Would you want your family covered by Opt Out?

Today’s WorkCompCentral brings an editorial on the “trend” in some state capitals towards plans legitimizing opting out of workers compensation.  Friend and colleague Peter Rousmaniere has done more research and investigation of opt-out programs than anyone else I know.

He knows of what he speaks, and his view of opt out is one we work comp folks should carefully consider.  His reporting on Oklahoma, overall trends, and progress to date are clear evidence of Peter’s expertise.

Among Peter’s concerns are:

  • the requirement that employees report injuries within 24 hours.  Peter notes there’s no good reason for this requirement.
  • Very low wage replacement levels, so low that higher-compensated employees may well be discouraged from filing claims
  • plan documents that are indecipherable
  • documents pertaining to individual claims that prohibit injured employees from sharing the document with anyone.
  • opt out plans being considered in several states may well violate ERISA.

It is important to note that many employers opting out in Texas are doing so responsibly, however the new efforts promoted by AAWC are anything but.

The net is this – would supporters of these programs want their family members covered by these plans?

Pro Publica published an extensive review of opt out; it is damning however in my view it suffers from a lack of credibility coming from its biased, slanted, and in many cases patently false “reporting” on workers comp.

What does this mean for you?

AAWC’s opt out promotion smacks of continuing a race to the bottom, adding yet another insult to working people.  If AAWC is really interested in doing right by workers it sure has a strange way of showing it.


The Anti-Opioid Movement is gaining speed and traction

The pushback on opioids has accelerated dramatically; every day there’s at least one major announcement about states, the Feds, or other entities taking major steps to attack the overuse of opioids.

We are starting to see some progress.  Perhaps most noticeably, a few weeks ago the CDC published draft guidelines re the use of opioids for treating chronic pain.

Unsurprisingly, the pain industry wasn’t happy. They’ve penned letters to CDC officials and Congress, with one complaining: “a lobbying organization that seeks to reduce the prescribing of opioids appears to have played a significant role in developing the guidelines.”

Allow me a moment to pick my jaw off the floor.  This is the height of hypocrisy.

This is coming from an industry that has used the billions it has made from selling opioids to:

  • lobby state and federal elected officials and regulators,
  • pack ostensibly unbiased review panels with drug company shills,
  • fund “research organizations” that published biased research supporting opioids, and
  • brilliantly and effectively promote the use of this incredibly dangerous and damaging drug.

I’m just stunned at the unmitigated gall of these people.

CompPharma (the work comp PBM advocacy organization of which I am president) has joined with the National Safety Council, Physicians for Responsible Opioid Prescribing, American Society of Addiction Medicine, National Coalition Against Prescription Drug Abuse and several other groups to support the DC guidelines.

The human cost of opioids is a constant and terrible reminder of the impact the opioid promotion industry has on each of us.

Yesterday the estimable Steve Feinberg MD sent one of his periodic emails re interesting issues related to work comp and the delivery of care in comp.. This one was a column by Bob Beckel, an editorialist who recounted how he had to check himself into rehab after a mere eight weeks post-op care involving OxyContin and Percocet had addicted him to the stuff.

Truly frightening.  And very common.

A truly awful side effect of the rampant overprescribing of prescription opioids has been the explosive growth in heroin use.  When patients can’t get prescription opioids, those addicted or dependent may well turn to illicit versions of opiates, namely heroin.

myMatrixx’ Phil Walls RPh has written an excellent synopsis of the history and current status of heroin. Detailed, thorough, readable; download and read on your next flight.

Perhaps the most trenchant observation appeared a couple weeks ago in an editorial in the New York Times entitled “How Doctors Helped Drive the Addiction Crisis”.  Here’s Dr Richard Friedman’s concluding paragraphs:

WHAT is really needed is a sea change within the medical profession itself. We should be educating and training our medical students and residents about the risks and limited benefits of opioids in treating pain. All medical professional organizations should back mandated education about safe opioid treatment as a prerequisite for licensure and prescribing. At present, the American Academy of Family Physicians opposes such a measure because it could limit patient access to pain treatment with opioids, which I think is misguided. Don’t we want family doctors, who are significant prescribers of opioids, to learn about their limitations and dangers?

