Insight, analysis & opinion from Joe Paduda


Private equity and work comp services…lessons learned

After 15 years working with private equity firms looking to invest in workers’ comp service companies, I’ve learned a couple of things.

  • Work comp is attractive primarily because it is viewed (accurately) as horribly inefficient, with admin expenses that are many multiples of those in group health, medicare, medicaid, and Exchange healthplans. PE firms LOVE inefficient industries…think old-school logistics replaced by just-in-time supply chain management; small physician practices snapped up by ever-growing health systems; and now rental housing.
    BUT…work comp is inherently inefficient because:

    • when you’ve seen one state you’ve seen one state. If you want to be a big player, you need coverage in South Dakota and Vermont as well as New York and California. So, you have to comply with constantly evolving regulations, reporting requirements, reimbursement standards, certifications and licensing.
    • each large employer has its own list of wants needs and must haves, which make “standardization” inherently impossible.
    • it is a shrinking industry, which means an investment today has to be evaluated against the reality that one out of twelve claims will not exist in three years.
  • High-touch service is absolutely mandatory. This flies in the face of “improving efficiency”… you can’t have people on the phone if you want to cut admin expenses. What many (but not all) PE execs don’t understand is adjusters and case managers and risk managers and injured workers and providers need quick accurate answers.
    Think calling your health plan, cellular carrier, tech service and on and on…an immensely frustrating experience certain to make you cranky for the rest of the day.
    Enough  adjusters complaining about endless automated responses (in order to best serve you I’ll have to ask a few questions, click one if you are in Pennsylvania, two if you’re in New York…cue cell phone being thrown at the wall) will get the managed care execs’ attention, and its off to RFP!
  • Firms that push their companies to create “value” defined as more revenue will ultimately destroy the value of the company.
    PE execs (again not all) define “value” purely in financial terms – how much EBITDA/free cash flow does a company generate – because the more earnings, the higher the price.
    This is nonsense. 
    “Value” is ultimately determined by your customers. Sure the quarterly numbers will look rosy for a quarter or two, but all those cost reductions, layoffs, and other “efficiency” measures will bite you in the butt when customers leave.
  • Decisions to sell/not sell companies are often driven by PE execs’ personal financial and “reputational” concerns and not by what’s smart and best for PE investors.
    Think Apax’ investment in One Call; after a couple of years pretty much everyone in the industry knew it wasn’t going to be a success, yet One Call’s board refused to recognize the obvious anti…to no one’s surprise, they had to write down their entire $700 million investment.
    Individual PE execs with decision power don’t want to admit their mistakes – or don’t want to sell for less than X times what they paid for the company. In the latter case, PE execs typically don’t get a big bonus – or any bonus at all – unless the company sells for 2.5 or more times what they paid.
    Meanwhile company execs and staff with stock options – who would get a nice payday if the company sells for less than that 2.5 number – get frustrated/angry/demotivated with obvious impact on their enthusiasm and work quality.

What does this mean for you?

Understanding what really creates “value” is critical – happy customers and happy staff. If you’re buying or own a company, focus on those two things and not on some BS number. 


The state of workers’ comp

The National Academy of Social Insurance has just released its latest report on workers’ compensation. This is required reading for any serious student of work comp; it’s stuffed with insights just waiting for you.

Here’s a few.

Note – COVID’s impact on 2020 results are significant especially re medical costs and the relation of medical to other work comp financial metrics.

  • From 2016 – 2020, medical benefits paid (per $100 of covered wages) dropped by almost 25%.
  • This followed a 17 point drop over the previous five years …
    • this massive decline is (likely) due primarily to lower claim frequency
  • Medical costs…
    • totaled $27.7 billion in 2020, $2.5 billion less than 2019
    • accounted for 53% of benefits in 2020, down from 56% in 2019
    • a reminder to those who predicted massive increases in medical costs due to COVID; a much deeper understanding of healthcare delivery, cost drivers, and sources of cost data would be quite helpful.
  • CWCI’s analysis indicated the Golden State accounted for a fifth of all benefits paid (Bulletin available at no cost to CWCI members)
  • Overall, employers’ work comp payroll-adjusted costs dropped almost 9 percent from 2019 to 2020

The report can be downloaded for free.


Here’s a quick-albeit-still-somewhat-up-in-in-the-air take on how the midterms may/will impact healthcare. Much depends on final results in several key elections (Senate in GA, NV, :

Medicare and Medicaid

Drug prices – Biden’s Inflation Reduction Act will reduce seniors’ drug prices; if the GOP takes control of the House (which appears likely) it may try to hold up/block/hinder Medicare drug price negotiation through oversight on how HHS implements the new policy.

