Worker comp payers – hold on to your purses and wallets

Two news items hit the virtual desk this morning; hospitals will lose more than $50 billion this year, and consolidation among hospitals and health systems is continuing, isn’t improving quality, and is increasing health systems’ leverage over payers.

The bad awful financial picture for hospitals comes after a pretty bad 2020, a year in which operating margins were slashed in half.

Of course financial problems are the main driver behind consolidation as health systems with stronger balance sheets take over struggling competitors. Physician practices hammered with revenue declines driven by far fewer patient visits, fewer elective surgeries, and more uninsured patients are also being acquired by health systems.

For payers – especially for workers’ comp payers – the balance of power has shifted to providers. With control over many hospitals and thousands of physicians, systems like Sutter Health in California can dictate terms to huge group health buyers.

I find it ironic indeed that the online ads next to the reporting on the consolidation problem in general and Sutter Health in specific include this one. Payers’ ability to control costs in consolidated health care markets is…challenging at best.

What does this mean for you?

If you operate in Alabama, Florida, Louisiana, Arkansas, Kansas and a bunch of other states, your facility costs are going up. 


CVC acquires a majority stake in MedRisk

International private equity firm CVC Capital Partners will acquire a majority stake in workers’ comp physical management company MedRisk.

The Carlyle Group is the current majority shareholder and will retain a “significant stake” along with MedRisk senior management.

I could not be happier for my many friends at MedRisk; they built a company from a start-up in 1994 to it’s current position as the dominant provider of physical medicine management in work comp.  The speciality network business essentially started with founder Shelley Boyce’s idea that grew from a business school paper (that earned a less than stellar grade). In 27 years, Shelley, Mike Ryan and their colleagues grew Medrisk to a company with hundreds of employees ensuring almost 400 thousand injured workers have received the best possible rehabilitative care.

I know the CVC people well; they are thoughtful, incredibly smart, understand healthcare, and have the resources to ensure MedRisk has whatever capital it needs to continue its growth.

Lessons learned

Focus – While pretty much every other work comp services company (except for PBM myMatrixx) was diversifying, MedRisk stuck to its business. The work comp physical management business is a big one at almost $5 billion, offering plenty of opportunity for growth. This focus enabled MedRisk to concentrate on doing one thing very, very well, instead of distracting management with ventures into “potential opportunities.”

A relentless focus on service also paid off very well. I wrote this some years back:

For years, MedRisk had the niche almost to itself, focusing its sales and service attention on corporate buyers. Along came Align Networks, a start-up that concentrated on the desk-level user, delivering stellar service to each and every adjuster and case manager.  Align was quite successful, eventually becoming the largest vendor in the PM management space.

A misstep by MedRisk helped Align.  Some years ago, MedRisk chose to outsource key functions, including some aspects of IT, billing, and outbound call center functions including patient scheduling. This did not go well, and the resulting dissatisfaction among desk-level users led some customers to switch from MedRisk to Align.

Confronted with the loss of business, MedRisk got back to basics.  The lesson was apparent; a dramatic change in customer service was critical. That involved a major shift in understanding about the central importance of the desk-level customer, the provider and the patient, and a recognition that those customers required, above all, personalized service.

Management – Investors invest in management. MedRisk’s management team is second to none, and has only gotten better with the addition of Danielle Lisenbey as President. CEO Ken Martino stays on as does Executive Chair Mike Ryan and most of the great people who made MedRisk what it is today.




Why don’t workers’ comp execs embrace change?

The short answer is – they have little incentive to do so.

Here’s why.

  1.  Workers’ comp insurance is mandatory in all states save Texas. Pretty much all employers have to carry workers’ comp coverage, so sellers of insurance and self-insurance services (albeit to a lesser extent) know their prospects have a budget, timeline and decision process, and selection criteria. It’s not IF they buy, it’s whose they buy. That removes a big problem in sales – finding prospective customers.
  2. For most of the last decade, insurance rates have been dropping. Workers’ comp costs are at or near historical lows in almost every state. As a result, with rare exceptions, buyers aren’t focusing on workers’ comp – it is way down the list of things CFOs and Treasurers are worried about. So, they aren’t pushing insurers or TPAs to improve, get creative, develop new products and solutions and improve existing processes.
    No problem – no need for a new solution.

