Insight, analysis & opinion from Joe Paduda

May
28

Hey work comp payers – Do Your Job.

Has any workers’ comp insurer, excess carrier, or state fund, any self-insured employer sued opioid manufacturers, distributors, or dispensers?

Have you?

Generic opioid manufacturer Teva just settled a lawsuit with  Oklahoma, paying the state $85 million. Purdue Pharma – in my view the worst company in the world – had already agreed to pay $270 million –  $70 million from the founding Sackler family’s coffers. Next up is Johnson and Johnson subsidiary Cephalon.

Sounds like a lot, right? Well, no.

The annual cost to the rest of us – in taxes, insurance premiums, lost wages, higher drug costs – is in the hundreds of billions of dollars ANNUALLY.

Meanwhile, a massive lawsuit involving 1600 cities, counties, other governmental entities, and Native American groups is headed to trial later this year in Ohio.

And, Massachusetts’ Attorney General Maura Healey’s suit against Purdue is pending. The massively detailed complaint is comprehensive and terrifying in its detail; here’s the AG’s record of the billions the Sacklers made from OxyContin.

I’ve asked dozens of work comp execs about this, and with a couple of exceptions, none have reported they are suing anyone in the opioid business.

Why not?

Is it because it’s too much work?

Or insurers don’t really care as they can just increase premiums to pay opioid-related costs?

Neither is remotely acceptable.

Workers’ comp payers – all of you – have a fiduciary responsibility and an ethical and moral duty to recover as much money as possible for their policyholders from the companies and people who’ve addicted, killed, and destroyed work comp patients. Those dollars should go back to the taxpayers and employers harmed by the opioid industry.

What does this mean for you?

Yes it’s going to be hard. Stop making excuses and start doing your job.

 


May
24

Research Roundup

In which I drop a “Nerd Bomb” into your email folder…

Here’s this week’s research-that-impacts-you I found compelling…

From WCRI, a report analyzing the relationship between prices for medical services and patient outcomes. More specifically, authors Olesya Fomenko and Bogdan Savych and ask the question “What happens to worker outcomes when prices increase or decrease?”

The authors used a comparison of workers’ comp medical prices for common office visits to group health, with the latter used as a proxy for adequate or benchmark compensation (my words, not the authors’.)

Key takeaways:

  • Medical prices are “not strongly related to measures of recovery of physical health and functioning, speed and likelihood of return to work, or duration of temporary disability.”
  • But…as all healthcare is local, there are some unexpected (at least to me) findings.
    • in areas where WC pays less than group health, raising WC prices results in more care delivered to WC patients, increased temporary disability (TD), but no significant change in access to care – and no impact on outcomes
    • where WC pays MORE than group, increasing WC prices results in more care delivered to WC patient, less concern about access – but NO meaningful impact on outcomes

Changing bad health behaviors

If you’re using financial incentives to change people’s health behaviors, you may be disappointed. Research published in NEJM indicates support from loved ones and clinical support are  more effective.

Pharmacy costs

Lost in the mostly-incoherent squabbling about drug prices is this: Net prices – that is, what insurers/healthplans/employers/payers paid AFTER rebates – for “traditional” drugs DROPPED last year (specialty med prices increased marginally).

Dr Adam Fein’s analysis of PBM trend rates showed the overall increase across all PBMs was in the low single digits; individual PBM results varied somewhat.

I’d encourage all to read Dr Fein’s post – and to subscribe to Drug Channels.

Speaking of drugs, the American Pain Society – the fine folks partially funded by opioid manufacturers looks to be filing for bankruptcy. 

Finally, how important is clinical care to a person’s overall health?

The answer – not much.

Your family income, environment, whether you take care of yourself – all these are WAAAAAY more important than the quality of care you get.

Which ties in pretty well to the research above about health behaviors.

What does this mean for you?

Get out and take a walk, and lift some weights too!

Note – this is me getting some exercise while on the boy’s annual mountain bike trip in Moab, Utah. Fortunately the “healthy behavior” of riding my bike a lot wasn’t outweighed by my inability to avoid crashing a few times…


May
23

NCCI – final takeaways

NCCI started with a terrific video featuring several people who suffered significant occupational injuries – and how work comp helped them recover. The video was really well done…kudos to NCCI and their partners for publicizing the good work done by many of you.

That’s the people side of things – one that the industry is doing a much better job publicizing. On the business side, the workers’ comp insurance industry has had a seven year run of increasingly positive results – measured by operating gains.

