With rare exceptions, work comp services companies don’t get marketing, don’t fund it adequately, and then complain when “marketing’ doesn’t work.

They build a product/service then try to convince buyers they need it.  Example – “buyers want to buy all ancillary services from one vendor!”

That’s bass ackwards.  Instead, they should identify an unmet need, then build their products/services to meet that need. 

Okay, you’ve already got products and services, so you aren’t looking to create any new ones.  Same rule applies –

• figure out what the market wants,
• adjust your offering so it meets those needs, and
• package it such that potential buyers see how it solves their problem(s).

More broadly, services companies must understand what drives buying decisions in work comp.  I’d suggest “fear” is a much more potent driver than “greed”.  Note these terms are very general and are not meant to connote actual fear or greed, but rather concern over lack of performance vs desire for optimal performance.

Buyers want to be assured the problem will be solved, the risk of non-performance is vanishingly small, and the cost will be borne by policyholders/clients/assignable to claims. They want as close to zero risk as possible – more for reasons of personal survival than corporate objectives.

And, understanding there are at least two “buyers” is critical – the exec in the home office who signs the contract and the desk-level person who actually uses the services. Both have to be comfortable that your product/service meets their individual needs, which are usually quite different.

The corporate buyers want solutions that deliver cost reductions with no compliance issues and minimal-to-no IT resource requirements.

The desk-level folks want seamless connectivity, proactive communications, and service that handles any and every issue.

What does this mean for you?

It isn’t about you or your products. Start from your customers’ perspective and not from your’s.  And stay there.

Happy Friday! It’s Research Roundup time.

Here’s my quick takeaways on new research – and how it affects you.

WCRI on the interaction of health insurance and workers’ comp

Bogdan Savych PhD of WCRI has provided an excellent review of the interaction of health insurance coverage and workers’ outcomes post-injury. 

The percentage of workers with health insurance increased from 84% in 2008 to 90% in 2017, driven primarily by the ACA.  Notably Medicaid expansion was responsible for most of this growth. Overall, workers who had private health insurance:

• got an initial non-ER evaluation a little earlier;
• recovered a little faster;
• were more  likely to return to work; and
• were a bit less likely to hire an attorney.

Note these differences were slight – but real – for workers who had employer-based coverage, NOT Medicaid. (Dr Savych separated out workers covered by these two payers.)

This means – health insurance coverage slightly improves work comp outcomes.

Implementation of the ODG formulary and opioid reduction

NCCI’s just-released analysis shows minimal correlation between adoption of the ODG formulary and decreased opioid dispensing. From the report:

The ODG Formulary had a limited observed impact on opioid utilization in the early period after implementation.

It appears other factors such as much more public and prescriber awareness of the dangers of opioids and general changes in prescribing patterns may have been a primary driver of the across-the-board decrease in opioid scripts.

This means…formularies are a relatively small part of the solution. Strong UR and external factors are likely much more important.

Drug prices and profits

Adam Fein’s excellent Drug Channels delivers details on where the pharmacy profits are piling up.

Dr Fein notes “many multi-billion-dollar businesses profit as drugs move through the U.S. reimbursement and distribution system.”

This means…most rebate dollars are passed thru to employers and PBMs.

Hospital prices

RAND’s research finds the gap between Medicare reimbursement for facility services and what other private health plans pay increased over the last few years; on average private insurers paid almost 2 1/2 times Medicare rates.

This varied widely among states; if you operate in Colorado, Montana, Wisconsin, Maine, Wyoming, and Indiana reimbursement is even higher, while Michigan, Pennsylvania, New York, and Kentucky’s commercial prices were only 1.5 to 2 times Medicare rates (yippee…).

This means…work comp payers are almost certainly paying way too much for hospital care.

Back to the work comp services business…

A while ago I wrote about how some buyers’ attitudes are a bit overbearing. I know, unusual for me to be rather subtle.

The post itself generated a few comments; many more were sent to me directly with the request they not be made public. I will always honor that request.

But…

Here are a few ways buyers mistreat “vendors”.

