Work comp services – another deal is done

Private equity firms Lee Equity Partners and Elements Health Investors completed a recap of Carisk Partners last week, marking one of the very few deals to be done over the last many months.

While this may be an indication that things may be moving, there are several reasons we aren’t likely to see a return to the halcyon days of a decade ago.

First, over the last two years Carisk is one of the very few companies to actually get a deal done. Several others tried and failed, mostly because:

a) sellers’ expectations were out of whack with what buyers would pay;

b) due diligence revealed softness in numbers &/or growth plans &/or management depth;

c) current debt service costs made a deal too costly; and/or

d) the property is/was too large (more at the mercy of industry trends than smaller entities, very hard to grow share when you are already huge)

Carisk has very experienced and quite effective management, terrific marketing, some of the best sales people in the industry, a strong culture and a coherent strategy for growth and expansion.

Second the structural issues inherent in workers’ comp, namely it is a highly mature, consolidating/consolidated industry with very low to negative growth make it less attractive than, say, generative AI.

Third, debt – which makes up most of the purchase price of pretty much every sale – is still expensive compared to rates over the last decade or so. Investors will eventually get over mid-to-high single digit interest rates, but haven’t yet.

Lastly, reality is work comp is just not that interesting: many execs are highly risk-averse if not downright lazy; innovation is frowned upon if not actively avoided; and complacency is rampant as is chronic under-investment in IT and human capital.

The few transactions that have closed – HomeCare Connect and now Carisk most prominent- are really solid companies with great management teams, solid track records and a clear path to substantial growth. The ones that didn’t close were…not.

That’s not to say some companies won’t test the waters, but don’t get caught up in rumors about this or that company getting sold or preparing for a sale or going to market or talking to investment bankers.

Bankers are ALWAYS talking up potential deals…it is how they gin up business – and the work comp rumor mill loves to help ’em out.

What does this mean for you?

A great company will always be valuable. 

disclosure – I have a (very small) financial interest in Carisk.


Profit shifting aka work comp is funding the P&C industry’s losses.

Or, it is a GREAT time to be a monoline carrier.

The property & casualty insurance business is a tale of two extremes, with work comp profits offsetting losses across all other lines.

That’s one reason multi-line insurers are dragging their feet on cutting work comp and continuing to hoard billions of dollars in excess reserves.

Work comp is hugely profitable, with insurers raking in hundreds of millions in profits…with $10+ billion more in excess reserves, aka unrealized gains.

chart extract from S&P

Other insurance lines are the yang to WC’s yin.

S&P predicts all other lines will lose money on an underwriting basis again this year…

Here’s the money quote (pun intended):

➤ Dismal first-quarter 2023 direct incurred loss ratios in the homeowners and private auto business suggests a repeat of 2022, when highly favorable underwriting results in the commercial lines, aided in part by favorable prior-year workers’ compensation reserve development, were more than offset by the personal lines losses. [emphasis added]

and implications thereof:

The [2022] workers’ compensation combined ratio of 83.9% represented a decline of nearly 3.3 percentage points from the 2021 result. It ranks as the second-lowest such result in the last 25 years, owing to relatively benign trends in the current accident year and a fifth straight calendar year of favorable prior-year reserve development in excess of $5 billion. [emphasis added].

What does this mean for you?

Those who pay comp premiums are subsidizing insurers’ losses in personal and commercial lines – especially personal auto.


Getting smarter about PT.

Why do some patients need more PT than others?

Why does a therapist’s treatment duration vary for patients with the same diagnosis?

What conditions have the most impact on patient recovery?

Thanks to WCRI’s Vennela Thumula PharmD; Randall Lea MD; and Te-Chun Liu there are answers.

WCRI’s latest research based on FOTO data digs into just how big an impact mental and physical health co-morbidities – and other factors – have on improvements in functional status.

The methodology is robust indeed, the data solid as it gets, and the insights provided by the researchers quite valuable.

Using FOTO’s 100 point scale, their research indicates patients with both physical health and mental health comorbidities see about 20% less improvement in functional status than patients with no comorbidities.

courtesy WCRI

Co-morbidities – aka health conditions a patient has in addition to the one you’re focused on – may be physical – think obesity, hypertension, arthritis – or mental – depression, anxiety/panic attacks, sleep dysfunction.