  3. That’s driven primarily by two key factors – frequency and medical cost.
    Frequency – the percentage of workers suffering an occupational injury or illness – has been dropping pretty steadily for decades. With fewer people hurt or sick every year, there’s fewer problems to solve. And yes, claim counts trended up till last year, but that upward trend was driven by increased employment.
  4. Despite what some vendors claim, medical cost trends are very much under control. Sure facility costs are increasing, but the decline in drug costs and related medical expenses seems to have offset that…so far. So, little incentive to come up with creative/fresh/different medical approaches.
  5. Risk:reward. With some notable exceptions workers’ comp execs are pretty satisfied with the status quo. Put another way, they are highly risk-averse. Most have ascended to their executive positions by not taking risks, by avoiding mistakes. Any new, creative, different approach is inherently risky and therefore anathema to folks who have succeeded in part by tightly managing risk.

By no means is this true of all execs; I’m privileged to be able to work with several payers that are pushing the boundaries, working very hard to come up with new and much better ways to help the injured workers and employers they work for.

What does this mean for you?

Workers’ comp buyers are mostly not interested in innovation or change. 


Workers’ comp is still in the dark ages.

With extremely rare exceptions, workers’ comp payers – and PPO networks – are doing next to nothing about “quality”.  An illustration.

Let’s compare two hospitals near Jacksonville Florida.

Using publicly available, free data (thanks to RAND), Baptist Medical  is pretty good; it has 4 out of 5 stars on the CMS Hospital Star Compare rating system – the most widely accepted quality rating metric.

Over the bridge is an HCA facility – Orange Park Medical Center – with 2 stars, below average on CMS’ scale.

Both facilities are in multiple workers’ comp PPOs…none of which indicate the large gap in quality between the two. Or any other quality measures for any other facilities.

You’ll note there’s a cost difference as well. And no, you don’t get what you pay for.

The higher-rated facility costs less –  Baptist gets paid about 2.6 times Medicare’s rate for care delivered by private insurers, Orange Park is 4x Medicare.

What does this mean for you?

Want to show you care about the quality of care delivered to injured workers? Send them to good facilities.




MCM is back – and so is the damn coronavirus

After a brutal three weeks of 12 hour work days, finally came up for air late yesterday. The water is receding, so should be able to get back to my posting duties on a regular basis.

Let’s get right into it.

COVID’s mutations are likely to put off a full recovery till late summer or even fall.

While quite rare, viruses mutate during replication – genetic material gets shuffled around, mixed up, and re-ordered. In most cases the result is pretty minor, or “fatal” to the virus’ replication (as viruses are not technically “alive”, “fatal” isn’t exactly the right term, but close enough.)

Mutations are even rarer for the coronavirus.

So that’s the “good news”.

The bad news is this – with hundreds of millions of people infected, each producing hundreds of millions of individual viruses, there are lots of opportunities for the virus to mutate.

That’s why we now have at least three separate instances of a mutation that appears to make COVID more transmissible. While only one – the UK variant – appears to be slightly more deadly, the overall impact is not good.

Even more worrying, these mutations also appear to make antibodies (one of the immune system’s tools to attack viruses) and perhaps one of the vaccines less effective.

The good news is the Moderna and Pfizer vaccines appear to work almost as well against COVID mutations as they do against the “original” virus. So far.

Meanwhile, vaccinations in the US are few and far between. With only one out of 12 Americans vaccinated to date, we have lagged far behind the world leader – Israel – which has vaccinated over a third of its population.

Amazingly, there are idiots seeking to stop or prevent COVID vaccinations; these people are complicit in the deaths of the 440,000 Americans who’ve died from COVID. (photo credit halperry)

What does this mean for you?