NCCI CEO Bill Donnell noted that technology may be moderating the “insurance cycle”; the hard-and-soft market waves that have bedeviled the industry for decades. The thinking is we’re more on top of indicators and track potential changes in real time, enabling players to anticipate and react quickly.

I’m not so sure.

Look at the stock market, where automated trading algorithms have led to wild swings in stock prices. Different environment to be sure, but a telling example of how tech has led to more volatility – not less.

And, we only know the metrics we are measuring. Things can move very quickly and we likely don’t know all of the factors/indicators/metrics that may – in the future – contribute to changes in WC results.

Frequency has declined by a third over last decade.  But, we’re getting older – more of the workforce is over 55 than ever before. Despite that, frequency keeps declining. While claims counts likely are flat to slightly higher, that is due to employment. As we’re at full employment, we can only expect claim counts to decline in the future.

It’s apparent to me that there are few new issues in workers’ comp that are worth getting excited about. Medical marijuana, the gig economy, fee schedule changes, pending legislation, all generate some excitement – but really, do these things move the needle?

Structurally workers’ comp is a declining industry. Costs continue to moderate, consolidation is the overarching theme, premiums are steadily declining. I challenge anyone to find an employer up in arms about their work comp program.

Contrast that to industry news that many insurers are looking to grow their work comp books.

These two things can’t happen. The drive for growth could push some insurers to cross the stupid line and cut prices below sustainable levels.  Focused intently on their new analytical reports, they won’t see the chasm until they are in it.

 

What does this mean for you?

Those who don’t learn from history are condemned to repeat it.


May
22

Bankruptcy: financial risk and patient impact

What are your risks if one of your vendors goes bankrupt?

Health insurers have gone belly-up in the past, in some cases leaving hundreds of millions in unpaid claims.

Here’s a potential scenario, where a payer – say a TPA or insurer – contracts with a vendor to handle certain types of medical services. The vendor schedules the patient, the patient gets the care, the provider bills the vendor; the vendor bills and is paid by the payer. 30-60 days later the vendor pays the provider.

At least, that’s how it is supposed to work.

Now let’s say the vendor runs into cash flow problems. Provider payment delays increase, and soon there are complaints from providers to the payer, or worse, regulators.

Some savvy payers who stay on top of this stuff immediately require the vendor pay their treating providers immediately after the payer reimburses the vendor. Others figure it’s no big deal and it will work out.

This goes on for a little while longer, until the vendor’s owners – let’s say a big investment firm – decide to walk away and write off their stake in the vendor. The new “owners” are the debt holders, the firms that bought bonds issued by the vendor’s owners. Now, the value of those bonds has dropped , and the bondholders need to quickly re-organize the vendor to cut their losses.

The new owners declare bankruptcy so they can buy some time while they figure out what to do.

No big deal, you say…companies go bankrupt all the time…someone will buy the vendor, and all will be fine.

Uh, no.

The treating providers who are delivering care to your patients now demand that you – the payer – guarantee payment for past bills and for scheduled care. You protest that you’ve already paid those past bills. The treating providers point out that no one’s paid them, and now that the vendor is in bankruptcy, there is no assurance they will ever be paid all they are owed.

The potential consequences include:

  • the patient gets billed, and/or;
  • the Insurance Commission weighs in, and/or;
  • treating providers refuse to continue or deliver treatment until payment is guaranteed by the payer.

So, payers may have to A) pay twice for the care that has been already billed and paid, and B) do so immediately or risk angry patients not getting treated, calling lawyers, and staying out of work even longer.

That’s the immediate problem – and it has to be addressed immediately.

There’s a bigger problem, though, and it’s almost as urgent. 

If the bankrupt vendor is a dominant player in its niche(s), do other vendors have enough capacity to quickly step in and take over? 

If not, how quickly can they ramp up?

If the answer is “not for a while”, how are you going to schedule treatment, collect and review data, manage care – all those functions the vendor was performing?

If you’re a TPA, the problem is even knottier. How do you go back to your employer/insurer clients and tell them they need to pay again for services they already paid for? Oh, and the vendor in question is one you – the TPA – recommended?

What does this mean for you?

Hopefully…nothing.

 

 

 


May
21

NCCI AIS research review – Comparing work comp to group health

Barry Lipton PhD did a quick review of a few ways work comp and group health differ – and how they are sometimes comparable.