It is physicians who, in large part, unleashed the current opioid epidemic with their promiscuous use of these drugs; we have a large responsibility to end it. [emphasis added]

Kudos to Gov Charlie Baker (R) of Massachusetts.  Gov Baker is calling for a strict limit on initial opioid prescriptions throughout his state.  Of course several docs are protesting this, noting problems of access for patients who need the medications.  It would be even better if these docs noted the problems inherent in opioid prescribing; perhaps they did but the reporter didn’t publish those comments… (thanks to Jake for the tip!)

Finally, there are many, many pieces and parts to ACA, including significant funding for clinical research, patient outcomes research, and research into improving the delivery of care. The Patient-Centered Outcomes Research Institute just closed it’s request for proposals for research into Clinical Strategies for Managing and Reducing Long-Term Opioid Use for Chronic Pain.

There’s nothing more important in the work comp world than this issue. 

ACA – what can we expect in the healthplan market in 2016?

First, benefit plans offered on Exchanges are evolving rapidly, with smaller, closed networks getting a lot more traction. A recent report from Avalere found:

from 2014 to 2016, the percentage of plans offering PPO networks dropped from 39 percent to 27 percent. This represents a 31 percent decline over the three year period. Meanwhile, use of health maintenance organization (HMO) and exclusive provider organization (EPO) networks has increased.

This isn’t surprising; health plans get better reimbursement, tighter relationships, and fewer management with small networks.  Expect this trend to continue.

But not without major challenges from regulators, health care providers, and consumers. In New Jersey, the dispute between Horizon Blue Cross/Blue Shield and a big hospital over Horizon’s value-based care initiative and that initiative’s impact on St Peter’s University Hospital is now before a judge.  Essentially, St Peter’s isn’t on Horizon’s Tier One provider list, which means consumers would have to pay more for care there.  They don’t like that, and want in.  Horizon claims St Peter’s is not committed enough to population-based care.

Expect these disputes to become commonplace.

Next, Co-ops – those start-up health insurance programs designed to add competition to the marketplace, are failing left and right.  Clear evidence that PPACA is failing, and another example of government’s inability to get anything right.  RIght?

Well, no.

In reality, this Congress screwed the Co-Ops.  

Long story short, the start-up Co-Ops were supposed to get financing in part from a risk corridor program that was part-and-parcel of PPACA.  The idea behind the arrangement was to help small players get started so they could provide an alternative to the behemoth health plans dominating our world.

Then Congress intervened.  Here’s Louise Norris:

On October 1, 2015 the federal government notified health insurance carriers across the country that risk corridor payments from 2014 would only amount to 12.6 percent of the total owed to the carriers. The program is budget neutral as a result of the 2015 benefit and payment parameters released by HHS in March 2014. And the “Cromnibus bill” that was passed at the end of 2014 eliminated the possibility of the risk corridors program being anything but budget neutral, despite the fact that HHS had said they would adjust the program as necessary going forward. But very few carriers had lower-than-expected claims in 2014. So the payments into the risk corridors program were far less than the amount owed to carriers – and the result is that the carriers essentially get an IOU for a total of $2.5 billion that may or may not be recouped with 2015 and 2016 risk corridors funding (risk corridors still have to be budget neutral in 2015 and 2016, so if there’s a shortfall again, carriers would fall even further into the red).

Many health insurance carriers – particularly smaller, newer companies – are facing financial difficulties as a result of the risk corridors shortfall. CO-OPs are particularly vulnerable because they’re all start-ups and tend to be relatively small. All of the CO-OPs that have announced closures since October 1 have attributed their failure to the risk corridor payment shortfall.

So, what happened is entrepreneurs based their business plans in part on the risk corridor program.  Congress, in its infinite wisdom, decided to not deliver on its original commitment, thereby killing off competition in many key markets.

One analyst has what I think is a pretty insightful take on non-financial enrollment challenges faced by new entrants to the health plan markets:

“I think the problem with [insurers not doing business profitably on public exchanges] is that it takes time…for them to mature. It is the nature of the insurance business when there is a brand new insurance line, where people had no insurance previously. There needs to be a motivating factor to buy insurance,” which may come when people face more significant fines in 2016 for not having coverage.

