Sep
19

One Call reportedly retains investment bank

Debtwire reported (subscription required) yesterday that multiple sources indicated work comp medical services firm One Call has retained Centerview Partners “as liquidity tightens, covenant hurdles loom.”

Centerview, an investment bank with extensive experience in the workers’ comp service industry, will reportedly “help [One Call] navigate balance sheet pressure, including a potential liquidity shortfall and covenant compliance hurdles.”

(A “liquidity shortfall” means a company may not have enough available cash to pay its bills.)

Debtwire also noted other sources said a group of One Call’s lenders have retained Jones Day as legal counsel.

Ten days ago One Call CEO Rone Baldwin released a business update on One Call’s website indicating “One Call is in full compliance with all debt covenants.”

The Debtwire piece went on to indicate that the company had $11 million of available liquidity split between cash and a revolving debt vehicle (it was not clear if this was at the end of of the second quarter or at some other time). This was down from $18 million at the end of the first quarter.

Several other sources discussed “potential remedies” to the company’s current situation, naming a meaningful debt for equity swap and/or a fresh injection of additional equity.

I don’t see either as viable options.

Equity would have to come from current owner Apax (or, much less likely, another investor). Apax has already written down its original investment. Private equity firms have to get agreement from their investors before spending their dollars; I strongly doubt Apax’ investors will want to increase their financial exposure to a potential default. More detail on this here.

The debt for equity swap is also unlikely. If the covenants are breached, the debtholders likely get (some) control over the company. I don’t see why the debtholders would swap debt for equity now, when that may occur in the near future.

Debtwire’s reporting comes on the heels of Baldwin’s announcement of a layoff of about 50-60 folks; on Friday Michael Jordan, the former head of One Call’s effort to expand into group health departed.

My best guess is One Call’s daily revenue is around $5 million.  Unfortunately, the company’s headquarters was closed for at least two days due to hurricane Dorian. The closure plus the strong likelihood that Dorian prevented many claimants from scheduling or receiving services provided via One Call didn’t do anything to help the company’s tight cash flow.

For more detail on the company’s recent history, here’s information on One Call’s debt refinancing, and a detailed review of One Call as of December 2018.

I’ve asked Moody’s and S&P when they will update One Call’s credit rating and will report back if and when that occurs.


Sep
18

Surprise! Medical bills in workers’ comp

Surprise medical bills happen when you think you’re going to an in-network medical provider, only to learn some of your care was delivered by a non-contracted provider who can bill you whatever they want.

In work comp, this happens when your employee suffers a serious injury on the job, and you send her to the nearest emergency room – which happens to be at a hospital in your work comp PPO network. You then get a bill for $30,000 because the ER is operated under contract by TeamHealth or Envision, private-equity owned companies that aren’t in your network.

While state fee schedules may help, rest assured the hospital revenue maximization industry knows exactly how providers need to bill you to guarantee collection.

While this has made headlines in the private insurance world, it has yet to get much attention from work comp insurers. That may be because comp payers are pretty unsophisticated about facility billing, despite claims from bill review departments/vendors to the contrary. (there’s legislation in Texas that deals with a very narrow slice of the issue; it will have almost no impact on the problem save for patients treated at a federal medical facility)

Congress has been blathering about “solving” the surprise medical bill problem all year – making as much progress as usual, that being none. That’s largely because the PE-owned medical service companies are spending tens of millions fighting legislation intended to stop surprise billing.

What’s clear is while the PE firms may win this battle, they will certainly lose the war. The surprise bill fiasco will generate huge returns over the short run, but lead to major reform as voters get madder and madder about this legal theft. The PE firms fully understand this. They are fighting to preserve their right to rip off patients as long as they can, and will keep doing so until voters rebel.

So, to Blackstone, KKR, Welsh Carson et al, enjoy it while you can. This is yet another example of hugely profitable investors’ short-term fixation on short-term profits.  While it will lead to massive short-term profits, it is creating a massive backlash, one that will inevitably lead to laws and regulations that will crush their business model.

In the meantime, employers and taxpayers will pay the price – especially because work comp hasn’t woken up to the issue.

What does this mean for you?

Analyze your facility spend to find out.

 


Sep
17

Where have all the work comp opioid patients gone?

Workers’ comp has done an admirable job reducing the volume and potency of opioids dispensed to work comp patients.

This from our latest Survey of Prescription Drug Management in Workers’ Comp…

The question is – how many work comp patients really stop taking opioids?

