Insight, analysis & opinion from Joe Paduda

Aug
14

Are health insurers profiting while providers suffer?

Well, yes – but it’s not intentional.

Most medical practices have seen a sharp drop in patient visits – and revenues – due to patient concern over COVID19 exposure. Hospitals have also suffered, as have ancillary providers, and many are on the brink of financial collapse.

Rural and safety-net providers are especially vulnerable, as many were on very shaky ground before COVID19.

Primary care providers are in the worst shape, as their patients often don’t have serious health needs that need to be addressed immediately. And primary care providers have the lowest pay as well. Research indicates that PCPs will lose about $15 billion this year.

Meanwhile, health insurers’ finances have never been better.

The connection is clear – insured people are not getting care, so insurers don’t have to pay their bills.

For months, healthcare providers have called on insurers to help them out by prepaying for care, paying billed charges, authorizing all treatment requests, providing loans, or otherwise funding providers. Much of this is nonsensical; authorizing all treatment requests would certainly lead to widespread abuse, over-treatment, and poor outcomes. Paying billed charges is nuts; NO ONE pays billed charges, which can be 10-30 times higher than average reimbursement.

What’s clear is COVID has likely created a significant one-time profit bump for healthplans, as a lot of foregone care will not be “made up” as practices gradually return to normal. While insurers should carefully assess their reserves, it is highly likely their “excess profits” won’t all be needed to pay for future COVID19 costs.

So, what to do?

Prepaying care may be a viable option. Healthplans would mine their data to determine what they paid a practice in the recent past, figure out how many members are using that practice, and sign a contract with the practice to ensure the plan’s interests are protected.

That’s just a short-term solution to a problem with roots that far predate the pandemic.

Reality is primary care is still under-valued, fee for service creates huge administrative friction and incentivizes over-treatment, and health care prices are unsustainably high.

What does this mean for you?

COVID will accelerate systemic changes that are desperately needed. There will be lots of pain for some stakeholders – primarily specialists and facilities.


Aug
12

Claim counts, COVID, and (premature) conclusions

We know a LOT about how COVID and the COVID economy are affecting workers’ comp – and that’s what Mark Priven and I will dive into next week as we discuss “Pandemic, Premiums and Profits: Is It the Sky That’s Falling … or the Floor?” .

The free webinar (register here) is happening August 20 at 10 am Pacific, 1 pm Eastern. (attendance is limited, so sign up now to make sure you get a spot).

Mark is Vice President and Principal of Bickmore Actuarial, a highly regarded Actuary, and a very insightful analyst of all things workers’ comp. I’m honored to be on the virtual dais with Mark.

What triggered our decision to work together was a shared concern that there’s been way too much discussion about the potential, theoretical, possible, hypothetical costs of COVID itself – and (with one major exception) no discussion, analysis, projections, or discussion of the huge drop in workers’ comp claims – and the effects of that drop..

Frankly, prognostications about the damage COVID could do to profits just don’t stand up to scrutiny.  How an industry with a combined ratio of 85 and investment income of 11% will go from a 26% profit margin to a loss when COVID claims are not that common and all evidence indicates they aren’t that expensive is…puzzling.

One can – and some do – argue that we don’t have data on claim counts yet – and therefore it’s premature to discuss the impact.

But you can’t have it both ways – we know little about COVID, so making assumptions or statements about how the disease will affect workers’ comp is equally presumptuous.

Fact is we are fast approaching budget season for employers, insurers, TPAs, and service companies – and it is incumbent on those with data and expertise to share that information.

So, sign up, send us your questions, and Mark and I will do our best.

What does this mean for you?

Sign up here.


Aug
10

COVID’s fallout for workers comp – the picture gets clearer

70,000+ small businesses have permanently closed their doors.

The demise of big retailers has accelerated, with JCPenney, Men’s Wearhouse, and Brooks Brothers all entering bankruptcy.

Prom wear companies were also hit hard, with Occasion Brands also a victim.

The airline industry is mired in a deep slump, with passenger volumes down to a quarter of pre-COVID levels.

That’s driven by both far fewer flights, and far fewer passengers on each plane.

Air travel reductions affect other businesses…

  • taxi ridership and rideshare services
  • on-airport concessions, food, retail, and services (these account for 2/5ths of airport revenue)
  • hotel and restaurant activity is lower with far fewer business travelers and vacationers
  • airplane maintenance requirements are greatly reduced – along with the need for mechanics, spare parts, and consumables (fuel, lubricants, etc)
  • airplane orders are way down and many have been cancelled, impacting the airplane industry  – and the thousands of suppliers dependent on it.
    • In June, Boeing had a single order for one jet, while losing 183 orders due to cancellations or likely cancellations.