— Vishnu Lekraj, securities analyst for Morningstar, Inc. in HealthPlan Week

For a thoughtful piece on just what it takes to start an innovative health insurance plan/company/business, read this.  A key takeaway is it is not just about financing…

What does this mean for you?

Health plans are evolving rapidly, painfully, and some successfully. It’s not pretty but it is necessary.

NWCDC – key takeaways

What was noticeable about this year’s NWCDC was what wasn’t.

That is, I didn’t hear or see much that was surprising or new or revelatory.  After a score of scheduled and many more unscheduled meetings, what emerged was an overall sense that the work comp industry is doing pretty well, the big takeaway being the status quo continues.

That needs some additional explanation. Today’s “status quo” is marked by:

  • consolidation both within and among industry verticals;
  • emergence of smaller, niche-specific service providers; and
  • continued interest on the part of investors.

Let’s take those on in order.

First, there’s no question consolidation continues.  In an industry with a structural decline in claims frequency, the rules of a mature industry are incontrovertible.

  • Scale and efficiency are critical to success.
  • Some service offerings/verticals are being commoditized.
  • Market share is hard to come by.
  • Service deficiencies lead to customers leaving, while
  • price is key to gaining other suppliers’ unhappy customers.
  • Vendors are broadening their services by acquiring “sub-vendors” (think TPAs acquiring medical management assets); and
  • Vendors are acquiring other vendors in the same market vertical (think Genex acquiring other case management firms).

Yet there are multiple examples of new competitors emerging, looking to take advantage of opportunities that arise because their much larger competitors are focussed on streamlining, efficiency, consistency, cost control.  While these tactics make sense in a mature market, they also create openings because customers don’t all want the same thing delivered the same way.

I’ll dig deeper into that tomorrow.

Finally,  investment professionals were evident on the floor and at sessions.  This year I encountered representatives from hedge funds in addition to the usual investment banking and private equity folks.

The investment interest seems to be concentrating in a couple areas – the really big and pretty small. On the “really big” end of things, the continued reports that UnitedHealthcare is going to invest in the WC PBM space, Examworks’ ongoing acquisition campaign, and Mitchell’s move into pharmacy management are all indicative of the trend.

While I haven’t seen much in the way of funding for small firms, it could well be there’s a good deal of activity I’m not aware of.  Certainly there’s a lot of interest among investors as they focused their time on the periphery of the exhibit show floor, looking for smaller companies with intriguing, potentially disruptive solutions and services.

Finally, I was somewhat surprised to hear about a good deal of innovation on a variety of fronts.  More on this later this week.

What does this mean for you?

Status quo does not mean static.  The industry continues to evolve, but there are potentially significant external factors that may well change where we are headed.

NWCDC – the Wednesday Report

Kudos to NWCDC for the Keynote – a real, live health care expert spoke for 90 minutes (!) on achieving excellence in medical care.

Arthur Southam MD, the leader of Kaiser’s hospitals and health plan operations, was a great choice.  Admittedly I’ve always been a fan, so perhaps I’m not the objective reporter one would want.

Saw some but not a lot of traffic on the exhibit hall floor in a quick pass thru. Lots of really big booths these days but the number of exhibitors seems to be down from past events. That’s not surprising; industry consolidation in most of the niches means there are fewer companies to exhibit…

Interesting conversation today with a medical management services exec. The discussion ended up focusing on the kind of intelligence or awareness needed to build and grow a successful company.

What business starters have is an intrinsic, almost visceral understanding of what their customers want. They KNOW what their new company needs to do to meet those demands and they focus intensely on every little thing involved in delivering to the customer.

As these companies grow, the successful ones continue that intense focus. They know who their customers – the ones who “buy” or choose to use their services – are. They spend time with those customers; a LOT of time. They develop relationships based on that shared time together, but more importantly the relationship is anchored in the customer’s belief that the vendor understands them and their world.

The next stage is often a buy-out or sale.  In some cases, the buyer recognizes the value inherent in that focus, and supports it financially and strategically.  Investing in technology, staff, training; getting out to actually visit customers and end users (often neglected if not ignored completely), these buyers use their business acumen and experience to build ever deeper relationships.