  1.  Wear an FDA-approved N95 or KN95 mask. Not a cloth mask, not a bandanna, not a “surgical mask. (Thanks Mary!)
  2. Prepare for at least six and maybe nine more months of COVID. It stinks and no one likes it and all that – we all need to suck it up, stop whining, help each other out, and power through.
  3. If you can, help out the less-fortunate. Be kind and be generous.



COVID update – good news and bad.

The good.

David Colon and Raji Chadarevian of NCCI have produced an excellent summary of COVID’s impact on workers’ comp medical treatment.

Colleagues Brittni Moore and Vicky Mayen have authored a companion piece that provides an early projection of 2020 financials. While not COVID-centric, there’s no doubt COVID is a main driver of the 8.1% decline in private carrier premiums. Moore and Mayen also note final premium totals may well be lower due to pandemic-driven declines in payroll.

As we projected back in the summer, profits remain robust. The pandemic-driven decline in claims plus carryover from inflated pricing due to the opioid factor are likely chief contributors.

A few takeaways from the COVID study:

  • Among COVID claims that had medical expenses, one-fifth had an inpatient stay. Note that this is only for accepted claims WITH medical expenses.
  • Among those claims with an inpatient stay, one-fifth – or 4 percent of all claims with medical expenses – were in an ICU at some point.

graphic courtesy NCCI

My takeaway – medical costs are relatively low.

Meanwhile Johns Hopkins University researchers studying Accident Fund data report there’s only one industry likely to be significantly impacted by occupational claims for COVID – you guessed it, healthcare.

The highlight – “This suggests that the vast majority of workplaces will not be subject to a high frequency of COVID-19 related WC claims over the course of the pandemic.”

Now, the bad news.

Long Haulers are COVID patients with persistent and often strange symptoms that can persist for month. Possibly related to an immune response gone awry, these conditions include (quoting the NYT):

  • fatigue,
  • pain,
  • shortness of breath,
  • light sensitivity,
  • exercise intolerance,
  • insomnia,
  • hearts that race inexplicably,
  • diarrhea and cramping, and
  • memory problems.

While most patients improve over time, one researcher estimates about one in ten have issues that persist for months.

What does this mean for you?

We have a lot to learn about COVID.


COVID’s impact on workers’ comp

Premiums and injury claims are way down; profits remain really high.

Those are the key takeaways from just-released analyses of COVID’s impact on comp from NCCI and WCRI (WCRI report free to members, fee for non-members).

That’s also what Mark Priven and I predicted last summer. I highlight that not to crow but rather to point out that these findings were quite predictable. And others’ grave concerns about COVID hitting profits were completely off the mark.

First, the qualifiers.

  • NCCI’s report includes private carrier data reported by NAIC through September 2020. Things got a lot worse late in the year, so it is highly likely premiums and injury claim drops increased somewhat.
  • WCRI data covers results from 27 states during the first half of 2020

Claim decreases

WCRI’s data shows a stunning decline in non-COVID claims (MO and LT) across the 27 states from Q2 2019 to Q2 2020…a 30% + drop in the vast majority of states.

Not surprisingly, the decrease in LT claims – while still dramatic – wasn’t as large.

The net – overall, claims dropped by more than a quarter in the vast majority of states.

Also, WCRI found that the severity of the outbreak was strongly correlated (my word not their’s) with the decline in non-COVID claims.


  • TPA revenues suffered as claim counts declined
  • Medical management revenues in the second half of 2020 almost certainly dropped significantly (compared to 2019). Fewer new LT claims = fewer bills, fewer network encounters, less need for case management and UR

What does this mean for you?

  • With COVID infections exploding – and the criminally inept vaccine rollout – we will almost certainly see a reprise of Q2 2020.
  • You can expect this reprise started in December and will continue thru April.