A Canadian study offers a sobering possibility – many likely did not.

those injured workers that received…120 MED or more at the end of their claim were likely to have post-claim opioid use in approximately 80% of cases. [emphasis added]

Caveats abound – different country, different system, different approach to opioid management. Yet we need to ask ourselves questions that are deep and uncomfortable.

Did we really help these patients?

Were they addicted, dependent, and/or have serious chronic pain that we failed to adequately address?

Have we looked deep enough into what happened to those patients taking opioids after they stopped?

Perhaps most important – What is our responsibility to those patients?

This is not – an any way – justification for the opioid industry’s twisted and misguided attack on efforts to reduce opioid over-prescribing. It is crystal clear that industry has killed hundreds of thousands of people, devastating communities and families.

Rather, we need to make very sure we are doing the right thing for patients. In some instances this will involve telling patients what they don’t want to hear; we need to be prepared to do that and help them thru the process, while understanding that process is very difficult.

What does this mean for you?

Do you know whether patients no longer getting opioids via work comp are still taking them? What responsibility do you bear?


Sep
13

The Purdue Opioid “settlement” – key takeaways for workers’ comp

Reportedly Purdue Pharma, the fine folk behind OxyContin, is nearing a settlement with 23 state attorneys general and thousands of other governmental entities.

Here are the key takeaways:

  • this does NOT appear to be a universal settlement; other state AGs, local governments, employers, and other affected entities will almost certainly seek their own compensation from Purdue.
  • The Sackler family, Purdue’s owners, will lose up to $3 billion of their personal fortunes estimated to total $13 billion – most of which came from OxyContin sales.
  • Purdue Pharma will enter bankruptcy and future earnings will go to addressing the awful repercussions of the opioid crisis

What wasn’t included are criminal charges for the Sacklers; that is an outrage.

It is crystal clear many members of the family were intimately involved in Purdue’s efforts to shove more and more opioids down more and more throats. Not satisfied with those billions, the arrogant bastards were going to make yet more treating the addicts they created. (Note not all of the Sacklers were involved in the opioid disaster)

This from NY’s opioid lawsuit (credit Vox)

The unmitigated gall of the Sacklers is stunning; they knew their drugs were killing tens of thousands, and now wanted to profit from the untold damage they had done.

For workers’ comp, there are a couple of implications.

First, as the tort industry dives deeper into this, they will sue more and more participants. My informed opinion is payers are pretty safe for several reasons;

  • state regulations are the primary and ultimate driver of work comp coverage;
  • work comp entities led the charge to reduce opioids when they first grasped the size of the problem;
  • payers did not receive rebates from opioid scripts so there was no financial benefit to allowing the scripts; and
  • payers were damaged by the opioid industry due to much higher medical costs, extended disability duration and death claims.

I haven’t heard of any workers’ comp entity being sued for damages related to opioids – but it is possible.

Second, work comp payers have been damaged by the Sacklers and their ilk. While state funds may be involved in some of the suits seeking compensation for damages (it’s impossible for me to unpack all the plaintiffs in all the filings), I have yet to hear of any suits involving commercial insurers or reinsurers.

I’ll admit to being surprised at the work comp insurance industry’s seeming lack of interest in taking on the opioid industry. Every day:

  • Insurers go after claimants for double-dipping and false claims,
  • Insurers go after employers for falsifying payroll data,
  • Insurers go after providers for fraudulent billing for practices, and
  • Insurers sue each other over coverage issues and reinsurance claims.

Before anyone else could spell opioids, work comp payers saw the damage being done and took action.

What does this mean for you?

Work comp insurers must be a highly visible part of the solution; we owe it to policyholders and taxpayers, we owe it to patients, and we owe it to all of the insurer staff, regulators, researchers, and other stakeholders who’ve dedicated untold hours to fixing the damage done by the Sacklers and their ilk.

Need more incentive? Here’s David Sackler’s $22 million Bel Air mansion your workers’ comp dollars helped pay for.

 


Sep
11

The soft market’s impact on work comp service providers

Yesterday I briefly summarized today’s work comp market, which in a word is

While this has been very profitable for work comp insurers (that are enjoying double digit returns for the first time ever) and has saved employers and taxpayers hundreds of millions of dollars, it’s been causing agita amongst service providers – with several notable exceptions. (by “service providers” I am referring to TPAs, medical and disability management entities, networks and other parties)

TPAs are flourishing.  As insurers look to reduce their overhead costs, they are finding fewer dollars available to invest in systems, IT projects, training and recruitment. They are also facing the reality that claim frequency declines mean there will be fewer claims to handle next year than this.

The net effect – why spend dollars to get better at handling a shrinking business, when you can outsource claims to a third party?