The biggest difference is that workers’ comp is very focused on return to work, and more broadly, we care more about functionality.  In group health, not so much.

Differences – other than the obvious e.g. WC=ortho and trauma; group health= everything

  • price differences are 12% higher for work comp than group health,
  • while utilization is 60% higher for workers’ comp
  • so total costs are 77% higher.

This differs by state, with Alabama, Missouri, and Virginia showing the biggest cost difference compared to national averages, and Colorado and South Dakota with the lowest cost compared to that average.

It also differs by type of service – not surprisingly physical medicine is used much more in workers’ comp, driven almost entirely by more utilization.

That’s not surprising, as comp conditions are predominantly musculoskeletal injuries and focused on return to functionality, while group health deals with many more conditions and RTW is irrelevant.

There’s also a big difference in the cost of MRIs…

You can see that Medicare pays way less than work comp (WC is blue, Medicare is green-ish). You can also see the impact of Medicare’s change in reimbursement in 2013; it started to really impact workers comp in the years after 2014 as regulators adopted/factored in/used Medicare’s rate for reimbursement in their state.

What does this mean for you?

Price + Utilization = Cost. But one has to factor in RTW in comp, a focus that is nonexistent in group health.

 


May
20

2018 Work Comp results – key takeaways part 2 – the details

NCCI Chief Actuary Kathy Antonello’s presentation on the state of the industry has just too much information for a single post – so here’s three key details.

Reserves

Private carriers are over-reserved. That means there’s several billion dollars of excess cash on carrier books. I’d note that this ASSUMES the projections are accurate, and that losses for already-incurred claims don’t get worse (or, in insurance-speak, develop upward).

Frequency

Lost time claim frequency declined by 1 percent last year – significantly less than we’ve seen over the decade. My take is this is related to several factors.

  • Employers aren’t focusing on work comp issues – e.g. safety and loss prevention – as premiums are so low that they aren’t a problem.
  • Hiring standards have been relaxed as we’re at full employment
  • More overtime is being worked, leading to higher injuries due to tired workers

Severity

Medical costs went up a mere 1 percent in 2018, continuing a trend of relatively low increases that’s persisted since 2008 (the jump of 4.1% in 2017 looks like an aberration).

What does this mean for you?

Workers’ comp is not a problem for employers – which means it will get little attention from legislators.

When buyers aren’t experiencing pain, they have little reason to buy.


May
15

NCCI AIS 2019 – Quick Takes

This year’s Annual Issues Symposium was the best I’ve attended – and I’ve been to 20 or so.

The hotel and conference center were excellent – great service, everything was right on site, food was very good, all around best conference site experience in memory.

The opening day’s content was rich and mostly very well done. Kathy Antonello’s discussion of results continues to improve. I would have liked a bit deeper dive into cost drivers, but that’s a very minor quibble; you can’t cover everything in an hour. Graphic presentation was helpful, and Kathy is clearly comfortable on stage and enjoys presenting.

For me, after Kathy’s State of the Line the highlight was the discussion of AI and human decision making. Jim Guszcza of Deloitte was brilliant, laying out a compelling case for the joint use of both AI and humans in decision making.

A discussion of TRIA renewal was – I’m sure – of keen interest to many, but the speaker’s impact suffered a bit as he read his talk.  David Priebe of Guy Carpenter is clearly expert in all things TRIA and knows his stuff.

Moments into David Deitz’ physician panel, the hotel lost power and all went dark.  Staff responded quickly, using social media to keep all of us informed – they handled the unexpected with aplomb.

The physician panel is up there somewhere…

When things got started, I had the sense the blackout was a metaphor for payers’ views of treating providers – there’s little visibility into what docs have to deal with when serving work comp patients.

In fact, the physicians had pointed comments about the problems docs face trying to do the right thing, many of which are caused by well-intentioned but ultimately dumb “requirements”. Takeaway – if we want good care, we need to make sure the people delivering it like to work with us. We have a long way to go to make the occ docs who care for our patients true partners.

Barry Lipton quickly ran thru three research foci, I particularly liked Barry’s insights into ways work comp and group health are different.

Alas I won’t be attending the second day; the boy’s annual mountain bike trip conflicted.  It’s off to Moab, Utah, for four days of back-to-boyhood.

What does this mean for you?

This is a must go. Sign up early so you don’t get locked out of 2020.