If Dems hold onto the House (which is highly doubtful),  we can expect legislation that would expand Medicare and Medicaid.

South Dakotans voted to expand Medicaid; this is a big win for rural hospitals and the uninsured – 40,000+ South Dakotans will now have access to health care. For South Dakotans, the impact – healthier people and financially healthier hospitals = healthier economy.

Abortion rights

Ballot measures in 5 states addressed abortion rights with voters in California, Vermont, Michigan, and Kentucky (!) passing measures to protect women’s right to choose; as of early this morning no word on Montana.  Note there are nuances specific to each state; CA MI and VT’s votes enshrined a right to an abortion in their respective state Constitutions while KY defeated a measure that would have explicitly stated nothing in the state’s Constitution creates a right to abortion.

impact – while the votes in CA and VT were no surprise, MI was less certain and KY’s result is notable indeed; Kentucky joins Kansas as another relatively red state whose voters protected abortion rights.

These wins may well drive anti-abortion candidates and politicians to re-think their stance or risk voter backlash.

Investigations, oversight, and the like

If Republicans gain control in the House (likely) and/or Senate (maybe/maybe not) expect a raft of investigations into all manner of Medicare, Medicaid, COVID response, drug pricing and other issues real and imagined.

The biggest thing no one is talking about

Voters in Arizona overwhelmingly backed a measure intended to protect people from medical debt collections and collectors. 

From the Arizona Mirror:

Prop. 209 would reduce the maximum interest rates that could be collected from 10% to 3% annually. Currently, up to 25% of wages can be garnished by creditors, but Prop. 209 would limit that to just 10%. Courts would also be allowed to reduce the amounts being garnished in cases of extreme economic hardship, a power they don’t currently have.

I fully expect activists in other states to jump on this; it is hugely popular and desperately needed.

What does this mean for you?

Watch the updated results to see what happens with the House and Senate. That will drive what really happens…



The core issue – the anti-Americans.

Those who continue to deny the results of the 2020 elections are anti-American; they seek to reject any result they don’t like. That is incredibly dangerous and a threat to our Republic.

Across more than 60 cases in 12 states, final rulings in every court case – including every one overseen by Trump-appointed judges – rejected allegations of fraud and confirmed the results of the election. 

If you care about democracy, you need to know which candidates are election deniers – or more accurately anti-American.

here’s just a few…

To find election deniers running for office in your state; just click on this link, then your state to identify those who refuse to accept the will of the people.

Need more info?

Trump’s own Presidential Advisory Commission on Election Integrity disbanded having discovered nothing.

The Heritage Foundation Election Fraud Database has compiled every instance of any kind of voter fraud it could find since 1982. It contains 1,296 incidents, a minuscule percentage of the votes cast.

study of results in three states where all voters are mailed actual ballots, a practice some allege to be rife with fraud, found just 372 possible cases of illegal voting of 14.6 million cast in the 2016 and 2018 general elections — 0.0025 percent.


19 years ago

I wrote my first post on opioids and workers’ comp. Almost two decades later, the post – which was really an excerpt from a Workers’ Comp Insider blog post – is terrifyingly prescient.

Interesting item from Workers Comp Insider today:
There is an interesting convergence of issues concerning the pain killer, Oxycontin. Originally developed to combat cancer pain, Oxycontin has been aggressively marketed over the past three years by its manufacturer Purdue, to the point where the drug is now the pain-killer of preference for work related injuries. This drug is twice as powerful as morphine and, while not technically addicting, it can create withdrawal symptoms when a person stops taking it. According to a study by NCCI, Oxycontin is prescribed for pain in 69% of permanent partial disability cases. This same study also points out that 49% of these prescriptions go to people with back injuries. When you combine that with the next interesting piece of data – Oxycontin is almost always dispensed in 50 day supplies (100 tablets) — you have a potentially volatile mix.

Kudos to Tom Lynch and Julie Ferguson for their early warning.

Dr Steve Feinberg sent me a note re the CDC’s just-released update to opioid guidelines; there’s a lot to unpack here. A couple of key takeaways.