Others focus on the numbers, all but ignoring what drives those numbers.  And that’s where they fail.

There’s much more to this, but it’s really late.  More tomorrow.

NWCDC – the Tuesday report

Sure, the show doesn’t officially start until today, but there was a lot going on Tuesday – not to mention a bunch of folks were here as early as Saturday setting up and prepping for the 72-hour sprint that is NWCDC.

So, quick first impressions…

Attendance is up 10 percent over last year – which was a very good year indeed.  With teh economy picking up and work comp doing better, that’s no surprise.  Kudos to Roberto Ceniceros and the folks at LRP – it’s come a long way from the basement of the Hilton in Chicago.

Tuesday is the day to get as many meetings done as possible before the madness starts Tuesday evening.  Great event at Skyfall hosted by Helios – well attended, convenient, conducive to catching up with old friends and colleagues.

Met with the principals at Social Detection to learn about their search engine customized/optimized for work comp investigations.  Pretty impressive, with wide application in comp.  As I understand it, their service aggregates social media and other sources from the web while getting rid of the noise.  So, instead of a gazillion hits on a person’s name, you get the stuff that’s most relevant.

More to come…


Examworks’ stock – a sudden dose of reality?

For those who have been following Examworks, yesterday’s collapse in the company’s stock price is a mystery indeedwhy did it take so long for investors to realize reality is kinda important?

As I noted in a post a couple months ago:

… I don’t understand how the company’s stock can trade in the mid-thirties.

And that’s because I do understand the market, their services, and the growth or lack thereof, and I just don’t see the upside investors obviously are banking on. Their stock price makes sense for a high-growth business in a sector with a lot of upside.

That is not how I would describe the IME/peer/MSA business.

EXAM’s primary business is providing Independent Medical Exams to insurance companies – mostly workers comp, some auto, some disability.  Mostly domestic, some in other English-speaking countries.

I hasten to add that I am about as far from a credible stock picker as there is.  For several years I’ve been mystified by the steady rise of Exam’s stock price to stratospheric levels – it just made no sense. Yet increase it did, up to and over the $44 mark.

(as proof, here’s my quite skeptical review five plus years ago…)

After yesterday’s earnings announcement, Exam has a value less than half what it was just six months ago.

While I have no idea what finally caused investors to extract their heads from their nether regions, it may have been due to the earnings call itself.

Among the notable statements were these:

  • “constant currency organic revenue is expected to be flat within an expected range of negative 1% to positive 1%”
  • Total leverage on a net basis was approximately 2.95 times
  • we really look at this as a pause that’s a temporary phenomenon frankly [talking about the annual growth rate].

First, it’s never a good sign when the Chairman starts off the call reminding investors of the “unique characteristics of our Company..The industry is approximately 40 years only [sic] and over the course of that time has grown in good times and bad times with little correlation to the general economy.”

Well, no.  As in, if you actually believe that, you clearly don’t understand your business. 

In fact, that’s pretty much totally wrong.  The workers’ comp industry (which is the primary buyer of Exam’s services) tracks the overall economic cycles pretty closely, albeit belatedly. That’s what you would expect from a business based on employment.

Moreover, as the US has moved away from high injury-jobs towards a service-based economy, the injury rate has declined rather dramatically – over 55% over the last 20 years.  So, if anything, Exam’s business – evaluating injured workers – is concentrated in a market that has structural declines baked in for the foreseeable future.

Which is particularly concerning when you read Chairman Perlman’s next remarks, to wit:

“As we understand it, healthcare is suffering from declining volumes as well as reimbursement pressures, neither of which apply to our industry.“[emphasis added]

Wait…did he actually say that?

Yup. If anything, his business – evaluating injured workers and people in a hyper-competitive industry – epitomizes that description. And, btw, healthcare is NOT “experiencing declining volumes”, at least health insurers, health plans, health care providers, and pharma aren’t.  How could they be, with the huge decline in the number of uninsured?