That’s driving growth at ESIS, Broadspire, Sedgwick, GB et al; most TPAs have seen significant increases in carrier business over the last few years.  That growth will continue.

Medical management entities are in a different situation – but it’s not a simple one.

With fewer claims to handle, there’s less demand for case managers. With medical costs flat, the volume of bills to handle, visits to schedule, and services to provide is static. Of course, while that’s true for the industry as a whole, there’s wide variation amongst the individual companies in the space. Some are growing quite nicely, while others are losing share and revenues.

Of course that’s due primarily to service providers’ abilities, competency, customer service, and how easy they are to do business with.

Many are cutting prices and giving up margin as they try to stay competitive, hold onto current customers, and have any shot at adding new business.  In general this makes sense, but you have to wonder at the long-term viability of the strategy.

A somewhat different approach is worth contemplating.

What’s working for some providers is their ability and commitment to take work off their customers’ desks and do it for them quickly, easily, and with minimal disruption.  These days this tactic isn’t just a nicety, it allows insurers to reduce their internal workloads by offloading tasks to vendors.

Some are doing this intentionally, others may not even be aware they are solving their customers’ strategic needs as well.

There’s a wildcard out there as well – or rather two.

First, most payers require at least two service providers for most services (excluding pharmacy and bill review).

Second, should one of the big service providers stumble or hit financial difficulty, there will be significant opportunity for competitors able to jump in and help out.

What does this mean for you?

Even in a very tough market, there are opportunities for those who think strategically.

 

 

 


Sep
9

Work comp’s ongoing soft market

Work comp rates continue to drift ever lower, with new declines announced pretty much every week. While this is great for employers and taxpayers, the impact on insurers, TPAs, and the work comp ecosystem is rather less than “great.”

It’s going to end…someday…right?

It always does, but this time around feels different.

Here’s where we are today – and why.

Rates and payroll drive premiums; as we’re at or darn near full employment with pretty static average weekly wages, premiums are likely holding steady or up just a hair.

Graph shows changes in average weekly wages adjusted for inflation from the Bureau of Labor Statistics

Florida’s rates will likely drop for a third straight year, New Hampshire employers are even happier as rates have declined for 8 straight years – this time by almost 10%. California – by far the biggest work comp state in terms of premiums, gets another decrease in 2020. Same story in Missouri, Wisconsin, and Virginia.

Rates follow declines in claim costs, so insurers are making tons of money. Historically high profits result from low combined ratios (defined as the ratio of total losses plus admin expense to premiums earned). As long as claim costs continue to drop, profits will remain strong.

Result – insurers are really happy. So are employers.

With work comp medical costs static [see detailed report from NASI, free to download] and claim counts stable-to-lower, there’s little if any growth in the number of claimants, the number of medical bills, and the volume of medical services. This means payers have fewer dollars to upgrade systems, pay staff, invest in improvements and training. As premiums drop, overhead costs get squeezed too.

Think of it this way – a California insurer collects $1 million in premiums this year. If it keeps all its current business and doesn’t gain any new customers, that same customer base = $900,000 in revenue next year. The 10% decrease means 10% fewer dollars to spend on IT, marketing, staff training, process improvement.

The impact on service companies isn’t quite as straight forward – for reasons we’ll dive into tomorrow.

What does this mean for you?

Fewer dollars is good news for some, but is likely preventing many insurers from much-needed investment and upgrades.

 


Aug
21

High hospital costs? This may be why.

Work comp and auto payers in many southeastern states have seen a sharp rise in facility costs over the last five years.

While ineffective fee schedules are partially to blame, the real driver may well be politicians’ refusal to expand Medicaid.

When Medicaid expansion was offered in 2014 as part of the ACA, most states took advantage of the option, resulting in a massive decline in uncompensated care. However, the ACA also reduced federal payments to hospitals in tough financial shape, the rationale being Medicaid’s expansion would reduce the need for additional funding.

Not surprisingly, the cost of uncompensated care dropped dramatically in states that expanded Medicaid.

Equally unsurprising was the increase in the cost of uncompensated care for those states that didn’t expand Medicaid.

In the chart below, the gold bubbles in the top right show how much the uninsured rate increased, correlated with uncompensated care’s share of hospital costs.

So, we have a massive revenue shortfall in non-expansion states; Florida, Texas, Georgia, South Carolina, and others, setting up pretty dire financial situation for hospitals.

What does this have to do with workers’ comp, you ask?

This.

The chart – courtesy WCRI – shows a remarkable correlation between non-Medicaid expansion and higher prices paid for workers’ comp.

