash flow. If OneCall is to survive intact, it will have to complete Polaris, have Polaris live up to expectations, reduce admin expenses, and add new business.

One bright spot – transportation. Partnering with Lyft, OCCM is making significant progress shifting a chunk of rides to the rideshare company while reserving higher-complexity cases for its standard WC transportation network. That’s the good news; the bad news is margin on those Lyft rides may be significantly lower than the rides they are replacing. Nonetheless, kudos to OCCM for working through this.

Having worked at a declining company in this space and still bearing the scars, I feel for the people in JAX going thru this.

Unfortunately, the company’s latest financials indicate things are not getting better, predicting an even more difficult path ahead for OCCM’s new leader. (Word is the new CEO, Rone Baldwin, comes from Centene,)

From December post on financials…

2018 has been a tough year; an investment industry source indicated Q3 EBITDA was down15% from the prior year’s quarter, while revenues actually increased 3%. Annual EBITDA saw a smaller decrease of about 10% for the 12 months ending 9/30/18.

Reports indicate total debt is just shy of $2 billion, and debt service (the interest OCCM pays to its creditors) is about $160 million annually.

Here’s the important stat – with Pro Forma EBITDA (EBITDA increased by management adding stuff that isn’t normally accepted by accountants) of $190 million, there’s not a ton of free cash (about $30 million) available for investments in staff, marketing, and other expenses.

A few questions worth pondering: (I’ve reached out to OCCM, no response as of press time)

• Given the limited whitespace and to-date-inability of OCCM to win more business than it loses, is the new hire tasked with pushing OCCM hard into group health and other non-work comp sectors?
• Given limited cash, what is the near-term plan to stabilize the company’s work comp business?
• What are owner APAX’ plans for the business?

Buyers are asking healthcare intermediaries for “transparency”. We talked about why this is happening yesterday; today I’ll try to concisely describe what this transparency thing is.

The emphasis on try is an upfront admission that a blog post is NOT going to be the end-all and be-all answer. You aren’t going to read a 5000 word treatise on this – and I sure don’t want to write it.

With that caveat, here goes.

First up, we are dealing with intermediaries or middlemen. Think PBMs, bill review firms, networks; entities that contract with healthcare providers, pharmacies, durable medical equipment vendors, chiropractors etc.; also hospitals. The intermediaries aggregate buyers and providers and provide simple access to and communications, data, and financial flows between those entities.

Let’s take Pharmacy Benefit Management as an example. Of late large benefit buyers have been pushing PBMs to offer transparent pricing options. One, the National Drug Purchasing Coalition, is working with Express Scripts Inc. to provide its members with cost plus admin fee pricing for drugs. That is, buyers know and pay what ESI pays for drugs, plus a per-script admin fee. ESI won’t earn any fees from the dispensing pharmacies or it’s own mail order pharmacy, nor will it capture any rebate or similar revenue. (disclosure – ESI subsidiary myMatrixx is an HSA consulting client)

Express is also offering clients a choice of formularies; to quote the Washington Post, “…clients can choose between lists that include drugs with a high list price — and high rebate…or the new list with lower-price drugs but with little or no rebate.”

And that is one reason this whole transparency thing isn’t as easy or straight-forward as one may want.

Rebates – which in this example are payments from brand drug manufacturers to PBMs to financially incentivize the PBMs to offer their drugs – can be opaque and hard to pin down. Buyers demanding full transparency will want full financial credit for all rebates…but they may also want to keep total drug costs down.

In some cases, those buyers will find that those rebates they participate in mean their total drug costs are lower – while their members may pay more.

This is an admittedly simplistic scenario but one that illustrates the key question – what do buyers want when they say “transparency?” I’d suggest what many buyers want is lower cost – but they aren’t asking for lower cost, they are asking their vendors for a specific thing that the buyer thinks will reduce cost. (Of course, they also want to KNOW that they are getting a fair price)

After lots of analyses and back-and-forth data dumps and algorithm testing and forecasting, what usually happens is…the buyer picks a non-transparent pricing option, that usually has some cost-cap guarantee or other mechanism to manage risk.

What does this mean for you?

There’s a lot to unpack here – but my top three are:

• Ask for what you want as the end result, not a means to get there. Let the vendor figure out how to get you what you want.
• Transparency is defined different ways – make very sure your definitions are consistent within your organization and your vendor partners’.
• When you “go transparent” you’ll have to pay more for stuff your vendor was providing under a bundled price. Call centers, clinical support, formulary management, client and state reporting, script transfer programs…all cost money to deliver.

For those looking for a deep dive into PBMs, pharma, and pricing, here you go! Credit to KHN’s Julie Appleby.