And energy – in a slump to begin the year, got crushed with fallout continuing.

Its not all bad news; in general larger companies are doing better – if they aren’t in retail, energy, air travel or tourism. Of course exceptions abound; WalMart is doing just fine, thank you as are big box home improvement stores.

For workers comp, the implications are significant;

  • lower premiums due to lower payroll
  • tougher to return injured employees to work due to cutbacks
  • fewer claims require fewer services
  • insurers focused on energy, Main Street businesses and retail will be hit hardest

 

 


Aug
5

COVID is crushing work comp claim counts.

Thank you, CWCI. Due to it’s diligence and foresight, we now know:

  • through June 30 there were 14,487 COVID claims reported to California’s DWC;
  • this amounts to 6.3% of all confirmed COVID cases (data from JHU);
  • the vast majority of COVID claims reported have been accepted;
  • and perhaps the most important data point…

Total claims (COVID and non-COVID) dropped 28.8% from the first half of 2019 to the first half of 2020. (note this is corrected from my original 36.4%)

Kudos to the fine folk at CWCI; they have produced the first data-based report on all things COVID. It is quite user-friendly, highly credible, and interactive, allowing users to analyze California-specific on COVID and non-COVID claims.  The tool enables comparison by industry, body part, nature and cause of injury, class code and region for claims (both filed claims and accepted claims) with dates of injury from 1/1/2020 to 6/30/2020.

The tool also allows users to compare actual claim counts for the same time period in 2019 to current and projected counts for 2020.

Claim counts, dear readers, is WAAAAAY more important than the rather minor financial impact COVID claims have had on workers’ comp. As I’ve reported previously, work comp COVID claims to date are not expensive; despite the prognostications of others, it is unlikely indeed COVID’s costs will have any material impact on work comp financials.

What WILL have an impact – and a very positive one – is the massive drop in total claim counts we’ve seen so far this year.

grey – 2019; green – 2020

Yeah, I know, this is California-specific, and only for half a year, and not fully developed, and all that stuff. I also know a 36% drop in total claim counts is the biggest thing to hit the workers’ comp industry in…forever. 

What does this mean to you?

Everything.


Aug
4

Mitchell’s Coventry acquisition – implications abound

The implications of Mitchell’s acquisition of Coventry’s workers’ comp business are broad, from insight into the future of M&A in workers’ comp services to impact on competitors. (press release is here) Today we’ll dive into a few of the top-line implications.

M&A

The $850 million price was likely driven largely by the network’s profits and sustained position as the work comp PPO industry leader… the PPO is by far the biggest revenue and margin generator for CWC (Coventry Workers’ Comp). The transaction also represents yet another step in the rapid consolidation in the work comp services industry.

Mitchell now owns the number 2 bill review application (by customer base), the largest medical management entity (Genex + Coventry), the largest case management business (a mixed blessing these days), and the dominant network. If it holds onto both PBMs, it will gain the number three position in that sector.

As I noted yesterday, Mitchell is likely off the major acquisition field for a good while. It has to fix its PBM business, integrate Coventry, develop and implement a customer outreach that ideally will result in more stuff being bought by more customers, ensure Coventry’s distributors (including bill review rivals Medata and Conduent) continue to offer Coventry’s network, all while dealing with COVID19’s impact on work comp and auto claims.

The other big players left in this business are OptumWC (network, PBM, ancillary services), Paradigm (cat case services and management, case management, some network and ancillary businesses), and One Call. The next tier includes bill review/document management company Conduent; physical medicine expert MedRisk and myMatrixx (number 2 PBM, both are HSA consulting clients).

I don’t see any of these entities scrambling to react to the deal; they’ve known about it for months, and outside of Optum and Conduent any impact is tangential.

Networks

Coventry’s PPO is the industry leader – and has been for decades. It has the most market share, is rated highest by customers, and its policy of demanding top billing in any state (primary network status) remains secure. Expect Genex to invest heavily in the PPO. This will secure its leadership position and hold off competition from newer entrants – primarily Optum.

Bill review

The market’s perception of Coventry’s bill review function indicates room for improvement. The chart below shows how BR buyers rated the top bill review entities’ customer service in a survey I conducted two years ago; service is THE key metric. [shoot me a comment if you want a copy of the survey, the comment won’t be published]

As I noted yesterday Conduent handles much of Coventry’s bill review; How Mitchell will address this is an interesting question.

If you’ve got additional questions, leave them in the comments section and I’ll do my best to get answers posted.

What does this mean for you?

