After re-reading my last rant about the lack of real innovation in workers’ comp, I decided to stop complaining and instead lay out a few recommendations.

Think impact, not features and benefits.

The “solution” and vendor selection process starts out way too detailed, down in the weeds instead of up in the strategic clouds. Instead of diving into the minutiae, both buyers and sellers should take a giant step back and focus on the buyer’s strategic goals.

What is the C-Suite focused on? What are the top execs worried about? What are their long term goals?

Only after the vendor really understands those strategic objectives, how they were developed, why they are so important, and what the buyer is doing to reach them should the vendor say anything that isn’t a question.

That’s the easy part.

Next, the vendor must build a story around how it will help the buyer meet those strategic objectives.  DO NOT discuss anything that is not directly tied into those strategic objectives. DO NOT about talk about your features and benefits – the buyer DOES NOT CARE.

Things buyers care about may include…

• reducing the combined ratio
• reducing reserves
• reducing administrative burden on staff

but you won’t KNOW what is important unless you do the really hard work to find out.

What does this mean for you?

To get a buyer to care, you need to know what they care about – and why.

Workers’ comp is the Innovation Prevention Industry.

As I wrote years ago, many executives, risk managers, “thought leaders” and brokers decry the lack of innovation in workers’ comp – yet they are often the very reason innovation doesn’t happen.

There are a host of reasons – cultural, practical, financial, historical, structural – all hampering, if not outright preventing real innovation.

Fundamentally, work comp is hyper-conservative, hidebound and traditional. A few notes…

• it’s almost entirely about musculoskeletal injuries – which haven’t changed for about a million years (no, that’s not hyperbole). Cause, treatment, and physical recovery are extremely well-understood – at least for those who want to understand.
• it’s insurance – which by definition is risk-averse
• it’s not important to the C-suite – work comp costs are a rounding error on corporate ledgers, account for <1% of US medical spend, and are steadily decreasing.

Structural problems  – starting with the RFP process – kill off innovation, starving it of light and energy before it can take root.

In most – but not all – cases, the RFP/vendor selection process is just stupid. The entire thing is intended to allow the committee to pick a vendor – to compare apples to apples by forcing respondents to tell how they will deliver a specific, detailed, highly-structured solution that precisely meets specs.

That’s fine – but what if you really need an orange?

Instead, the buyer should ask how each vendor will solve their problem, what they do differently, how they can deliver better results, and what the buyer must do to achieve break-through results.

Next – other barriers to innovation, and why you need to blow them up.

The internet, smart phones, electric vehicles, 9/11, genome sequencing…a lot has changed since 1990.

But in workers’ comp…not so much.

About 30 years ago OUCH (now part of Coventry) started the national workers’ comp PPO business. Liberty Mutual execs (literally) handed OUCH a bunch of three-ring binders stuffed with contact info for the providers Liberty used, and asked OUCH to build one of those new network thingies.

OUCH did just that, then went out and marketed its network to every WC payer, merged with HealthCare Compare, became FirstHealth then Coventry Workers Comp, merged with Concentra’s PPO along the way, and got sold a couple more times.

Outside of several name changes, nothing has really changed since that fateful delivery of intellectual property. 

Sure, there’s been a lot of talk about “outcomes based networks”, but uptake has been minimal.  Reimbursement is still based on fee-for-service (the more service, the more fees), quality assessment is poor to non-existent, and buyers measure PPOs based on how deep the discounts are and how thick the provider directory is. Specialty networks have carved a big chunk out of PPOs, but many payers still access specialty services via their PPO contracts.

Networks charge payers a percentage of the discount below fee schedule/U&C – so the higher the charges, and the more charges there are, the more money the network makes. And the higher employers’ medical costs are. (I CANNOT BELIEVE I AM STILL WRITING ABOUT THIS AFTER 17 YEARS)

There were some promising attempts to do things differently…Sixteen years ago Crawford and Liberty Mutual got into the predictive analytics business.

“…Liberty Mutual uncovered what it believes are the two keys to managing workers’ comp medical costs.
First, the statistical averages for treating specific injuries in any city or state – for example, how many office visits are needed to heal a torn rotator cuff in Denver, or what does it cost to set a compound arm fracture in Pennsylvania. Second, how individual caregivers and facilities in the area compare to that baseline.”

Coventry started their Outcomes-Based Networks, some California payers (the State Fund being the leading example) set up their own tight MPNs, and the WC Trust of CT built a terrific network for its customers. While laudable, these are exceptions.

I get WC predictive analytics is really knotty for a host of reasons, but here we are, in 2021, with most payers having made little if any progress managing cost – and with the exception of pharmacy and some specialty niches – no progress on quality.

This is why lost time claim medical costs per claim have doubled since 2000.

chart courtesy NCCI

It is also why workers’ comp medical costs are set to increase this year and the ones to come.

What does this mean for you?

Until employers demand better, it won’t be.