Stone Point has added yet another firm to its growing portfolio of workers’ comp assets; when the deal closes in a few weeks, Mitchell will join previous acquisitions Genex, AmTrust, and Sedgwick (the latter two have co-investors).

(I mis-read the press release this am – Elliott, a hedge fund with $34 billion under management is EXITING Mitchell.)

One of  – if not the – investment firm(s) with the most experience in the  work comp space, Stone Point’s been busy.  It just completed the acquisition of bill review and case management company Genex.   As I wrote in February when that deal was announced:

“I’d also expect some much bigger acquisitions. I don’t think Stone Point bought Genex to get into the case management and bill review business; these folks have bigger plans.”

Mitchell fits that definition…I’m speculating the price was well more than double Genex’.  KKR bought Mitchell for $1.1 billion a bit over 4.5 years. When Mitchell’s “book” was out about a year ago, word was KKR wanted to double their money.

According to internal sources, Genex and Mitchell will NOT be combined or integrated or even work together. They were pretty adamant about that.

Allow me just a bit of skepticism; private equity (PE) firms don’t often buy companies with similar capabilities and services and leave them alone. That’s inefficient: they own two separate entities – overhead, management, systems, staff, and all – that do the same thing. Especially when those two businesses are aligned as closely in many areas as these two are.

While Mitchell also operates the nation’s third-largest work comp pharmacy benefit manager, and provides a wealth of services to the auto claims industry, Genex’ offerings sort of “fit in” to Mitchell’s portfolio.  Genex’ utilization management, peer review, case management, and related offerings are very similar to Mitchell’s. And, Mitchell provides Genex’ bill review application.

Sources indicate there’s a lot of leverage (debt) on the Genex deal – as there is in pretty much every acquisition – so cost-saving moves and elimination of redundant functions is likely a priority.

It is certainly possibly the two companies will operate completely independently – but I’d be surprised if that lasts very long.

Couple related points.

Mitchell’s Alex Sun and his team are smart and savvy. There’s sort of  a California tech vibe at Mitchell, an impression that is in contrast to the more traditional, operational focus of Genex. There are few people in this business I like or respect more than Genex CEO Peter Madeja; he’s well-regarded and well liked by all, especially by his co-workers.  Point being, there are different cultures here, and this might be a, if not the, reason Stone Point may not want to move some pieces around.

The team that runs Stone Point’s P&C operation is extremely knowledgeable, well-respected and highly regarded for their experience and expertise in the comp industry.

Most of all, they are strategic.

They most certainly have a plan, and the Mitchell acquisition is one part – albeit a very large one – of that plan.

What does this mean for you?

More consolidation in a very mature industry.  If you haven’t figured out where you want to be and how you’re going to get there, get busy.

I’ve lauded the Ohio Bureau of Workers’ Comp for their great successes reducing opioid usage. But, I’ve heard from many stakeholders that Ohio’s got a unique advantage; BWC is both the regulator AND the payor, so they get to do whatever they think makes sense, and providers, patients, and pharmacies have to do what they’re told.

Fair point.

The implication is this – it’s way harder when you’re:

A) not a monopolistic state fund;

B) you don’t have the power to implement formularies, UR, pre-cert, and other care controls; and

C) you don’t have the full focus and influence of a state’s governor behind you.

Well, the State Fund of California is delivering stellar results without any of the inherent advantages listed above – in a state that is highly litigious, without a formulary (until this year), and where a subset of providers spends every waking hour thinking up new ways to screw the State Fund, insurers, employers, and taxpayers by gaming the system. (CA Gov. Jerry Brown is fully supportive of the State Fund).

(btw love the campaign…)

From 2014 to 2017, the State Fund delivered:

• A 60% reduction in total opioid prescriptions to injured workers covered by State Fund
• A 74% reduction in opioid spend
• Across-the-board Morphine Equivalency Dosage (MED) reductions:
  • 80% percent reduction in the number people above 50 MEDs
  • 83% percent reduction in the number people above 80 MEDs
  • 87% percent reduction in the number people above 120 MEDs

As a result, opioids now represent 16.9% of the State Fund’s total prescriptions, down 31% since 2014.