Haven Healthcare’s demise – lessons for workers comp

Haven Healthcare – the Amazon-JPMorgan-Berkshire Hathaway joint venture intended to re-invent healthcare – is no more. The quest to improve access to primary care, simplify insurance coverage, and make prescription drugs more affordable ended after three years.

We don’t know why Haven is now in heaven; it could be that three of the most powerful and well-run organizations in the world could not figure out how to build a better healthcare system.

Or it could be that they each had different motivations, different needs, and different priorities and could not figure out how to work together. That would not be a surprise. Or that their well-known, accomplished, and brilliant CEO was not an effective CEO (that’s not a slam; I’m no operator either).

Or more likely – all of the above plus more.

Regardless, it’s dead. Workers’ comp execs can learn three lessons from Haven’s failure.

CEO Atul Gawande MD lacked the intimate, deep knowledge of healthcare infrastructure, reimbursement, regulations and management required to be successful. A brilliant writer, insightful analyst, and highly visible public figure, Gawande didn’t have the management chops. He also didn’t give up his other jobs and had no experience as CEO of a start-up.

Implications – Two things – knowledge and commitment.

Do you know anyone in workers’ comp with deep knowledge of healthcare? Someone who understands reimbursement, infrastructure, process, the regulatory environment? Medical drives workers comp, and very few comp execs have that knowledge and understanding. 

Many who think they do – don’t.

Then there’s commitment. Gawande was committed to Haven – and frankly the three founding companies were as well – like the chicken is committed to breakfast.

If you want to take on something as daunting as reforming healthcare, you’d best be committed to the task like the the pig is committed to breakfast.

Second, market share. With about 1.6 million employees – and perhaps 5 million insureds – the three giants had a lot of lives to cover, a lot of healthcare dollars to leverage (about $24 billion in employer costs and a total of about $30 billion). BUT, the proverbial mile-long-and-inch-deep problem meant Haven didn’t have local scale.

Healthcare is local – facilities and medical practices want insured bodies, the more the better. Outside of a very few markets where Amazon has big distribution centers, Haven didn’t have enough bodies to leverage big changes.

Implication – Total annual medical spend in workers’ comp is about the same as Haven’s – $31 billion. That is less than 1 percent of US medical spend. Haven tried to leverage all those dollars. It failed.

Unlike Haven, there are lots of workers’ comp networks all trying to negotiate deals – the largest may have $8 billion in spend nationally.

That is small potatoes indeed…A mere tablespoon of hash browns.

What does this mean for you?

The workers’ comp industry cannot “solve” healthcare. But that’s not the point.

The point is this – organizations and leaders that know more about healthcare, that are more committed to doing better, will far outperform their competitors.


Predictions for 2021 – Workers’ Comp Part 2

Wednesday I dropped the first five predictions; today we’ll finish up.

6.  The workers’ comp insurance market will stay soft.

Here’s a few reasons why.

  • There’s hundreds of billions of capital floating around out there, looking for a home. Workers’ comp insurance has been a) quite profitable and b) is a great place to park dollars.
  • Claim counts continue to decline – while COVID is accelerating the decline, the structural drop is embedded in the business and is here for the long term. Next year there will be fewer claims, and the following year even fewer.
  • Medical inflation remains pretty low (while there are troubling indicators that costs will bump up, overall trend remains low historically)
  • There are lots of insurers fighting for a shrinking market, and it only takes a couple cutting prices to force others to join in.

7. More layoffs and staff reductions will hit insurers and TPAs
See #6 above.  Fewer premium dollars = fewer administrative dollars; fewer claims = less need for staff. Layoffs hit several insurers last year and we can expect more to come.

8. Other than presumption and tele-services, there will be very few significant moves in WC regulation or legislation.

Between drastic reductions in state revenues due to sales and other tax receipts affecting staffing and state legislatures and governors all-consumed by COVID responses and budgetary issues there’s little oxygen left to fuel any material changes to work comp regs. While it would be great to see Florida’s legislature stop facilities raiding workers comp to make up revenue shortfalls, that’s highly unlikely.

