myMatrixx released it’s annual Drug Trend Report yesterday; there’s a lot of good news – and a few trends that bear close attention.

The good stuff (lots more in the report itself)

  • drug costs per patient decreased by 2.4% despite a 1.9% increase in utilization
  • opioid cost per patient continued to drop, this time by 10.7%
  • comparing claims incurred in 2019 to those incurred in 2016 or earlier:
    • 45% fewer patients were prescribed opioids
    • the average days supply dropped by 2/3rds, from 28 to 9
    • the average morphine equivalent dose dropped by 40%

Stuff that demands your attention.

Many payers are working hard to close older claims. For claims older than about 8 years, pharmacy costs account for almost half of medical expenses. Obviously, ensuring the drugs prescribed and dispensed to long-term patients are still appropriate and are helping the patient recover is the first step in developing a plan to resolve these old – and very expensive – claims.

Specialty meds are becoming increasingly common – and increasingly costly, accounting for 8.8% of drug costs.

The bad stuff

Physician dispensers are the worst. They suck money out of employers and taxpayers, justifying their rampant profiteering by lying about maintaining patient access and improving care. 

Their latest scam is topicals. One out of every eight physician dispensed meds is a topical, but one out of every three dollars you pay for physician dispensed drugs is for a topical.

chart used by permission

One – methyl salicylate cream 25% – is available at retail pharmacies for about five bucks. Physician dispensers are getting $345.

I’ll save you the math – you are paying 69 times more than you should.

There’s a lot more detail in myMatrixx’ report – you can download it here.

What does this mean for you?

While payers and PBMs have made remarkable progress addressing opioids and controlling costs, much remains to be done:

  • keep the focus on long-term opioid patients
  • aggressively attack physician dispensing
  • if you don’t have a specialty med program, you’d best get one set up.(myMatrixx is an HSA consulting client)


The stuff is hitting the fan

COVID19 is morphing, affecting different regions differently, infecting a different age cohort, and perhaps mutating.

What should workers’ comp service providers do?

  1.  Pay attention to the facts.
    Not the politicized nonsense from people who should know better, but the facts. Where is COVID19 spreading, what populations are being affected, what mitigation measures are and are not working.
  2. Pay attention to experts’ predictions – not politicians.
    Epidemiologists, Anthony Fauci, objective data scientists, and credible sites e.g.  COVID Forecast Hub. This last is particularly helpful as you can see predictions for infection rates and deaths based on aggregating carefully evaluated models.
  3. Understand that COVID’s impact will vary greatly by state, and even within individual states. For example, infection rates are exploding in many southeastern and southern states, while they’ve leveled off and are declining in most northeastern states.
    Death rates trail infection rates by 2-4 weeks; the COVID Forecast Hub’s excellent and fully transparent model will help you project what the next few weeks will bring in each state. (click on specific states for their data)

    For predictions of infection rates, go here to select individual states. The graph below compares New York and Texas…

    That’s great – and what do I do with it?

A few thoughts.

Compare different states to determine where your clients are going to need resources, help, staff – and what kinds. For states on the downslope (NY for an example), plan to reduce staffing while prepping those staff for work in states where infection rates are on the rise (e.g. TX).

Have your compliance staff research and prepare information for clients and your product development people. This a) helps your branding, and b) ensures your staff are working within state regulations.

Using infection predictions, track presumption laws and changes thereto, share that information with your clients, and develop services specific to each state.

Using death rate predictions as a proxy for severity and potential facility overload, devise ways to help find facilities for patients, perhaps even out of state. Contract with transportation entities to move patients when required.

I’m quite sure your front-line staff have a lot more and a lot better ideas than these; ask them for their thoughts on what they would have done differently

Finally, the elephant in the room. In what can only be described as a self-inflicted tragedy, idiots have politicized COVID19 and in so doing done incalculable harm.

COVID doesn’t care about your political ideology or party affiliation. Managing a business requires allegiance to facts based on data and decisions based on logic.

What does this mean for you?

Your competitors hope you listen to idiots.


COVID’s impact – Work comp payers and service companies weigh in

If you really want to know what COVID is doing to workers’ comp, you have to hear from those on the front lines.