In healthcare and work comp, “transparency” is becoming the latest popular word, or more accurately, customer request.

Nationally, the Trump administration is requiring hospitals post their list prices. More and more large employers and healthplans ask their pharmacy benefit managers for “transparent” pricing. In workers’ comp, HSA research shows a strong correlation between customer service rating and transparency of pricing and cost reporting.

I’ve thought a lot about this over the years; I’ll spare you the idle musings, and focus instead on what I believe is behind the growing demand for transparency – and the importance of transparency in some customer relations.

The problem is simple – healthcare services has no measurable “output.” If you can’t put your finger on what you get when you plunk down your dollars, that’s a problem. Unlike electricity, car parts, travel, or a new building, buyers really have no idea of the “value” of healthcare…more productive employees? sure, and that is measured…how?…more widgets being produced? sure, and that is correlated with healthcare spend…how? longer life? sure…and that helps an employer of a 28 year old…how?

Since we couldn’t measure value, instead we just wanted to spend as little as possible.

That didn’t work – costs continually escalated, and now healthcare costs are all but unaffordable. And we still can’t identify an output.

So, the next step is to strip out as much of the unnecessary cost as possible. In order to do that, one needs Transparency – to know what those “costs” are and where they are added onto premiums, so buyers can know exactly what their suppliers are paying – and negotiate from there.

Simple, right?

Anything but. We’ll discuss tomorrow.

The older I get, the more I understand the value of experience. (convenient, huh?)

The counter to that is one also learns – often the hard way – that assumptions – usually based on “experience” or “common knowledge” – can be dangerous indeed. Below, a few of the assumptions I’ve held at various times that turned out to be wrong.

More workers’ comp claims happen on Monday because workers hurt over the weekend wait till Monday to file so they can cheat the system.

Well, if there is a correlation, it is tiny. The NCCI did an excellent study last fall looking at the impact of the ACA on claims, here’s one of the study’s findings.

People without health insurance are more likely to file work comp claims.

Nope. In fact, the best research I’ve found – from RAND – indicates the opposite is true. That is, workers whose employers do NOT provide health insurance are LESS likely to file work comp claims.

This may be due to the employer-employee relationship; employees who perceive their bosses to be more benevolent may be more likely to file claims as they don’t think they will suffer retaliation.

People always act in their own self-interest.

This one is a bit more complicated. Generally, it is true – the key is how one defines “self-interest” – external entities can often convince people to act against what is their true self-interest via effective messaging. Poor white farmers joining the Confederate military to preserve a system that kept them desperately poor is one striking example; the anti-vaxxer campaign is another.

What does this mean for you?

Be ready to give up long-held beliefs in the face of solid evidence. It’s Ok to admit you’re wrong.

Apologies for my absence this week – getting back in action after dealing with the flu for a few days. I’m a lousy patient, as my long-suffering bride will attest.

Two quick facts about healthcare in the US.

One – we white people are a lot healthier than people of color and native Americans. This is particularly true for African Americans.

Two, that’s because minorities have less access to healthcare.

I bring this to your attention as it seems particularly important today – Martin Luther King Jr’s birthday.

If you are near-poor, or live in a state like Mississippi that has crappy coverage for poor people under Medicaid, and/or are an ethnic minority, you will likely:
– die sooner,
– be less healthy, and
– go through life with less access to needed care.

What does this mean for us?

In a country as rich as ours, this is appalling. We can do so much better.

Workers’ comp is a declining industry.

While there may be occasional bumps in claim frequency, claim counts and cost per claim, the irrefutable fact is that every year one of every thirty claims will disappear.

Put another way make sure you reduce claim counts by about 10 percent when you do your three-year plan.

Yet pretty much every business in this space is planning to grow.

That won’t happen – but it will for those who invest in branding and marketing.

Reality is most companies in WC services woefully underspend on branding and marketing, or spend their dollars…unwisely. I fully expect that to continue as execs cut back on “soft” dollars allocated to marketing as they try to shrink their way to increased profits.

Before you scoff, ask yourself why you drive the car you do, drink the beverages you drink, use the toothpaste you brushed your teeth with this morning.

Put another way, Is Coke really different than Pepsi?

What companies should be doing is investing in their brand – finding out what the market thinks of them and their competitors, defining what it is that makes them unique and special, and creatively communicating that to potential buyers, influencers, thought leaders.

This works because it ensures:
– potential buyers actually know you exist
– those buyers have a positive view of your company
– they feel comfortable with you.

So when they issue that RFP and read your response they interpret your answers positively, they look for confirmation of what they already know – you value customer service, you listen to your customer’s needs, you are a low-risk choice.