9. OneCall will be sold and/or broken up

While the current debt load is a LOT less than it was under the previous owners and the current CEO is an improvement, the decline in claims hit One Call hard in 2020.   The first half of 2021 won’t be any better with employment numbers and claims counts likely reduced due to the pandemic.  On the plus side, there’s still lots of investor money looking for deals.

Net – I expect the company to change hands this year. Whether it is sold as one entity or broken up is TBD.

10. Opioids and other dangerous drugs will get a lot more attention.

With COVID dominating everyone’s calendar, workload, thinking and energy, we all dropped the ball on managing opioids. That will change.

chart below is from The Economist.

With prescription volumes, MEDs, and duration likely up during 2020, expect payers to re-engage with prescribers, PBMs, and employers to get things moving in the right direction.

What does this mean for you?

This is going to be a very busy year, with more change than any we’ve seen in a long while.


Predictions for 2021 – Workers’ comp

Never has the crystal ball been cloudier.

A lack of visibility does not mean one shouldn’t think through what might be hidden within the clouds. To quote Dwight Eisenhower, “plans are useless, but planning is indispensable.” While what we think may happen may not, the process of working thru the implications is hugely valuable.

So, here we go.

  1.  Total premiums will stay low.
    As employment, payroll, and injury rates all remain under pressure, total premiums will remain significantly lower than we’d expect in a non-COVID, non-recession environment. We are also on the tail end of the opioid cost bubble, with actuarial projections still over-compensating for what was rampant overuse of opioids.
    Unemployment will persist at least thru the first half of 2021 – and likely the first three-quarters – helping to keep premiums lower. There are some predictions that employment will ramp up towards the end of the year; let’s hope so.
    Implications abound.
  2. Facility costs will spike.

    Hospitals are in dire financial straits, with 2021 bringing no respite from the cash crunch experienced by the entire industry when people avoided facilities, put off elective procedures, or weren’t able to get care due to facility restrictions.
    As desperate financial managers look high and low for any and all revenue sources, you can bet your house they’ll be focused on workers’ comp. Payers have:

    • few effective price or utilization controls;
    • an often-lackadaisical approach to cost management;
    • bill review programs and processes hopelessly outclassed by sophisticated revenue maximization technology; and
    • management that doesn’t know that it doesn’t know;

thus payers are going to see facility costs – already the largest part of medical spend – jump.

3. Consolidation
Seems I’ve been forecasting increased industry consolidation for years…it’s not a prediction but more acknowledgment of reality. Workers’ comp is a declining industry with shrinking claim counts and flat expenses – and that isn’t going to change.

COVID has accelerated the process dramatically; with claim counts down 15-20%, there are fewer claims to adjust, fewer services to medically manage, fewer bills to pay, fewer dollars to compete for.
Because there will be fewer revenue and premium dollars next year than this, more consolidation is inevitable.
I expect this to be most pronounced among medical management firms and TPAs, and the big to get bigger. Genex/Mitchell/Coventry, Sedgwick, Concentra are all likely consolidators. Not sure about Paradigm.

4.  Drugs will re-emerge as a significant problem
After several years of declines in opioid prescription volumes, it looks like things headed in the wrong direction last year.
Prior Auth requirements were relaxed, refills extended, and states loosened restrictions on prescribing. Add to that patients weren’t able to get to their PT visits and surgeries were postponed. The result – I expect we’ll see drug costs in 2020 flattened out, and opioid usage actually increased (We will know a lot more in mid-late March when I complete my Survey of Drug Management in WC).
That was last year; as COVID is returning with a vengeance, expect to see continued increases in 2021.

5. COVID claims aren’t going to be costly.

Despite all the caterwauling we heard back in 2020, COVID costs have been minimal. That will not change. Yes there will be long-haulers, but those will be very few indeed. Yes there will be more claims, but most will cost just a few thousand dollars.

Tomorrow – the next 5.