The IME (independent medical exam) business is brutally competitive.  Driven in no small part by Exam, prices have been slowly if steadily declining for some time. The reasons are simple; again noted a couple months ago:

…maintaining, much less improving margins (management expects they will get somewhat better in future quarters) depends on lowering cost of goods sold and increasing prices.  At least in the US, the latest quarter [Q2 2015] shows the price for their average service fell.  I’d expect that to continue, or perhaps level out.  Winning national accounts requires very competitive pricing, as well as, in many cases, payment of “management” or “administrative” fees to the payer customer.

Then there’s the cost end of things.  This is a pretty simple business with relatively low administrative expense and not much opportunity to reduce that expense. While Examworks may try to reduce payment (the biggest component of their cost of goods sold) to IME and Peer Review docs, those docs can just refuse to go along.  As claims adjusters and attorneys on both sides have very definite preferences for docs, those docs do have some pricing power – and if those physicians aren’t in an IME company’s network, than that IME company likely won’t get that adjuster/attorney’s referral.

What’s happened of late – as evidenced by the lower net revenue per service reported by Exam over the last two quarters – is this decline in pricing has affected their “mix of business”.  Fortunately word is pricing has stabilized somewhat – good news for Exam’s competitors.

There’s a lot of other fluff in the earnings call, fluff that I’ve described in detail in earlier posts (just type “exam” in the search box up there to the right), but the net is this.

These guys have no clue about their business, or they do have a clue and hope investors don’t.

Ok, I can’t resist.  Perlman does say “We have secured six of the 40 national accounts in the US and expect to continue to grow the national account business.”

That means the nice, well-dressed, smiling Examworks field reps have a “license to hunt.” It does NOT mean Exam is going to get all the business from those national accounts, far from it.  It means the Examworks field reps get to try to get into claims offices (an increasingly difficult thing to do as more and more payers are refusing to admit vendor staff) and schmooze Jane and Jack adjuster in hopes J&J will refer files to them.

Instead of the myriad other IME companies knocking on their cubicle “doors”.

Sorry, one more thing just begs to be addressed.

Exam makes a very big deal of their purchase of a Buffalo NY-based IME firm – First Choice.  This $24 million company with earnings in the $1 million range sold for 7-8x earnings.  Perlman said, and I quote, that this is a price “in line with what we have paid historically for businesses of this size and regional significance.”

Historically, EXAM bought smaller, regional companies for around 4x.  Unless my math is pretty bad, prices are going up, despite what Mr Perlman says. First Choice is somewhat larger than previous acquisitions, but the doubling of the multiple is NOT “in line” with previous purchases.

OK, I’m done.  For now…

What does this mean for you?

I don’t own the stock, although I wish I’d short-sold it a couple weeks back. You?

Note – I have nothing against Exam, don’t know Mr Perlman, and have no financial stake in this industry.  I do find equity analysts’ understanding of core business issues sometimes don’t have any grounding in reality.

NWCDC – a few last things to consider

For those heading to Las Vegas next week for the annual work comp meeting, it’s time to re-confirm meetings, check for double booked time slots (I always have at least 2), and finalize the sessions you’ve got to attend.

Here’s a list of must-dos when preparing for Vegas.  It’s far too easy to miss essential sessions or forget to stop by booths to meet with vendors so be sure to set that calendar up with the right alerts. To help navigate to sessions and around the exhibit floor, I strongly encourage all to download and use the NWCDC smartphone app.

Bob Wilson, the legendary WorkCompKing, John Plotkin and I will take the stage at 5:30 pm Nov. 11 at the Mandalay Bay in Vegas to discuss how social media can be used for good. Bob’s public discussion of SAIF’s appalling treatment of Plotkin is well known and but one example of the power of social media.  If you haven’t signed up for ISG’s Social Media: SAFE and Uncensored get-together, registration is here; cocktails and hors d’oeuvres will be served.

Random notes

Here’s a great post on how to know when to move on from a chance meeting; I expect a few colleagues will employ these techniques when they run into me unexpectedly.  No worries, no offense taken.

Be smart and don’t cross the stupid line.  Have a great time but remember someone’s within watching or listening range – and that someone could be a potential customer, boss, employee, or colleague.

Finally, it’s a long week – pace yourself.

I’ll be live blogging from Vegas when I get the time; planning to get a couple posts out each day but plans have a way of changing.