May
14

Work comp – the physicians’ view

Dr David Deitz moderated a panel of physicians tasked with describing the role of primary care in workers’ comp. Ed Bernacki, Jill Rosenthal of Zenith, and Will Gaines of Baylor Scott&White Health participated.

The takeaways –

  • Primary care for occupational injuries which will evolve significantly over the next few years due to retirement of physicians, telemedicine and physician extenders.
  • Most physicians never get any training in occupational medicine (I know, shocker) – therefore it’s no surprise communications with treaters can be frustrating and care management contentious at times.
  • Hospital consolidation is affecting patient care, and direction of patients to the best provider can be hampered/interfered with if treating docs are required by their health system to refer to other providers in that system.
  • Measurement of “performance” and “quality” is different for occ docs; we care about long-term outcomes and functional ability. Not enough payers are actually sharing scorecards/outcome reports with treating providers, and those who are aren’t doing much in the way of follow-thru to discuss results and ways to improve.
  • Electronic Medical Record technology tends to be menu-driven, click-thru, or voice recognition  – all of which are inadequate at best.  Dr Gaines estimated EMR adds 90-105 minutes EVERY DAY to his workload. Not reimburseable, too.
    • Oh, and the doc is often looking at the computer or screen – not at the patient.
    • The EMR yet one more factor making primary care a less and less attractive specialty for new physicians. They just don’t want to deal with all that friction.

 


May
14
  • Direct written premium was flat,
  • combined ratio stayed low,
  • loss costs decrease, and
  • reserve deficiencies disappeared.

Later this week I’m going to do a series of posts unpacking these findings and opining on what it means for you. For now, here are the key takeaways

The big number – the combined ratio – got a lot better – declining to 83 from 2017’s 89. That is a historically low number.

Here’s the entire presentation.

We’ll focus on indemnity and medical expenses for a moment, as these are key cost drivers. Note that these data are ONLY for NCCI states – which don’t include some big states such as New York.

The graph below shows that indemnity claim severity – the cost per claims did increase – albeit modestly.

Medical costs barely increased last year. I’ll have a lot more to say about this in a future post.

Kathy does an excellent job making really complex data understandable while making it relevant.

For example, payroll increased by 5.3% in 2018, more than offset by total loss costs (driven by frequency and claim costs) which dropped almost 9%. The takeaway – claim costs decreases are more than offsetting increases in payroll and employment. That happened despite a big increase in employment in construction, which is a higher frequency, higher severity industry.

The result, only 5 percent of surveyed respondents saw an increase in their WC premium rate this year; almost everyone had no increase or a decline.

Let’s pause here.

This has never happened in workers’ comp. We have never seen this level of financial performance, and it is clear insurers are still trying to figure out why this is happening, when it will end, what will cause a change, and what the warning signs will be.

What does this mean for you?

Life is pretty great right now. We do know it will end.  We do NOT know what will cause that event.

 

 


May
13

Explaining pharmacy pricing, part 4

Do you have any idea if you are paying your PBM what you should?

Work comp payers’ PBM pricing is based on AWP; typically it is a percentage below AWP. Brand drugs are discounted 10-16%, and generic pricing is typically below AWP -40% .

The PBM is making its money on the “spread”; the difference between what it pays the pharmacy, and what it charges you.

Your PBM contracts with retail pharmacies, chains, food and drug purveyors (think Walmart), and independent pharmacies. In some cases third party billers are also contracted, along with physician dispensers and mail order pharmacies.

Here’s where it gets funky.

The PBM’s contracted rates with those pharmacies are all over the place and may even vary by region or drug. That’s fine; you are getting a discount, and the PBM is betting it will – overall – make a profit.

That is, it’s fine IF your average discount is equal to or better than what you were promised.

Reality is, very few workers’ comp payers review their PBM’s bills to make sure that the average discount is what they were promised. 

Workers’ comp insurers and TPAs audit claims, case management performance, reserves, bill review, hospital bills, network discounts, legal bills…pretty much everything BUT pharmacy.

The Russians said it best.

That is NOT to say PBMs purposely mess with the numbers/bills/codes to increase their reimbursement. Rather, like any entity, mistakes can be made, lapses occur, updates lag.

Unfortunately, in the audits we’ve seen these errors usually benefit the PBM.

What does this mean for you?

If you’re looking to ensure you’re paying what you should, let’s talk.


Joe Paduda is the principal of Health Strategy Associates

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