Quick takeaways…

About two-thirds of patients have a physical or mental health comorbidity, and these comorbidities definitely affect the patient’s ability to recover.

The more comorbidities a patient has, the greater the impact on recovery.

More troubling still, the more likely these patient would have “very limited” function at the end of therapy.

The researchers also looked at the same metrics for non-work comp patients…and found comorbidities had similar if not more impact on recovery.

And…it isn’t just comorbidities.

Quicker access to PT had an even greater impact on recovery than physical or mental health complications. The details are on page 43 of the study. If you’re not a WCRI member, become one to get access to all their great work at no charge.

Non members will have to pony up a few bucks to learn more.

What does this mean for you?

Great research is really useful…use this to help injured workers get better faster. 




Forbes’ “rating” of workers comp insurers is…

A farce.

Ok folks, I’m gonna get snarky here.

First, there’s the title. I think they meant “insurers” not “insurance”… the latter is quite consistent across all insurers

A while back PropertyCasualty360’s reported on a “rating” of workers’ comp insurers by Forbes Advisor, an entity which doesn’t appear to take its ratings very seriously.

Everyone loves lists – done right they can reward the best and force others to up their game while helping consumers pick the best offerings. Done poorly they mislead, provide zero value, and result in buyers making decisions based on useless/misleading/wrong criteria.

In this instance, Forbes’ understanding of what makes for a “good” insurer is about as deep as my understanding of quantum mechanics.

In fact, the article looks like it was created by a beta version of ChatGPT with zero editing by anyone who passed a high school English course. (I did try to contact the author but there’s no link or contact info other than a name on Forbes’ website, and I’m not going to waste even more of my time trying to track this guy down)

okay, the details.

From PropertyCasualty360 (who really ought to know better):

Forbes Advisor based 90% of the scores [sic] the level of upheld complaints made to state insurance departments and collected by the National Association of Insurance Commissioners. The remaining 10% of the scores were based on the financial strength assigned to the company by AM Best.

Well. I’ll spare you, dear reader, my minor criticisms and focus on the major ones.

  1. What??? 90% of the “rating” is based on complaints which have little to nothing to do with how good a business partner a carrier is.
  2. What about cost, dividends, time to first report of injury, claim closure rate, claim frequency, sustained return to work…Jesus there’s about a million criteria more important than complaints to regulators.
  3. That said, a major driver of complaints would be certainly driven by claim volume…so the bigger the insurer, the more likely they would a) have complaints and b) the more complaints there would be. No discussion of this in the “survey.”
  4. Sometimes people complain because they don’t want to go back to work, don’t like having to go to specific providers, want brand drugs instead of generics, and on and on. Sure some of these complaints would likely be dismissed by regulators, but others would likely not be “dismissed.”
  5. Financial strength – well, given many carriers are A, A – or A+ rated, how useful is this? Might as well say “hey, only buy WC insurance from an A rated carrier!”
  6. What about:
    1. customer satisfaction?
    2. injured worker satisfaction?
    3. broker rating (be careful, but a whole lot more useful than “complaints”)
    4. claim closure rate?
    5. medical provider satisfaction?
    6. Net promoter score?
    7. employee rating of their employer e.g. Glassdoor?
    8. best places to work ratings?

The result is a wholly useless exercise which may encourage clueless buyers to make bad decisions based on a “survey” which looks like nothing more than clickbait.

I’ve seen better/more useful/more credible ratings for the top home margarita blender kits, highest rated shoelaces and best pencil erasers.

What does this mean for you?

Another sign of the impending apocalypse. 



When you’ve seen one state…

The brainiacs at NCCI have a must-read post detailing physician services’ costs and utilization in most states.

Gotta say this is one of the most useful and insightful analyses I’ve seen from anyone. Kudos to NCCI.

Couple highlights…

  • VERY wide range of physician costs – on a service year basis, state costs range from $800 to almost 4 times that.
  •  Using NCCI’s utilization metric (units), utilization varied almost as much – from fewer than 1000 to more than 2500 units.
  • one of the most insightful learnings is about the factors contributing to variations in utilization…

  • “service intensity” is the most important driver of variation; NCCI’s definition is the “collection and type of physician services rendered on average for a claim given its diagnosis and whether there was a major surgery.”

