Insight, analysis & opinion from Joe Paduda

May
21

Risk Managers and work comp outcomes

Walt Disney, Darden, and Publix’ risk managers gave their views on a variety of topics at last week’s NCCI AIS – including provider networks and outcomes.

Walt Disney direct contracts with providers, evaluates outcomes, and monitors those providers on an ongoing basis. The company also administers its own claims, has its own medical management staff, and tightly coordinates with it’s PBM – myMatrixx/Express Scripts.

Got to say, I’m pretty impressed with this approach, the depth of understanding of real costs drivers it shows, and the investment made by Disney.  Kudos to Risk Management VP Michele Adams and her colleagues.

That said, Disney has a major advantage over other employers – tens of thousands of workers located in one place equals huge buying power. I heard from several risk managers at the break that Disney’s situation is unique and one that doesn’t really apply to them.

My take – there is ALWAYS something you can learn from well-run programs. Instead of focusing on what you can’t do, focus on how you can adopt principles of successful programs in your situation. For example, buying power is a function of dollars per provider; the fewer dollars you have, the fewer providers you need.

Allocate your dollars to a few providers and you will get their attention. And yes, you can soft channel in so-called “non-direction” states.

Publix’ Marc Salm reported that his workers sometimes complain about specific providers they use, and those providers are often the ones with poorer outcomes.  Salm also seemed to infer that most large employers are focused on outcomes, and select providers based in large part on that criterion.

Marc may talk with different folks than I do; suffice it to say I haven’t encountered more than a handful of large employers that are engaged to any measurable degree in provider selection or network evaluation, much less outcomes.

My sense is this is the primary reason outcomes-based networks haven’t taken off; there just isn’t the demand.

That said, there are several companies – Albertsons’ being one – that rely on Kaiser Permanente On-the-Job (KPOJ) for all or a large chunk occupational care.  They’ve made the decision to work exclusively with KPOJ because the care model works, the providers’ incentives are appropriate, and most importantly, the outcomes are superior. So, perhaps Marc and I are talking with the same folks – at least in California.

Darden outsources network selection and pretty much all managed care functions to its claim administrator.

 


May
18

Blockchain’s getting more real in work comp

Kudos to NCCI for including an excellent discussion of blockchain in this year’s Annual Issues Symposium.

(Prior posts on blockchain are here.)

This is starting with reinsurance; a good summary is in presenter Paul Meeusen’s summary slide below.

Meeusen and his colleagues and business partners have moved very, very quickly. Many of the bigger names in insurance, reinsurance, and other service entities came together in December 2016 to figure out if and how to work together on blockchain.

Now, less than 18 months later, a company is working to set standards, coordinate communications, and define working processes.

Rather than get into the nits of this, I’ll focus on impact.

Remember – P&C insurance’s administrative expense load is stupid high.

And work comp is perhaps the worst offender; about 30% of premiums go to stuff other than paying claims. That administrative expense is, in the view of blockchain advocates, proof that WC is very inefficient. Therefore there is a significant opportunity to strip out costs while improving data quality, speeding up transactions, and reducing employers’ and taxpayers’ expenses.

The business case for blockchain – which I’m using here as a description of a broader use of technology to replace today’s cumbersome, error-prone, and high-friction administrative system – is so compelling as to render it inevitable.

It also means there are going to be a LOT more opportunities for consumers to insure things that are valuable to them – objects, events, structures, trips, you name it.

What this means for you:

  • Many of us who are “frictional cost” are going to lose our jobs.
  • Service companies who make their money doing admin work are going to lose their customers.
  • And other vendors, especially small ones who can’t afford to adapt to blockchain, are going to find they can’t service their customers.
  • But there are great opportunities for creative insurers to find new niches to service customers.

 


May
17

Opioids, marijuana, pain, and workers’ comp

NCCI’s Raji Chadarevian discussed opioid utilization, price, and cost at NCCI’s AIS 2018.

6 percent of opioid medications used in workers’ comp is for treating opioid use disorder; methadone and suboxone are the drugs of choice.

The older the claim is, the more opioids are prescribed. For 15 year old claims, about 2.5 oxycodone pills were prescribed per day. As a result, claims that are more than 10 years old accounted for more than 50% of all oxycodone pills. And, the top 10% of users consumed 79% of pills.

Those heavy users also get a lot of other medications to help them deal with side effects of opioids (and other conditions). These users get about 7 non-opioid scripts for every 10 opioid scripts.  These drugs include gabapentin, benzos, and muscle relaxants.  Fortunately, Raji reported that there’s been a change over time as prescribers have shifted to non-benzo anticonvulsants and made other changes to reduce health risks.