A couple more data points then we’ll dig into how they did this.  There were 1458 patients prescribed 120 or more MED in 2014, today there are 186 cases.

Results for those patients prescribed 50 or more MEDs were almost as good; the number of patients declined by more than 80%, from 5000 to 994.

How’d they do this?

There are two primary foci; reduce initial opioid usage, and help long-term patients wean off of opioids; we’ll focus on the latter in this post.

Recall that these results occurred before the new formulary was implemented, so that did not have an affect on these results.

The State Fund’s long-term opioid reduction program begins with the adjuster, who remains involved in the claim throughout the process. The program involves multiple vendors, a variety of approaches, an openness to innovative treatment, and a lot of communication. There is no “canned” approach: Cognitive Behavioral Therapy, acupuncture, counseling, physical therapy and exercise programs, and Functional Restoration Programs have all been employed. Medication-assisted therapy, or MAT, has been used in selected cases but for the most part the State Fund is trying to stay away from using opioids to solve opioid problems (my wording, not there’s).

Key to the long-term issue has been using vendors to conduct peer to peer conversations with the prescribing physician(s). According to State Fund Medical Director Dinesh Govindarao MD MPh, this peer-to-peer education of prescribing physicians has been instrumental in the success of the program, as many treating providers don’t have adequate training on pain management and opioid prescribing.

For those patients with significant chronic pain, the State Fund developed a program specifically aimed at helping those patients cope with their condition.  Patients willing to participate were enrolled in this program.

Going forward, the State Fund and Dr Govindarao are working to set up a more defined process to triage patients, one that will have different approaches and process flows for different types of patients. They will be looking at commonalities in patient groups to see if they can flow them through consistent treatment approaches.

What does this mean for you?

You can dramatically reduce long-term opioid usage through a well-designed, carefully-managed, patient-centric approach overseen by a very competent medical director.

And when you do, you can save scores of lives, hundreds of families, and millions of dollars for policyholders and taxpayers.

One last comment – these results were produced by a state entity and state workers focused on doing the right thing, the right way.

There are several potential implications of the latest national policy changes for workers’ comp.

First, if wages and hiring increase due to the tax cuts – as promised by the President – premiums will rise.

So far, that isn’t happening. The vast majority of the windfall is being spent on stock buybacks.  While this is inflating stock prices it isn’t going to have any material effect on wages or hiring, so no joy for work comp.

With the added focus on deporting undocumented workers, industries that demand low-skilled workers for high-stress jobs such as meatpacking are often struggling to find enough workers. Jobs are usually filled with first-generation immigrants – as those jobs always have been.

And many low-skill jobs are going to disappear – including burger-flipping. 

And healthcare administrative jobs.

So, we could well see injuries increase if untrained workers are hired to replace people with long experience in those risky jobs.

Now add the tariffs on steel and aluminum, which will really hurt manufacturers that use those materials, and add transportation to the industries affected by tariffs and NAFTA redos and we may see a reduction in commerce – which will affect employment and wages.

credit – CNN

One industry that’s been hit again is agriculture.  Cash crop farmers, especially soybean producers, are justifiably alarmed by China’s retaliatory tariffs on soybeans and other ag products.  Here in upstate NY, our next door neighbor has hundreds of acres in soybeans; farmers in the midwest are also heavily reliant on soybeans.

So, it is possible hiring will increase, altho the latest numbers aren’t encouraging. Wages could go up, altho again, the most recent data doesn’t show a significant bump.

It may well be more likely that employment and wages take a hit due to trade wars and tariff fights. If that happens, work comp premiums will be affected, but we may see a bump in claims from workers concerned about layoffs.

What does this mean for you?

Watch the reports on trade wars carefully.