What does this mean for you?

Your medical management strategy MUST be state-specific. 


CompScope is up…medical costs are not.

It’s that time of year…when the brilliant minds at WCRI release the latest CompScope report.

The top finding…is likely to surprise many…

Couple observations:

  • yes, this was during COVID….medical costs during COVID were LOWER, not higher than previous in previous years. Those who understand medical care delivery anticipated this, alas that is a very small group.
  • no, medical costs in comp are NOT increasing significantly. Haven’t been for years.
  • That’s because we’re still benefiting from the opioid hangover effect.

Warning – Medicaid disenrollment aka “screw the poor folks” will push facilities and healthcare systems in many states to look for revenue replacements.

And, because work comp is pathetically awful at controlling facility costs, we can expect facility costs to increase – which will increase medical costs.

You can register for WCRI’s  webinar highlighting findings from this year’s report here….tune in November 16, 2023 @ 2 pm eastern.

What does this mean for you?

It is long past time to start preparing for higher medical spend.


Work comp bill review – the state of the industry

Over the last two decades work comp bill review has A) changed a lot and B) remained stagnant.

Both things are true…

Here’s the top takeaways from our just-released Survey of Workers’ Comp Bill Review (public version is available here; respondents received a much more detailed version).

Top findings are as follows (scores are 1 – 5, with 5 being highest):

  1. The BR industry’s overall rating from 2018 hasn’t changed, with an overall average grade of 3.2.
  2. Today there’s almost no differentiation in ratings across the major vendors; scoring has become more compressed since 2018.
  3. Customer service is of utmost importance in establishing a successful BR relationship. It is the primary reason respondents gave for changing vendors.
  4. There is a noticeable difference between executives and front-line employees in the evaluation of their BR vendor’s customer service. Front-line employees’ average score was 3.6, while executives scored 4.2.
  5. Automation is a hot topic in the industry, with a focus on improving turnaround time, auto-adjudication, and quality. However, some respondents are still looking for their BR vendor to better handle basic tasks.
  6. E-billing is gaining popularity, particularly among larger respondents and those who handle BR internally.

Couple deeper dives.

As noted above the survey included both front-line staff and management respondents; it won’t surprise many readers to learn front-line folks are not as satisfied with their BR vendor as their titular superiors are...that’s because execs value “savings” (which are mostly ephemeral as they are just reductions below some arbitrary benchmark, not actual medical cost reductions) – while front-line workers value efficiency, simplicity, clarity and quick problem resolution. 

Since execs make buying decisions, vendors mostly focus on what I would argue are often meaningless metrics. (don’t get me started on reductions below billed charges…)

More broadly, since our first BR Survey way back in 2009:

  • there’s been major consolidation…there were more than 11 vendors back then (remember Stratacare?  CS Stars? CompReview? Ingenix?) and market share was pretty spread out. Today, the number of vendors hasn’t shrunk much, but market share is much more concentrated. 
  • BR vendors have yet to embrace real payment integrity tools. There’s way too much “we know what we are doing” and way too little “we can always get. better”. The arrogance of ignorance is nowhere more entrenched than among BR company execs (not all, but almost all).
    And that, dear reader, is because buyers aren’t pushing vendors hard enough.
    That is NOT to say some payment integrity vendors aren’t at fault; they are too rigid in their pricing or workflow requirements, just too hard to work with.

What does this mean for you?

Buyers – push harder.

BR companies – you can do better.  A LOT better.


Medical costs are going up because…

Wonder why that office visit/imaging study/minor surgery/diagnostic test costs twice what it did last year?

Partly/mostly because the physician practice was acquired by a health system or big hospital…which – under current Federal law – allows the new owner to upcharge for “facility fees.”

VERY briefly, way back in 1997 Congress passed the Balanced Budget Act, a giant bill that, among other things, allowed facilities to tack on a facility charge for services delivered in its facilities.