Raji handed the mic off to Dr David Deitz (good friend and colleague). Dr Deitz gave a trenchant and informative description of marijuana, noting that way more is not known about marijuana’s (and its included compounds’) effects on humans than we do know. Some of the effects are reduced anxiety, reduced inflammation, euphoria, appetite stimulation and others you may have experienced yourself.

Dr Deitz then reviewed the state of the science on cannabis – there is substantial evidence of benefit for the treatment of chronic pain and the treatment of nausea due to chemotherapy.  Moderate benefit for anxiety, sleep loss, and appetite/weight loss due to HIV/AIDS has been found.

Evidently there are a lot of restrictions on research into marijuana by the FDA – some seem nonsensical.  These restrictions are screwing up research, and perhaps leading to wrong conclusions.

For work comp, cannabis may be useful as an adjunct, or secondary treatment for:

  • Chronic pain
  • Anxiety
  • Spasticity related to spinal cord injuries

Couple other key points.

Opioid mortality and the use of opioids for Medicare and Medicaid patients both declined in states with legalized use of marijuana.

58% of voters support legalization of marijuana, and 70% oppose enforcement of federal laws in states that have legalized marijuana.

The net – we don’t know much about cannabis, but we do know it absolutely helps in certain conditions, and most folks want it legalized.


May
17

That’s the first top takeaway from NCCI’s Annual Issues Symposium.  Over the last 30 years the average pretax operating gain has averaged 5.5%; last year the return was more than four times higher.

 

The big news came from Kathy Antonello, NCCI’s Chief Actuary. (the bullets below are derived from different data, complete presentation is here). Note “NCCI states” does not include several large states; California, New York, Pennsylvania, Ohio, and others.

  • Claim frequency dropped precipitously – 6 percent, on top of last year’s 6.2%…over the last 20 years, frequency drops 3.7% per year (for carriers and state funds in NCCI states).  According to Antonello, “barring major unforeseen events, we do not expect this trend to change.” (I may have slightly misquoted her) Private carriers’ work comp premiums declined marginally…adding State Fund premiums still resulted in a marginal decrease.
  • WC combined ratio for private carriers improved to 89 – the lowest result in over 50 years.  That is a pretty amazing number.
  • Two big states – FL and NY – saw premium increases north of 9% (rates are available for all states)
  • Medical inflation for lost time claims increased 4 percent for funds and carriers in NCCI states.

A couple underlying stats reveal much more.

Comp premiums are driven by payroll and losses; payroll jumped 4.4 percent, while loss costs dropped by 4.2%. So, despite more pay to more workers, losses stayed flat.

Put another way, the frequency decline more than offsets increases in employment. So, the total number of claims likely declined significantly.

The result – filed premiums in the vast majority of states decreased last year, so most employers’ costs are decreasing. And, this may continue, as reserves are in very good shape, so insurers won’t have to raise rates in future years to build up reserves for past claims.

Finally, Kathy’s presentation was terrific. Great use of graphics, videos, and slides to communicate some pretty complicated and dense information. Kudos to the folks behind the scenes who developed the data, put together the graphics, and made it all understandable.

I’ll give my take on what this means next week; suffice it to say that this is:

  • great news for employers and taxpayers,
  • bad news for case management and other claims-centric businesses, and
  • going to force insurers to think very carefully about future capital investments.

There is a wealth of information in the presentation, SSDI and work comp, residual markets, BLS v WC claim rates – download it here.


May
16

Headed to NCCI

After the boys’ annual mountain bike trip – this time to Sedona AZ – its back to work.

Off to Orlando to take in NCCI’s Annual Issues Symposium; I’ll be live-blogging a few of the sessions, starting with the State of the Line Report where we’ll get a first look at last year’s work comp results, medical inflation rates, premium changes and various other key metrics.  Kathy Antonello does a bang-up job on this (supported by her able staff) so very much looking forward to it.

Bob Hartwig will follow; I’ll type as fast as I can but he’s always moving at warp speed…If I only miss half of Bob’s trenchant observations it will be a good day.

And we’ll be on top of our game for Dr David Deitz’ and NCCI’s Raji Chadarevian’s session on pain, opioids, and marijuana.

Rather than stuff your inbox with all of this at once, expect I’ll send them out over the next few days.

Beware…


May
4

Fast facts about work comp pharmacy

We’re pushing to finish CompPharma’s Annual Survey of Prescription Drug Management in Workers’ Comp next week. After cleaning up the data, we’ve got final figures.