Smart acquisition at a very good price makes Mitchell the leading entity in workers’ comp services. I wouldn’t worry too much about Mitchell gaining too much market power.


Aug
3

It’s done; Mitchell owns Coventry work comp

After almost 5 months of negotiations and COVID19-related delays, Mitchell International owns Coventry Workers’ Comp.

The price was around $875 million, with most of the value based on Coventry’s work comp PPO. The network is a cash machine, has been the industry leader since it started the work comp PPO business, and so far is holding off a new competitor – Optum – without too much difficulty. Press release is here.

Sources indicate Coventry will report up thru Genex, with current president and CEO Art Lynch staying on in that role.

Long time readers will recall Aetna tried to sell Coventry six years ago, an effort that failed due to what can only be described as ignorance on the part of Aetna; whoever was responsible for the deal didn’t understand that network contracts were the linchpin.

What’s next?

Way back in March I dug into this in detail, here’s an edited excerpt:

Now that Coventry will be owned by a workers’ comp entity run by people who know workers’ comp, I’d expect a pretty significant investment into the core asset – the PPO.

That will undoubtedly include building and staffing a network contracting and management capability – from scratch. In the interim, one can assume M/G will use Aetna’s technology and perhaps contracting/credentialing resources until it has completed building a network management capability. M/G will do everything possible to build that network management capability quickly and well.

Quick takes

Mitchell is likely out of the acquisition game for some time. Digesting Coventry while battling thru a no-end-in-sight COVID crisis is going to consume management’s time and focus.

If anything, the company might sell it’s PBM business, a move that would free up management time that’s been focused on a business that has been rather challenged – and generate cash to pay down older and quite expensive debt.

I know, combining Coventry’s PBM – First Script – with Mitchell Pharmacy Solutions would create a third significant player to compete with Optum and myMatrixx. But…

  • First Script has suffered from chronic under-investment,
  • Express Scripts (myMatrixx’ parent company) provides First Script’s pharmacy network,
  • the work comp PBM business is brutally competitive,
  • selling the PBM businesses would free up cash to help lower debt, and
  • management time is needed to
    • integrate the rest of Coventry’s assets,
    • strengthen the network,
    • figure out what to do about Coventry’s bill review operation (most is handled by Mitchell competitor Conduent) (myMatrixx is an HSA consulting client), and
    • manage thru COVID.

It is possible Mitchell will hold onto the PBM, but there isn’t a compelling business case. And no, the “bill review and PBM synergy” argument isn’t it.

Bill review

Coventry’s bill review function runs mostly on Conduent’s platform. This will (very) likely change – the question is when.

Mitchell will want to cut costs and increase cash flow by switching customers over to a Mitchell platform. That is no simple task; systems connections and data feeds are business-critical; state reporting; integration with UR, claims, and financial systems as well as external vendors and other entities are notoriously complex and will take quite a while to build out.

This:

  • in an industry that chronically under-invests in IT, and
  • at a time when insurers and TPAs are staring a in the face of a 20% reduction in claims volume and accompanying drop in premiums.

What does this mean for you?

Consolidation continues, Coventry’s network should get better.

Tomorrow – a deeper dive into implications.


Jul
31

COVID update – vaccines, denier death, and prognostications

Lots of news COVID-related this week…

Three vaccines seem to be the most promising; all are entering Phase 3 trials with tens of thousands of test subjects involved.  Moderna and Pfizer look to be the furthest along, with AstraZenica/Oxford University’s vaccine also showing some promise.

Before we pop the champagne, remember…

  • trials are just that – they are used to assess safety, effectiveness (how much protection the vaccine provides) durability (how long the vaccine provides immunity)
  • the history of vaccine development is not exactly encouraging, and
  • once a vaccine is proven, we’ll need tens of millions of needles, syringes, vials, and a delivery system to ensure it all gets to the people who need it most.

There’s another problem with these trials – too few people of color are involved – far too few. That’s really troubling, as Black and Latinx people are suffering much more than Caucasians.

So, keep doing smart stuff until you get vaccinated. Fortunately, more of us are now accepting that masks make a big difference.

The death of former GOP Presidential candidate Herman Cain from coronavirus and the infection of Texas Rep. Louie Gohmert (R) may be changing minds; these two gentlemen dismissed the news about COVID19 and refused to wear masks.

Mr Cain is wearing the red tag.

Meanwhile, I’ve been engaging with NCCI and experts from the Insurance Information Institute in an effort to better understand the financial impact of COVID on workers’ comp. Stay tuned for more; key takeaway so far is that NCCI and III are focused on potential costs of COVID itself; they have not done any work assessing the impact of the sharp decline in claims.

