Tag Archives: joseph paduda

Drones Reducing Accidents on Job

One of the most dangerous jobs in America is power-line maintenance. More than 330 people were killed last year due to falls and electrocution while working on power lines, and thousands more were injured. Now one energy company is employing sophisticated drones to monitor power lines, allowing workers to trade the sometimes-scary task of climbing way up a swaying tower in possibly lousy weather to check out a junction for a ground-based drone control and monitoring job.

According to an AES exec: “We find that using drones, we can reduce the number of hazardous hours that it takes to do certain types of maintenance. And we can also enhance the efficiency of the business.”

And AES is not just focused on aerial drones to reduce occupational risks. It recently announced a program seeking unmanned methods of evaluating energy production and transmission equipment. The risk here is intense heat; when something goes awry, it often takes considerable time for the site to cool down enough for a human to enter and figure out what’s happened. AES is looking for ways to use “unmanned technology” to get in quickly, assess the problem and fix it.

See also: What Is the Future for Drones?  

Measure is the company working with AES; Measure is deep into multiple ways to use drones in heavy industry. For example:

  • shipboard workers using drones to check on container stability, possible fuel leaks, wiring and hoses
  • firefighters using drones’ heat-mapping capabilities to identify hotspots, vulnerable areas and trapped people
  • tower workers using drones to keep nesting birds at bay

What does this mean for you?

Fewer accidents, lower risks for workers, reduced workers’ comp premiums. 

And this is just the start.

What Is the Business of Workers’ Comp?

At the risk of alienating most people within the workers’ comp world, here’s how things look from my desk:

Most workers’ comp executives – C-suite residents included – do not understand the business they are in. They think they are in the insurance business – and they are not. They are in the medical and disability management business, with medical listed first in order of priority.

That statement is bound to lead more than a few readers to conclude I’m the one who doesn’t know what I’m doing. For those willing to hear me out, press on – for the rest, see you in bankruptcy court.

Twenty-five years ago, the health insurance business was dominated by indemnity insurers and Blues plans; big insurers like Aetna, Travelers, Great West Life, Met Life and Connecticut General and smaller ones including Liberty Life, Home Life, Jefferson Pilot, Time and UnionMutual. Where are those indemnity insurers today?

With the exception of Aetna, none is in the business; the only reason Aetna survived is it took over USHealthcare, or, more accurately, USHealthcare took over Aetna. The Blues that became HMO-driven flourished, as did the then-tiny HMOs – Kaiser, UnitedHealthcare, Coventry. Why were these provider-centric models successful while the insurers were not? Simple: The health plans understood they were in the business of providing affordable medical care to members, while insurers thought they were in the business of protecting insureds from the financial consequences of ill health.

The parallels between the old indemnity insurers and most of today’s workers’ comp insurers are frightening. Senior management misunderstands their core deliverable; they think it is providing financial protection from industrial accidents, when in reality it is preventing losses and delivering quality medical care designed to return injured workers to maximum function.

That lack of understanding is no surprise, as most of the senior folks in top positions grew up in an industry where medical was a small piece of the claims dollar. Medical costs were considered a line item on a claim file or number on a loss run, and not “manageable” – not driven by process, outcomes, quality.

Think I’m wrong?

Then why is the industry focused almost entirely on buying medical care through huge discount-based networks populated by every doc capable of fogging a mirror (and some who can’t)? Even with those huge networks, why is network penetration barely above 60% nationally? Why has adoption of outcome-based networks been a dismal failure? Why do so few workers’ comp payers employ expert medical directors, and, among those who do, why don’t those payers give those medical directors real authority? Why do non-medical people approve drugs, hospitalizations, surgeries, often overriding medical experts who know more and better?

Because senior management does not understand that success in their business is based on delivering high-quality medical care to injured workers.

At some point, some smart investor is going to figure this out, buy a book of business and a great third-party administrator (TPA) for several hundred million dollars, install management who understand this business is medically driven and proceed to make a very healthy profit. Alas, the current execs who don’t get it will be retired long before their companies crater, leaving their mess behind for someone else to clean up.

workers' comp

Workers’ Comp: Where the Smart Money Is…

What’s with all the investor interest in workers’ comp services? There are several dozen private equity (PE) firms looking hard at the workers’ comp services business today, with many pursuing acquisitions of companies large and small. While their approaches, priorities and goals may differ slightly, there are several reasons why their attention will likely persist for some time.

First, there are a lot more investment firms out there these days than five or 10 years ago, with a lot more capital to invest. That means lots of smart people with big bank accounts are looking to park millions of dollars, which means there’s a lot of competition for attractive companies.