Quick takeaway – we workers comp types are doing a MUCH better job controlling drug usage than the rest of the world  – and MUCH MUCH better controlling opioids.

Here are a few key data points:

  • Total drug spend was down almost 10 percent last year; drug costs are down 22 percent over the last six years
  • In contrast, other payers’ spend dropped 2.1%.
  • Opioid spend decreased by a third over the last two years.
  • Other payers’ opioid spend dropped by less than half that – 14.9%.

While decreases in opioid spend have been dramatic, payers are still extremely concerned about opioid consumption – especially among long-term patients.

There’s a widespread and deep concern among respondents (29 payers of all types) that we’re a long way from figuring out how to help long-term opioid users reduce/eliminate their drug consumption.

This year we dug deep into that issue, and one key takeaway is the current regulatory focus on formularies and utilization review is focusing on a problem – initial prescriptions of opioids – that, while not solved, is much better controlled.

Where payers, patients, prescribers, and PBMs need regulatory help is with chronic opioid patients. Respondents had a raft of suggestions…

  • mandatory urine drug testing done by labs not affiliated with the prescribing physician
  • prescriber documentation of improvements in pain and functionality required before continuing dosing
  • allow payers to reimburse for opioid recovery services while eliminating responsibility for non-opioid related psychological issues

What does this mean for you?

Work comp isn’t known as an innovative or progressive – yet here you are, well in front of other payers and work comp regulators.

Well done.


May
1

The Reed Group’s attack on WCRI

Reed Group‘s current attack on WCRI is unwarranted, misguided, and out of line. Several Reed employees have publicly chastised WCRI for a variety of sins ranging from poor quality research to a lack of concern about worker outcomes.

Reed’s frustration with WCRI first came to my attention in a post by Reed’s Carlos Luna a couple months back; Carlos said “I find it curious how WCRI, perhaps due to industry demand, focuses on one product (WLDI’s ODG).”

It’s not curious, Carlos.  Much of WCRI’s research is driven by regulators looking for an independent, credible, analysis of potential changes. They ask, WCRI delivers.

More recently, a Reed researcher said that methodological concerns with one of WCRI’s studies (on opioids and disability duration) call into question ALL of WCRI’s research.  In this morning’s WorkCompCentral Elaine Goodman quoted Reed Group’s Fraser Gaspar:

“Based on the substantial limitations and errors in their [WCRI’s] most recent opioid research paper…it is clear that their current review process is insufficient…[WCRI’s] information that does not meet basic research standards”

I strongly disagree.

Gaspar is claiming that WCRI should use blinded reviewers; that is, reviewers should not know that the research is coming from WCRI as that might bias their perspective. Couple of points here:

  • WCRI uses outside experts to review all of its published research; I’ve helped a couple of times and I know many others who have as well.
  • I know of NO other credible research entity involved in work comp that uses blinded reviewers. Does that mean the research by CWCI or NCCI is not credible or doesn’t meet “basic research standards?” Of course not.
  • I have strongly disagreed with WCRI in the past, and they not only listened to what I had to say, they asked me to participate in a webinar to discuss my views.

Goodman reported Reed SVP Joe Guerriero “is also concerned that WCRI’s research focuses primarily on workers’ comp costs, with little attention paid to injured worker outcomes or the possibility of cost-shifting to other payers.” [her words, not his]

Quoting Guerriero:

“looking at reduced drug costs to determine the efficacy of any program is far too narrow…” [emphasis added]

Guerriero is mis-directing here; worker outcomes and cost-shifting weren’t within the scope of the study WCRI was asked to do.  

Not to mention WCRI has done quite a bit of research on cost-shifting and case-shifting. Moreover, it is not possible for WCRI – or anyone else for that matter – to figure out if patients  no longer getting drugs via work comp were obtaining drugs via another payer.

And, WCRI has published dozens of research reports on worker outcomes.

While I understand Reed’s frustration that most regulators are focusing on ODG, the fact is for years ODG’s publisher has been a much more effective marketer than Reed. In addition, the binary nature of the ODG formulary is simple to understand and relatively easy to implement.

FWIW, I’ve long viewed ACOEM’s (affiliated with Reed) approach to guideline development and it’s formulary as more rigorous and more patient-centric than ODG’s. I still do.  I’ve been a fan of ACOEM’s clinical guidelines for years. Their methodology, diligence, and professional dedication to the right care has always impressed. Yes, it’s more work, but it’s better for patients.

But that’s beside the point.

WCRI has always been open to collaboration and conversation. I would encourage Reed to work with WCRI and not cast aspersions about WCRI’s research.