1. The Jerk-Around
   This begins pleasantly enough, with lunches and dinners and meetings building rapport and “relationships.”  The buyer is really, really interested, voicing approval of the vendor’s product/service, requesting more information, discussing needs and priorities. The vendor is convinced the buyer is really interested, it’s just not the right time. Perhaps in a couple months.

   Then, a new management focus appears, and this is on the back burner for a bit. Oops, a change in systems resources is holding things up.  It may be because the buyer is really trying to get a deal done. More likely, the buyer just doesn’t want to say “no”. While understandable, this is the wrong thing to do – for everyone.A fast No is far better than a long maybe.Yes, the sales person is at fault too. They should be asking, probing, talking with others at the buyer’s employer. But if they keep getting the wrong information and are led the wrong way, it’s easy to succumb.

2. The Disappearing RFP
   This starts with a voluminous request for proposal asking every possible question and attestation in multiple ways. It takes weeks of work by the vendor, pulling scarce resources away from other projects.

   And then…crickets.

   Days become weeks, weeks stretch out into months, and months disappear into the void. Eventually everyone involved forgets what happened, who wrote what why, and where things stand. And the vendor has lost tens of thousands of dollars in labor costs…so has the buyer. Why payers go thru all the work to write an rfp only to abandon it, often without informing – and apologizing to – the respondents, is a mystery.

   (Actually it isn’t…there are way more service providers with way more capacity then there are potential customers, so you’ve got no choice…you HAVE to respond to every RFP even though you know your chances are miniscule…)

   What you’d LIKE to say…

   

3. The Change-a-Thon
   The original specs both parties agreed to are set forth in stone. Well, still-liquid mud actually, but mud is just stone that hasn’t solidified quite yet.

   Then, there’s a Note/email/change request… “due to regulatory issues, or a change in management, or because we just forgot something, we now need your data to feed this other system/comply with this standard/include these fields that we never told you we wanted, and/or your staff has to have the following credentials, and/or we need the reports on pink paper on Tuesday.”Oh, and we can’t pay you any more for this.Then there’s another change request, and another, and on it goes.

4. The “We Need a Better Price”
   You’ve negotiated everything, and it’s pretty much a done deal. Then the buyer – often a procurement person – says they need a better price.  You’ve been hearing for months that the customer wants better service, is leaving their current vendor because of lousy service, and places a premium on service.Except they refuse to pay for it.

   So, you’re stuck.  It’s either agree to barely break-even or perhaps even lose money, or agree to the price knowing you’re going to reneg on service once the contract is signed.Which leads to the final problem (although I’m sure you have your own list)

5. The Procurement Problem
   Oh boy.  The business people have written the specs, delved deeply into your capabilities, certifications, experience, and results.  They fully understand that the service they want – and what you are expert in – is hugely complex, requires deep experience and highly trained staff, and will evolve over time as you work together and learn how to do things smarter/faster.

   The procurement/purchasing folks have been involved, but up till now they’ve been pretty much silent.

   Now they start negotiating price, and the dreaded Service Level Agreement (SLA). They want performance guarantees with financial penalties, but won’t agree to bonuses based on stellar achievements. They may demand you agree to specific time frames and project specs, refusing to factor in possible screwups/delays on their side of the implementation process. They negotiate price like a pitbull; in fact they focus most of their effort ratcheting down the price.Your business contacts plead with you to agree to the terms, saying they’ll work it out. Then, you’re locked in, and once again stuck in the “we can’t afford to deliver this for that price” – so it’s lose money or be accused of failing to deliver.

   (Terrific insights into marketing and procurement here.)

   (Now that I’ve thoroughly angered my friends in purchasing/procurement roles, know that some – a few – are reasonable, thoughtful professionals that seek to understand these issues and recognize the price implications.)

   What does this mean for you?

   You get what you pay for.

   Workers comp services is a shrinking business in a highly mature market. The only way vendors grow is by taking business from a competitor. Buyers have all the negotiating power, and often use every bit of it to wring concessions from suppliers.

   That’s almost always a grave mistake, leading to poor service and poor results.