35 workers’ comp insurers, TPAs, state funds, self-administered employers, and service companies gave me their views on the impact of COVID19 and employment on their businesses, claims counts, costs – and how they are adapting to a very different climate.Quick takeaways:

  • COVID claim costs are pretty low, with just a handful of claims exceeding a few hundred thousand dollars.
  • Shutdowns/Lockdowns = drop in payroll + business closures -> premium decreases, delayed RTW 
  • Respondents see total claim counts dropping 20% for 2020
  • Tele-everything is growing rapidly, but still has a long way to go
  • Many filed claims are not accepted because:
    • patient does not have a positive COVID test
    • patient is asymptomatic
    • Employers tend to give workers exposed to COVID19 two weeks of paid leave; they become WC claims if/when medical care is needed to treat COVID
  • Presumption is a concern, but less so than it was a couple months ago

Winners and losers

Service companies with the following attributes are generally doing much better than their counterparts:

  • no or low debt service cost and
  • on-shored business functions that
  • provide services typically used later in the claim’s life e.g. pharmacy.

Here are more details – and your free copy of the summary report is here.

A comprehensive version of the report including respondents’ detailed statements (respondents are not identified) and the accompanying raw data is available for purchase; contact jpadudaAThealthstrategyassocDOTcom. (substitute symbols for capitalized letters)

What does this mean for you?

For workers’ comp, the economic fallout from COVID is far more significant than COVID itself.


COVID catch-up

Apologies for the dearth of posts; vacation and slammed with client work.

Went bike-packing last week in the wilds of Pennsylvania and Maryland – had a great time off the grid, camping out, solving world problems around the fire at night.

Alas the world just created more…

Here’s a quick update on what I missed.

the great re-opening…or, what scares the bejesus out of me.

About 25 million people that can’t work remotely are at high risk if they contract COVID19. So, they a) have to go to work, b) many take public transportation, and c) are at high risk due to pre-ex conditions and poor health. This does not bode well for states experiencing increases in COVID19 cases.

Many states appear to have decided the healthcare implications of opening up outweigh the economic and societal costs of staying closed.

Florida is one such state:

This from JHU’s site.

Here’s a snapshot of positive tests, go here to get data on your state. The graphs show case counts from January thru yesterday; the greener the background the steeper the decline, the redder the steeper the increase.

Hospitals in seven states are in danger of being overwhelmed with new COVID-19 cases as fatalities increased yesterday for the first time since June 7. 33 states and territories have a higher rolling average of cases yesterday than they did last week.

Meanwhile the Federal government is scaling back its support for testing in 5 states.

Employment, payroll, and workers’ comp

As I noted in an earlier post, the biggest impact on workers’ comp will not come from COVID19 itself, but rather the dramatic drop in employment, business failures, and payroll.

According to NCCI, job losses peaked a couple months ago and employment has recovered somewhat…however there is wiiiiiiide variation across states, with some states as low as 8% unemployment and others up to 20%.

Remember the PPP dollars run out in a week, and when those $$ disappear, employers who had to keep workers on payroll to qualify for PPP won”t have to keep them “employed.” So, watch the unemployment numbers for early July closely.

Insiders are expecting a big increase in the number of corporate bankruptcies driven by way too much debt, changing buyer tastes, and of course COVID19. My take is COVID19 will accelerate the jump in bankruptcies, but the underlying drivers are the root cause; lots of debt works great…until it doesn’t.

The term for companies that are having big problems covering their interest expense is “Zombie”, signifying an entity that is dead but still stumbling around. About one out of five publicly-traded companies earns this sobriquet.

What does this mean for you?

Stay tuned to reports on unemployment and payroll changes in July. If the numbers aren’t good, the implications are broad and deep.


Do you know how to knit?

A good friend and colleague sent me this note; with their permission I am posting it in its entirety.
I read your post today with interest.
Your projection that ALAE will be depleting the result of changes to operations during Covid19 is likely on target.  However—the WC insurers (including some self insured corps.) that I survey regularly all indicate that they are already reaping the “benefit” of having changed operating model to virtual—w/ a majority of claim staff working remote from home due to Covid19—the transition has actually worked out better than most anticipated in terms of efficiencies—in turn driving fixed operating expenses very low.
This comes at a time when emerging technology including AI is pushing for a place at the operations “table” hoping to supplement front line staff with algorithm-based analytics—for far less operating expense (and with the value proposition of better/more accurate predictive analytics and outcomes).
I am getting the impression from these fireside chats that lots of COOs/CFOs are considering retaining the operating model even after Covid19 is through with us. [Joe note – I got a similar impression from many survey respondents, specifically big insurers/TPAs are questioning why they need offices when WFH [work from home] is working really well. 
While the choice may initially drive reduced ALAE, what I am concerned about is that many WC insurers will falsely rely on lower operating expense as a justification for work force reductions, i.e., reducing front line staff or eliminating key positions in specialty areas (think Large Loss Examiners, Subrogation Specialists, Triage staff, etc.) in an effort to artificially suppress fixed costs.  While that may support short term diminution of operating expense and combined ratios——it may not serve best interests in long term.  Claim Management is the insurer’s “service department.”  If too-harsh staff cuts result in diminution of service quality—those choices could eventually boomerang, especially if insurers also choose to sharply increase premium post Covid19.
Joe says – What does this mean for you?
COVID19 is going to force big changes in workers’ comp – and we are an industry that doesn’t do change well – if at all.
Those who get comfortable being uncomfortable will succeed.
Those who think the world won’t change will not.
Hey, do you know how to knit? I’m gonna need a sweater…