That oversight is a key reason health systems have been snapping up provider practices as fast as they can, paying gazillions for primary care, specialty care, imaging, PT, you name it. (another key reason is health systems want to own as much of the care delivery and referral process – and fees – as possible)

This from Health Services Research:

Medicare reimbursement for physician services would have been $114 000 higher per physician per year if a physician were integrated [part of a health system] compared to being non‐integrated.

The differential varied greatly by type of service…

The solution seems pretty simple…to quote Health Affairs,

Pay for common ambulatory services under the rates, codes and policies in the physician fee schedule regardless of location

There’s an effort underway to at least partially remedy this by moving to a site-neutral reimbursement…but as it will take Congressional action that is a heavy lift indeed…especially given the current House of Representatives.

What does this mean for you?

Two things…

  • Think through potential unintended consequences BEFORE its too late
  • Rethink network contracting strategies…lock in pricing with office-based practices.


Do not let the past repeat itself

The Triangle Shirtwaist Fire was the horrific result of unregulated capitalism. 146 people – mostly women -burned to death or were smashed on the pavement nine stories below the factory floor when fire raged through their Greenwich Village workplace.

The mind reels when contemplating the last moments of the victims, who moments before had been looking forward to a Saturday night with friends and family, and a Sunday (gasp!) off work. When the fire below burst through the stairwells and floor it found bins of dry cotton, wooden worktables, beams, walls and floors.  There was no escape – the owners had locked the exit doors. The conflagration exploded in seconds, and women and men young and old were gone in moments.

And yes, this was foreseen, and preventable. This from David Drehle:

Despite the New York City fire commissioner’s well-publicized prediction that a deadly blaze in a high-rise loft factory was inevitable — and despite multiple small fires during working hours at the Triangle — the owners ignored a consultant’s advice to perform regular fire drills to train workers for an emergency. And they declined to enforce their posted rule against smoking near the highly flammable cotton scraps their workers snipped by the ton.

Long ignored, for over a century there was no memorial, no permanent reminder of the tragedy, no tribute to the mostly-immigrant women who died that awful day. That ended when Mary Ann Trasciatti and others’ relentless effort culminated in this…the steel runs along the building, listing names and ages of the victims and quotes from survivors. It will be completed early next year.

Good friend and colleague Rick Sabetta reminded me of this, and I am indebted to him.

What does this mean for you?

We would be well-advised to learn a lesson from days past, a lesson seemingly ignored by those looking to employ young kids in dangerous jobs and downplay the very real dangers of heat exposure in agriculture and logistics.


more good jobs = more premium and more claims

Old coal-fired electric plants are being converted to manufacturing, residential, office, and recreational uses. These are massive undertakings involving dismantling giant buildings; taking down crumbling smokestacks; removing hundreds of tons of asbestos; shredding hundreds of tons of steel, copper and aluminum; and hauling hundreds of truckloads of debris.

photo credit Daniel Lozada, NYTimes

Then there’s site remediation to clean up hazardous and dangerous residues from decades of processing and burning coal.

Developers estimate around 20 coal-burning plants are candidates for this type of re-development; many others may be taken down as well. A quick scan indicates a plurality of plants are located in Michigan, Texas, Indiana and Tennessee. 

Once the demolition and remediation is done, it’s time to build – and not just commercial and residential projects. One of the main attributes of these plants is they are tied into the grid, making them prime locations for green energy production in the form of solar and wind farms.

From the NYT:

In Illinois alone, at least nine coal-burning plants are on track to become solar farms and battery storage facilities in the next three years. [emphasis added] Similar projects are taking shape in Nevada, New Mexico, Colorado, North Dakota, Nebraska, Minnesota and Maryland. In Massachusetts and New Jersey, two retired coal plants along the coast are being repurposed to connect offshore wind turbines to the regional electrical grids [emphasis added]

Building and operating renewable energy projects has long been cheaper than fossil fuel plants. The barrier “is not economics anymore,” said Joseph Rand, a scientist at the Lawrence Berkeley National Laboratory, which conducts research on behalf of the U.S. Department of Energy. “The hardest part is securing the interconnection and transmission access.” [which is not an issue when old coal plants are re-purposed]

Which all translates to lots and lots of very well-paid workers doing risky work for years.

What does this mean for you?

More workers’ comp premiums and claims.