The reason is simple. Hospitals, especially those in southeastern states, rural and small ones, are desperate for revenue, and workers’ comp is a very soft target.

What does this mean for you?

If you think you’ve got the right answer for facility costs, you’re probably wrong.


Aug
13

The coming recession’s impact on workers’ comp

It’s not “if”, it’s when the next will recession hit.  Things were looking iffy a couple months ago, and – if anything – the outlook has worsened since then

And when it does, workers’ comp will be affected – like everything else.

Here’s how recessions affect workers’ comp; tomorrow we’ll discuss why the next recession may well be long, deep, and painful. 

At the early stage of a recession, employees who get hurt are less likely to file a workers’ comp claim. While we don’t know why that happens, research suggests it’s because workers are concerned their bosses will eliminate their job while they are out on disability, and they’ll have no job to return to.

As the recession deepens, frequency tends to bump up as employees realize their jobs are in real jeopardy.  Claims increase as a result, and it is tougher to find re-employment opportunities for workers ready to resume some level of work. This extends to part-time or other limited duty work that is essential to recovery and return to full duty. So, duration increases too.

In the final stages, as the economy recovers frequency appears to accelerate. Employers put older, less-safe equipment back on line, require workers to put in big overtime hours, hire temps who have minimal training on safety, and the pace of work picks up speed. The result – more injuries.

So, that’s what we can expect. The question is, when will the recession arrive, how long will it last and how bad will it be?

That’s for tomorrow.

What does this mean for you?

Fortune favors the prepared.


Aug
9

Quick takes on the week that was

Hope your week was excellent, and the weekend is full of family and fun.

Here’s a few takeaways from this week…

Congratulations to Ken Martino; he’s been named president of MedRisk, a post formerly held by Mike Ryan. Mike remains CEO. Ken’s been an instrumental part of MedRisk’s recent growth, and the promotion is well-deserved. I’ve known Ken for thirty years or so; he’s a consummate professional. (MedRisk is a n HSA consulting client)

Word is CorVel’s recovery from the Ryuk ransomware attack is not yet complete. Reports indicate as of yesterday some handwritten UR reports were still being faxed. Heard confirmation that at least one customer has switched from CorVel to another service provider. Adjuster.com’s Jorge Alexandria summarized the attack in a post last week.

BTW Adjuster.com is a pretty interesting site; if you are looking to better understand what makes the front-line folks tick, put it on your reading list.

Congratulations to One Call; reports indicate the company made it thru the second quarter without breaching a key financial covenant. However, customer losses including Great American, Broadspire, and Nationwide didn’t hit the financials in Q2. Unless One Call wins a big piece of the Liberty Mutual ancillary services RFP it will be nigh on impossible to make up the lost revenue.

Will keep you posted.

MSA Administrator Ametros has released an app its customers can use to access their settlement funds and track expenditures.  The Massachusetts-based company pretty much owns the MSA Administration business; this is one sector I’m quite surprised there isn’t a lot more activity.

Family is coming in from California and Jackson Hole today – it’s going to be a terrific weekend!

 


Aug
7

Work comp vs. opioids – how we’re doing

It’s been a decade since work comp payers and PBMs got the big wakeup call, the one that changed the industry.

From looking at drugs just as an expense, the industry began to see how devastating these drugs were to patients, families, employers, and taxpayers. Instead of fighting over the price of each pill, payers started to push PBMs to figure out ways to slow down the spread of these incredibly dangerous drugs.

Today, we’re on a roll. While anyone with any sense of the issue knows opioids will remain a top 3 issue for years to come, we’ve made a lot of progress.

After surveying 30 workers’ comp payers, we’ve learned this:

  • Opioid spend dropped 19.7 percent from 2017 to 2018.
  • For the first time on record, opioid spend represents less than a fifth of total drug spend
  • By a long shot, opioids are not the biggest problem in workers’ comp pharmacy. (3 respondents out of 30 said they are)
  • Payers believe the’ve made more progress dealing with initial opioid scripts vs chronic
  • By far the most important tools have been more internal resources and focus on the opioid issue, followed by new regulations and legislation and payers adopting a comprehensive approach to the issue.

We’ve got work to do, to be sure.

But we should take a minute – or a day – to stand back and revel in what we’ve accomplished. 

The industry has cut opioid usage probably in half, and it’s headed further down. People haven’t died, families haven’t been destroyed, pills haven’t found their way into kids’ hands.

What does this mean for you?

A welcome opportunity to reflect on a very hard job done well.