COVID is whacking work comp…Let’s play this out.

If survey respondents’ estimates of claim count reductions are accurate, we’re looking at about 20% fewer work comp claims in 2020 than last year.

So, what does that mean?

That’s about 1.2 million fewer claims. We can expect a greater percentage of those filed will be lost time; in tough economic times, workers tend to not file claims for minor issues.

Insurers, State Funds, and TPAs

Profit margins for insurers and funds will be higher because there are fewer claims; yes revenues will be lower, but combined ratios will actually improve. But, while margins will be up, dollars of profit will be stable or, more likely, somewhat less.

I’d expect insurers to hunker down and hold on to as much cash as possible. Expect a big push to reduce Unallocated Loss Adjustment Expenses; think fewer dollars for IT projects and the like.

Execs will be looking for ways to reduce allocated expenses and claim costs. Here are a few that may get traction.

  • Pharmacy – with PBM pricing declining over the last few years, payers that have not gone to market recently would be advised to make sure they are paying market-competitive pricing.
  • Facility costs – hospitals and health systems are looking for pennies in the couch cushions; with margins on WC higher than any other payer, rest assured insurers are the center of attention. Few bill review entities have all the tools necessary to keep hospitals’ sticky fingers out of payers’ wallets – make sure yours does.
  • Offload variable costs by offloading claims to TPAs – with volumes dropping its better to pay-as-you-go than have a building, equipment, staff, and all the necessary support soaking up overhead dollars.

Service companies

Companies with very good customer relations and high service standards will win.  While staff reductions are inevitable as case loads drop, service companies that manage those reductions wisely and humanely will reap benefits as the workers still employed will show their loyalty by going above and beyond for customers.

On the product side, many vendors are figuring out ways to help employers get safely back to work, prevent workplace infections, and facilitate medical access for patients with injuries. On-site employee assistance, testing access, cleaning services, scheduling support are all in play as is stress management and support for families dealing with illness.

Tele-services are a big part of this; big winners will be those that make the leap from using tele-as just a face-to-face visit to something more substantive, more diagnostic, more useful. There’s lots of creativity at work here…dare I say it innovation may actually become acceptable!

Expect more consolidation as private equity and venture capital owned firms (and others with solid cash reserves) try to buy out competitors, get their customers on board, and do it all on the cheap.

What does this mean for you?

Chaos brings opportunity – especially for those who remember this business is about helping people who are hurt get better. 




Work comp is worried about the wrong thing.

Finishing up the second survey report on the impact of COVID19 on workers’ comp and one takeaway has me shaking my head.

There’s a lot more fear and trepidation about presumption than I think is warranted. Across the 24 payers surveyed (including very large TPAs, insurers, state funds, and employers) there were less than 7,000 COVID claims accepted to date. Yes, several have considerable business in California, Kentucky, and Illinois and more than a few have a lot of health care and public entity clients.

Relatively few of those 7,000 claims are expensive, perhaps less than 5%. And even then they aren’t nearly as costly as real cats with expenses above $1,000,000. And this in an industry that is wildly over-reserved, like $10 billion over-reserved

There’s some – but significantly less concern over plummeting premiums driven by business closures and dramatic declines in payroll. That should be a lot scarier; we are talking billions of dollars of premiums lost, and the potential that figure premiums will not return to pre-COVID levels for a long time – if ever.

This will get worse as governmental entities are forced to layoff workers when sales tax revenues aren’t sufficient to cover payroll.

This is like worrying that your cable bill is going up when your salary’s been cut 30% and your hours reduced.

What does this mean for you?

Focus on the dollars, the pennies are just pennies.