What does this mean for you?

What you do today defines if you are in business in three years – let alone growing. If you aren’t spending 2+ percent of revenues on REAL marketing, your chances of success are limited indeed.

In 2015, a federal judge ruled the House of Representatives could sue the Obama Administration for spending money it hadn’t approved.

Now, that ruling could well be why President Trump hasn’t – and won’t – declare a National Emergency over his much-loved Wall.

If Trump declares an Emergency – which most knowledgeable people thnk is well within his power – he’ll then have to find the money to build the Wall. That’s a whole other problem, one that was specifically addressed In the House v Burwell case in 2015.

House v Burwell was the lawsuit filed by the House (then run by Republicans) when the Obama Administration used unallocated funds to fund subsidies for lower-income people buying insurance via the ACA. The case was eventually settled, but during the process, precedent was likely established. To wit:

Presiding Judge Rosemary Collyer wrote “Neither the president nor his officers can authorize appropriations; the assent of the House of Representatives is required before any public moneys are spent,” Collyer wrote this in September 2015.

Now, there’s a bit of nuance here. From WaPo’s Paige Winfield Cunningham:

“[If] Congress hadn’t set aside funding specifically for those (ACA) subsidies, it had at least authorized them as part of the ACA. But in this case, Congress hasn’t passed a law creating a border wall — let alone set aside money to pay for it.” 

In the view of some legal experts, this makes a potential House suit to block funding for the Wall much stronger. And the likelihood that Trump gets his Wall bleak indeed.

What does this mean for you?

Beware of unintended consequences.

There’s an excellent piece on automation and employment in the Harvard Business Review; here are what I see as the main takeaways.

What jobs will be lost and where are they?

Yes, automation will undoubtedly create jobs – as technological change always has. The key here is the pain and opportunity will happen in ways we can predict.

Jobs that are “automatable”are mostly routine, lower-skilled positions. Think logistics, manufacturing, transportation, retail, some construction and heavy industry. These jobs are more likely to be held by men, and tend to be located in inland California and many smaller southern and midwestern metro areas where they make up half or more of all jobs.

From HBR: “Conversely, just one-third of jobs in metro Washington DC and San Jose CA are routine.”

The automated jobs also tend to have higher injury rates and/or higher injury severity.

What about wages?

Automation affects wages, and wages affect automation. Or, if a machine can do something cheaper than a human, the human will be replaced by a machine. The obvious takeaway is the lower the human’s wage is, the less likely they will be replaced by a machine.

So, higher-wage routine jobs will likely be more affected by automation.

The net effect – automation drives down wages for specific jobs and in specific industries – both in the industries that see high automation and those industries where workers who lost their jobs seek new ones.

Automation will reduce wages in jobs that tend to be higher frequency/higher injury severity.

What does this mean for you?

More evidence that automation will accelerate the long-term decline in workers’ comp.

Or…

Note – this is a repost; a system problem prevented email notifications for the original post.

Is rather modest – until it isn’t.

Preparing for the next pandemic, monitoring food safety, preventive health services for at-risk people, new drug approvals – all are on hold or severely curtailed as the Federal government shutdown heads towards its fourth week.

Fortunately, funding for most health-related federal programs – the VA, Medicare and Medicaid, other CMS programs – was approved before the current impasse, so most of us will not be affected.

That is, if the shutdown is resolved soon. If not, the downstream effects are going to be felt more deeply – by more of us.

While it may seem like there’s not much impact on most of us, that would be wrong. Specific departments’ policies, funding approval processes, budgetary allocations and the like are often affected by other agencies. For example, there are significant pending changes to healthcare IT standards which must be approved before hospitals, healthcare systems, and other providers and payers can update their systems to comply with Federal laws and regulations.

Programmers are waiting for guidance, and will keep waiting until the deadlock is over. Some of these system updates have deadlines; while the deadlines should be extended if and when the politicos agree to a deal, what should happen in Washington – and did back when adults ran our government – often doesn’t.

This is just one example – and there are hundreds more. Reality is we live in an incredibly complex world, the Federal government is tasked with making sure that world is safe, non-toxic, operates well and does so efficiently. And most government workers are committed to doing that well.

The problem isn’t the workers; it is the press that vilifies them and the politicians that blame government workers for problems the politicians create and exacerbate.

Of course, for those who want to use our national treasure – the National Parks… if the knuckleheads in DC don’t get their stuff together, the Parks may be their own public health crisis.

What does this mean for you?

There are dozens of ways the government affects our lives – almost all of which we don’t know about or appreciate until it’s gone.