There’s also a lot of talk about how bad COVID may be for profitability, a position I’m still struggling with.

What does this mean for you?

Wear a mask. 


Jul
24

Friday catch-up

COVID and client work has kept me way too busy this week – hope to be back to more frequent posting soon. Meanwhile, here’s what I missed…

Workers’ comp drug trends

myMatrixx released its annual Drug Trends Report. Key findings include:

  • 6.1% drop in drug spend for myMatrixx clients
  • 10.7% drop in opioid spend
  • over five years, clients’ opioid spend dropped 45%
  • Lyrica’s brand patent expired; within 4 weeks over 90% of patients had been switched to a less-costly generic

(myMatrixx is an HSA consulting client)

Workers’ comp pharmacy regulations – WCRI’s national inventory

Is available for purchase here. This is a must-have for any and all workers’ comp payers. Info on medical marijuana, opioid prescribing limits, drug testing, and pricing is all there.

Presumption

Pretty solid summary of presumption changes provided by the Premium Reduction blog; some good reporting on numbers of claims in FL, CO and CA as well.

Medical pricing lookup

Medata has a pretty cool medical service pricing lookup tool that’s useful for consumers, adjusters, and employers. It includes pricing for group health, auto, and workers’ comp.

COVID’s impact

Thanks to Risk & Insurance’s Courtney DuChene for her reporting on our survey of COVID”s impact on workers’ comp.

Finally, this…

And, one day, perhaps this…


Jul
20

What COVID really costs.

Last week Fair Health released an analysis of charges and payments for COVID-related medical care. Here are the key findings based on data from January through May.

  • Median estimated allowed payment for hospital care was $24,012 for people 51-60 years old
  • HOWEVER – costs varied significantly around the country, especially in the western US
  • 30% of people diagnosed with COVID19 were 51-60
  • However, the average age appears to be dropping by about 15 years
  • 54% of those diagnosed were male, 46% female
  • About 6% of diagnoses were made via telehealth
  • Patients’ past medical conditions weigh heavily on outcomes; the most common comorbidity involved kidney disease.

What does this mean for you?

  1. The median cost of hospital care for COVID patients isn’t that much.
  2. Patients with significant comorbidities will suffer more, require more treatment, and thus incur more costs.
  3. Another study found almost all patients hospitalized for COVID had comorbidities.
  4. While “only” one in 20 diagnoses were made via a telehealth visit, it is highly likely that percentage will (or already has) increase(d).
  5. Remember – this is based on data through the end of May; you can be sure things have evolved since then. For example, a best guess is 10-20% of those diagnosed with COVID end up hospitalized – but that is a guess, and does not account for undiagnosed cases (which may be several times higher than those diagnosed).

 


Jul
17

COVID Quick Hits Vol. 2

Lots of COVID news this week – here’s the latest.

The bad.

One out of every hundred Americans has been infected with COVID19.

Almost one out of every 25 people infected have died.

People of color are far worse off than white folks.

This racial disparity is pretty much everywhere, in every state, although it is particularly bad in Kansas where Black people account for 6% of the population and 22% of deaths; Michigan – 14% of the population, 41% of deaths; and Missouri – 12% and 36%.

Testing here in the US is still waaaaay behind where it should be. Results often take so long they are all but useless.

Hydroxychloroquine is useless. Or worse.

Despite being touted by the President and others who should have known better, more and more research is proving the drug:

Fortunately the FDA revoked its emergency use authorization for the drug; unfortunately idiots with no science background continue to tout it.

I have written extensively about this over the last four months; here’s

The good

We DO know masks really make a difference.

Fast, cheap, and accurate tests are coming – and they can’t get here soon enough. The paper-strip tests will cost less than $5 and give instant results. While that’s still costly, it is a lot less expensive than the current lab-based tests.

Therapeutic medications appear to be helping treat folks who are infected.

Monoclonal antibodies (taken from the blood of those already infected and maybe from mice) appear to help prevent the disease and treat those who get infected.

A study published last week shows anti-viral drug remdesivir was associated with “improved recovery and a 62 percent reduced risk for death compared with standard care.”

Black people did even better as did those not on a ventilator.

The unknown

We do NOT know if or when a vaccine will be developed and produced in sufficient quantity to inoculate enough of us.

If you’re buying into the White House’s happy talk about a vaccine, take a lesson from the Administration’s early cheerleading for hydroxychloroquine – they were completely wrong. Wait for the science, and ignore the politicians.

What does this mean for you?

Science.  It’s all about the science. 

 

 


Joe Paduda is the principal of Health Strategy Associates

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