COVID and pharmacy benefit management – an update

COVID19 is having an impact on work comp payers’ pharmacy programs – but this isn’t due to treatments for the disease itself.

That’s largely because there are no medications that have been shown to be safe and effective in treating COVID19 in credible clinical trials.  As a result, there’s little consistency in how payers are approaching medications intended to treat COVID and the symptoms thereof.

Some are approving hydroxychloroquine without a prior authorization (PA) while others require a PA for initial and refills. As the surveys were completed before the latest news that hydroxychloroquine research found less-than-promising clinical results for patients exposed to the virus, it is possible more payers will require at least a PA for future prescriptions. (Other research that reported specific health risks recently came under fire from multiple sources.)

None of the respondents mentioned remdesivir, a brand antiviral that has shown some promise (based on limited clinical trials). This may well change if and when additional trials are completed and the results are satisfactory.

What is consistent is payers’ moves to loosen other prior auth requirements to allow refills for other medications for longer periods and earlier than usual.

Home delivery has also ramped up appreciably, with many retail outlets offering delivery in an effort to keep customers tied to their local store as opposed to using the PBM’s mail order pharmacy.

What does this mean for you?

Unfortunately, we don’t yet have any medications that have been proven to be safe and effective in preventing COVID19 or moderating COVID19’s effects.

Read studies carefully, and get your clinical experts to weigh in on coverage decisions. Science matters.


Which work comp service entities are most affected by COVID?

That’s one of the questions I asked 36 payers and service providers; here’s a snapshot of their responses along with some interpretation…

Service types

Briefly, those services that happen earliest in the claim and/or require face-to-face contact have seen the greatest impact as new claims volumes dropped overnight.

Initial visits to occ med clinics, transportation, imaging, PT and rehab, IMEs, Field Case Management, surgery and management thereof have taken the biggest hit to date. Network revenues are suffering as a result, as is UR.

As the shutdown and peoples’ reluctance to expose themselves to infection continue, there have been significant reductions in bill review and network business volume.

Less  – but still somewhat – affected are sectors that get most of their revenue from longer-duration claims. Think home health care and DME, Pharmacy Benefit Management.

Business models

Cash-rich companies with manageable (or no) debt are in far better position to weather the crisis than highly leveraged firms. This generally benefits founder-owned companies and those with solid cash reserves.

Networks may well weather the crisis as they are generally high-margin businesses with relatively low staffing requirements.

Companies that have kept more of their business functions on-shore are in far better shape than those that outsourced critical functions  such as turning paper into pixels (processing documents), clinical support, provider relations, and call center operations.

There’s a lot of nuance to this; thanks to the 36 respondents for their insightful and sometimes surprising views.

What does this mean for you?

Cash is king. On-shoring is critical. 

Note – A public version of the report will be available in 2 weeks; respondents will receive a detailed version. A third version with additional interpretation will be available for purchase.


Covid’s economic effect on workers’ comp

COVID’s biggest impact on workers’ comp has not been from the disease, but rather from efforts to control its spread and the resulting impact on the economy.

35 workers’ comp insurers, state funds, TPAs, and service providers and large self-insured/self-administered employers took part in our second Survey of the impact of COVID-19 on Workers’ Comp. Payers have received about 33,000 COVID-19 claims to date and accepted just over 1/5th of all claims filed.

While there are major differences in claim acceptance policies across the respondents, by far the most common reason claims have not been accepted is a lack of a diagnosis, no symptoms, and/or a negative test for COVID19.

The “non-COVID” effects include:

  • a drop of 25% to 50% in new injury claims since the outbreak,
  • slower return to work due to an inability or unwillingness to access care and/or adjudication processes, and
  • respondents’ estimate that 2020 will end with a 20% decrease in the total number of claims.

For payers with large books of small businesses, retail, hospitality, and travel the picture so far is grim, with most expecting major declines in premiums.

The good news is the cost of COVID claims remains pretty low, with most accepted claims resolving with minimal expense. A relative handful have been quite expensive (>$200,000) due to costs associated with ICU and ventilator care.

The big winner is tele-everything. The big service providers all reported massive increases in tele-rehab, tele-triage, and tele-medicine visits with most indicating they expect this to persist after we are through the COVID19 pandemic.

As I work thru the data we’ll be publishing more details; a public version of the report will be available in about 3 weeks.

What does this mean for you?

This will be a very tough six months. The big decline in new claims and drop in premiums will have knock-on effects throughout the industry and every stakeholder.