  • the guidelines were just that – guidelines. In far too many instances they were used to define hard limits, which was wildly inappropriate and completely inconsistent with CDC’s guidance.
  • this from Christopher Jones, acting head of the CDC’s National Center for Injury Prevention and Control and a co-author of the updated guidelines:
    • “The guideline recommendations are voluntary and meant to guide shared decision-making between a clinician and patient…It’s not meant to be implemented as absolute limits of policy or practice by clinicians, health systems, insurance companies, governmental entities.”

What does this mean for you?

Pay attention to early warning signs and don’t over-react.


Republicans planning to force Medicare cuts

House Republicans are planning to impose massive cuts to Medicare, raise Medicare’s eligibility age, and withhold payments to early retirees and retirees earning more than a certain limit.

News sources indicate the GOP will use the upcoming debt limit to try and force Medicare cuts, a reprise of earlier efforts supported by 175 House Republicans to slash Medicare spending. The effort is also gaining traction among Senate Republicans, with Senator Lindsey Graham planning to use the Republicans’ leverage in Congress to cut Social Security and Medicare.

Sen. Rick Scott’s 11 point plan goes a lot further; it would end Social Security and Medicare if Congress doesn’t take specific action to renew those programs every few years (see Scott responding to Fox News question at 1:09 of the video here.)

You may well recall that Scott was sued for Medicare fraud back when he ran Columbia/HCA. Columbia/HCA was ordered to pay the Feds $1.7 billion in fines and penalties.

What does this mean for you?

If you and/or your parents are on Medicare, this means a lot. 



Employee and customer trust = loyalty = success

with “success” defined as;

  • more revenue,
  • sticky customer relationships, and
  • more new business driven in large part by referrals from happy customers.

So, how do you measure “trust”?

Well,  you can use lengthy surveys, have long conversations, or track measures such as additional revenue, referrals, and added services.

All of which don’t tell you much about loyalty and are vulnerable to interpretation and confirmation bias.

Or you can take an objective, reproducible approach that can help you determine what really matters to customers, where you’re falling short and what you need to do going forward.

Why do this?

According to an analysis by the Economist, lost trust has financial consequences. Volkswagen, Wells Fargo, and six other corporations lost 30% of their value when they lost trust, at least in the short term.

From Harvard Business Review:

customers who trust a brand are 88% more likely to buy again, and 79% of employees who trust their employer are more motivated to work and less likely to leave…

Customers who give a brand high trust scores are three times more likely to stick with it through a mistake. Eighty-eight percent say they’re more likely to buy from that brand again, and 62% will buy almost exclusively from the brand.

The HBR piece outlines a pretty simple yet powerful way to assess trust and loyalty – which is built on a foundation of trust – and to identify specific factors that will affect customer and employee trust and loyalty.

Briefly, there are four components, each scored on a 7 point scale.

  • Humanity: The company/brand demonstrates empathy and kindness toward me and treats everyone fairly.
  • Transparency: The company/brand openly shares information, motives, and choices in straightforward and plain language.
  • Capability: The company/brand creates quality products, services, and/or experiences.
  • Reliability: The company/brand consistently and dependably delivers on its promises.

Different customers may give your organization the same net promoter score, but for different reasons. A brief survey can unpack key drivers and enable you to focus on specific areas that will improve employee and customer trust.

What does this mean for you?

Nothing is more important to business success than employee and customer trust.

The survey tool is here. Use it.


Complacency and arrogance – part 2

Last week’s post on Complacency and arrogance struck a chord with quite a few readers; some commented on on the post and/or LinkedIn while more chose instead to email me directly.

One question was raised by several of you; how does one guard against complacency and arrogance?

a few thoughts…

  1. survey your staff
    there’s an excellent piece in this morning’s Harvard Business Review on employee surveys. Key takeaways include:

    1. tell your staff you need and want their feedback/input/recommendations
    2. confirm that by a) let your staff know you value their input and appreciate their willingness to be honest; b) letting all know what you heard and what you plan to do about it; and c) show some self-awareness by letting them know you recognize one or more of your habits/tendencies that may be a challenge for them and want their perspective on how you can better work with them
    3. change what you do and how you do it based on staff feedback
  2. survey your customers
    1. ask what you can do better
    2. identify one thing they’d like you to do differently
    3. ask how you can make their interactions with your company easier/faster/more useful
  3. be self aware
    1. seek to better understand why you react/respond the way you do to criticism or disagreement. Are you defensive, aggressive, placid, dismissive, apologetic? Why? is it because you aren’t as self-confident as you’d like to be? Perhaps a bit over-confident and egotistic?
      The way you react speaks volumes about you – and will determine if your outreach is a success or another nail in your coffin.
  4. Don’t talk – listen.
    No one cares about you, your company, your story, your successes – and the more you blather on, the less they care.
    Until you’ve convinced the audience you understand their need/wants/problems/fears and can help solve them. Ask questions, and follow-up questions, and more questions. Listen hard. Repeat what they’ve told you “If I heard you correctly, you said XXX is limiting your ability to do YYY…Did I get this right? Ok…what have you tried to do to address that? What’s worked, what hasn’t, and why?
    for more on this – here’s a post from 11 (gulp) years ago…