[note – I’ve long been impressed with Elaine Goodman’s reporting and pursuit of the details necessary to provide a complete picture. Kudos to Elaine for an even-handed piece]

ed note – NO REPUBLICATION OR EXCERPTING OF THIS POST IS ALLOWED WITHOUT EXPRESS WRITTEN PERMISSION FROM JOE PADUDA.

copyright 2018, Joe Paduda, all rights reserved.


Apr
30

Workers’ comp opioid usage is way down

CompPharma’s latest Survey of Prescription Drug Management in Workers’ Compensation (past reports available for download) has some very welcome news; over the last two years, opioid spend is down by one-third.

Most of that reduction is from improvements in clinical management and changes in prescribing patterns and behavior.

(I’m finishing up this year’s report draft tomorrow…)

Of the 28 respondents to this year’s Survey, 25 had double-digit decreases in annual opioid spend, and six saw drops greater than 25%.

The opioid spend reduction was a big driver of a reduction of 9.8% in total drug costs across all respondents –  the sixth decrease over the last 8 years.

Couple early takeaways:

  • A dozen respondents cited improved/upgraded/expanded clinical management programs as key drivers of the change.
  •  Big decreases in compound drug costs were also noted by several respondents, with most seeing reductions greater than 30%.
  • In response to the question “Where do prescription drug issues rank compared to other medical service issues at your organization?,” drug costs were rated as a 4.1 on a 5 point scale, (more important than other medical service issues).

This last is telling.

After dramatic improvements in opioid utilization, respondents remain quite concerned about the impact of drugs on claim closure, disability duration, and patient safety.

What does this mean for you?

Progress is great, and much remains to be done.

 

 


Apr
26

UPDATE – Mitchell will be bought by Stone Point

Stone Point has added yet another firm to its growing portfolio of workers’ comp assets; when the deal closes in a few weeks, Mitchell will join previous acquisitions Genex, AmTrust, and Sedgwick (the latter two have co-investors).

(I mis-read the press release this am – Elliott, a hedge fund with $34 billion under management is EXITING Mitchell.)

One of  – if not the – investment firm(s) with the most experience in the  work comp space, Stone Point’s been busy.  It just completed the acquisition of bill review and case management company Genex.   As I wrote in February when that deal was announced:

“I’d also expect some much bigger acquisitions. I don’t think Stone Point bought Genex to get into the case management and bill review business; these folks have bigger plans.”

Mitchell fits that definition…I’m speculating the price was well more than double Genex’.  KKR bought Mitchell for $1.1 billion a bit over 4.5 years. When Mitchell’s “book” was out about a year ago, word was KKR wanted to double their money.

According to internal sources, Genex and Mitchell will NOT be combined or integrated or even work together. They were pretty adamant about that.

Allow me just a bit of skepticism; private equity (PE) firms don’t often buy companies with similar capabilities and services and leave them alone. That’s inefficient: they own two separate entities – overhead, management, systems, staff, and all – that do the same thing. Especially when those two businesses are aligned as closely in many areas as these two are.

While Mitchell also operates the nation’s third-largest work comp pharmacy benefit manager, and provides a wealth of services to the auto claims industry, Genex’ offerings sort of “fit in” to Mitchell’s portfolio.  Genex’ utilization management, peer review, case management, and related offerings are very similar to Mitchell’s. And, Mitchell provides Genex’ bill review application.

Sources indicate there’s a lot of leverage (debt) on the Genex deal – as there is in pretty much every acquisition – so cost-saving moves and elimination of redundant functions is likely a priority.

It is certainly possibly the two companies will operate completely independently – but I’d be surprised if that lasts very long.

Couple related points.

Mitchell’s Alex Sun and his team are smart and savvy. There’s sort of  a California tech vibe at Mitchell, an impression that is in contrast to the more traditional, operational focus of Genex. There are few people in this business I like or respect more than Genex CEO Peter Madeja; he’s well-regarded and well liked by all, especially by his co-workers.  Point being, there are different cultures here, and this might be a, if not the, reason Stone Point may not want to move some pieces around.

The team that runs Stone Point’s P&C operation is extremely knowledgeable, well-respected and highly regarded for their experience and expertise in the comp industry.

Most of all, they are strategic.

They most certainly have a plan, and the Mitchell acquisition is one part – albeit a very large one – of that plan.

What does this mean for you?

More consolidation in a very mature industry.  If you haven’t figured out where you want to be and how you’re going to get there, get busy.


Joe Paduda is the principal of Health Strategy Associates

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