OR, hey, just ignore doubters and staff and customers…

What does this mean for you?

If that little inside voice is bugging you, you’d best listen…and listen. hard. 


Complacency and arrogance

Reading your own press clippings.

Belittling competitors.

Overweening self-confidence.

All are all too common when companies are succeeding, growing and taking marketshare. Everything is going well and senior leadership is blissfully confident that it always will. Any hint of a shadow on the horizon is rapidly dismissed as insignificant, unimportant, and nothing to be concerned about. After all, everything we do is well thought-out, smart, and insightful, if not outright brilliant.

Internal dissent, contrasting opinions and concerns about troubling indicators are quickly dismissed. After all, things are going so well, those can’t be right. Nah…that negativity is just the product of jealousy…feeble efforts by detractors unable to compete in the marketplace or staff unable to grasp how smart the C-Suite is.

You gotta see the new product/service we developed…it’s a game-changer, a big leap forward, way better than our erstwhile competitors! How do we know? Well because we built it…and everything we touch turns to gold.

But wait, what about continuing to improve our core product, enhance our service, incrementally get better? That’s where most of our revenue comes from, what made us successful and built our stellar reputation…

Sure of course yeah let’s do that…but look at this shiny object!
this webinar! This industry award! This way-better-than-anyone-else-has product! This brochure that features a big picture of…me! This interview in (insert media outlet)!

This is all too common in the world of work comp services. As in sports, business, entertainment and politics, leaders that focus on themselves, their successes, their brilliance – and fail to focus on continuing to do what made them successful in the first place – will inevitably fail.

Success is not about you, your social media followers, your past successes, resume, or brilliant ideas.  It certainly isn’t about how much better you are than your competitors…or rather how much better YOU think you are.

Success is about nurturing customers, listening hard to them, seeking to understand what they want, why they want it, and how they want it. It’s about making damn sure the people who pay your bills – your customers – know you are 100% focused on them.

what does this mean for you?

1. if you are darn sure you’re really good and all is well…it isn’t.

2. It’s not about you  it’s about your customers.




Leaving Las Vegas

After 2 1/2 days of nonstop meetings, change encounters, and talks, it is a relief to be heading out.

What was notable

Loved the way the conference planners set up the sessions in “rooms” surrounding the exhibit hall. Exhibitor attendance has been…declining for some time, with exhibitors rightly bemoaning the lack of traffic.

This generated more traffic – as did locating lunches and beverage consumption opportunities.

Newbies – lots of tech-focused entities on the floor this year. I’m not sure they all entirely understood their value proposition, what drives workers’ comp buyers, and exactly how they fit it. But hey, great to have them and their cool stuff on the floor.

Coolest premium – myMatrixx’ charger. Now, I didn’t spend a lot of time trolling for freebies – but this was far and away the best I saw. (disclosure – mM is a consulting client)

Biggest disappointment

Attendance at the session on impact of climate change on workers’ comp.

Aren’t you paying attention?

Every day there is more news about floods, fires, droughts, blazing heat and devastating storms – all of which have direct and major import for work comp.

And more regulations about heat exposure, polluted air, and employee safety.

And more discussion of unforeseen impacts of climate-change driven weather – from flesh-eating bacteria in the swampy waters inundating Florida communities to new regulations addressing exposure to smoke-filled air in western states.

Two claims professionals all-too familiar with hurricanes, floods, and wind (Jill Leonard of LWCC) and fires, heat, and drought (Jeff Rush of California Joint Powers) spent a ton of time preparing to help you handle what is coming. They know all about preparation, planning, the impact on injured workers (where’s my check!!?), dealing with new “employers” that flood an area after a hurricane, and all the things you can only learn from decades of experience.

As Jeff noted, Mother Nature doesn’t care about your opinions on human-caused climate change.

But your boss sure will when the stuff hits the fan and you aren’t ready.


Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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