Second, some comp services companies have gotten pretty big, with earnings in the tens of millions of dollars and revenues north of $200 million. Finding potential targets, conducting due diligence and going through the deal process takes about the same amount of time and staff if it is a $50 million or $350 million deal. Obviously, PE firms would rather do a couple or three large deals than a bunch of smaller ones as it’s a lot less work on the front end, and a lot less to manage and oversee after the deal is done. And PE firms just seem to like companies with more revenue.

Third, what used to be considered a problem — the regulatory risk associated with a workers’ comp company — is now seen as a strength when compared to a non-work comp healthcare firm. Investors see the 51 regulatory bodies affecting workers’ comp as creating far less risk than the single regulator driving Medicare, Medicaid and most health insurance programs. Investors don’t know what’s going to come out of CMS as reform is implemented, so PE firms are hedging their bets by going where, in a worst-case scenario, they’re going to get hurt in one or two big states.

Fourth, there are a lot of inefficiencies, stodgy business practices and just plain poorly run sectors of the workers’ comp business. PE firms make a lot of money by stripping out inefficiencies, delivering better performance, streamlining workflows and processes, removing cost and delivering more value. Anyone who’s spent any time at all in work comp knows that there are a plethora of opportunities out there to do all of these.

Bill processing, analytically driven medical management, intelligent utilization review, provider clinics, complex case services, IMEs/peer review and chronic pain management and addiction services are just a few sectors where there’s a ton of opportunity.

Interestingly, no PE firm has yet taken advantage of the biggest opportunity in workers’ comp. That opportunity is to buy a comp carrier/TPA, rationalize the claims and medical management process, write workers’ comp insurance and make huge profits by controlling medical costs and delivering much better outcomes. The investment executives I’ve spoken with about this seem to be afraid of the risk; what if they do it wrong, or get a bunch of bad claims, or whatever?

To which I respond: You can’t do it any worse than many of the current comp carriers, so what are you waiting for?

Predictions for Work Comp in 2015

Once again, I’ll head out on a limb with saw firmly in hand…

1.  Aetna will NOT be able to sell the Coventry workers’ comp services (CWCS) division.  I’ll double down on last year’s prediction: Even if the giant health plan wants to dump workers’ comp, the network – which is where all the profit is – isn’t sellable. The rest of the operation isn’t worth much; the bill review business continues to deteriorate (and CWCS is looking for a replacement bill-review application), competitors are picking off key staff and customers continue to switch out services and network states.

2.  Workers’ comp premiums will grow nicely, driven by continued improvement in employment and gradually increasing wages coupled with increases in premium rates in key states (we’re talking about you, California).

3.  Additional research will be published showing just how costly, ill-advised and expensive physician dispensing of drugs to workers’ comp patients is. Following on the excellent work done by CWCI and Accident Fund/Johns Hopkins, we can expect to learn more about the damage done to patients, employers, insurers and taxpayers by docs looking to Hoover dollars out of employers’ pocketbooks.

4.  Expect more mergers and acquisitions; there will be several $250 million-plus transactions in the workers’ comp services space, with more deals won by private equity firms. Of late, most transactions have been “strategics,” where one company buys another; the financials of these have been such that private equity firms couldn’t match the prices paid. I’d expect that will change somewhat in 2015 as  “platform” companies come on the market.

5.  A bill renewing TRIA will be passed; the new GOP majorities want to show they can “govern,” and this has bipartisan support.

6.  Liberty Mutual will continue to de-emphasize workers’ comp. The company’s continued focus on personal lines and property and liability coverage stands in stark contrast to the changes in workers’ comp. The sale of Summit, management shifts and the financial structuring of legacy work comp claims portend more change to come. Recent financial results show the wisdom of this strategy.

7.  After a pretty busy 2014, regulators will be even more active on the medical management front. Workers’ comp regulators in several more states will adopt drug formularies or allow payers to more tightly restrict the use of Scheduled drugs via evidence-based medical guidelines and utilization review (UR). While the former is easy, the latter is better, as it enables payers to more precisely focus their clinical management on the individual patient. Expect more restrictions on physician dispensing and compounding, increased adoption of medical guidelines and UR, along with incremental changes in several key states (California, we hope) to “fix” past reform efforts.

8. There will be at least two new workers’ comp medical management companies with significant mindshare by the end of 2015. These firms, pretty much unknown today, are going to be broadly known among decision-makers within the year. While they will not generate much revenue this year, they will be attracting a lot of attention.

9. Outcomes-based networks will continue to produce much heat and little real activity. After predicting for years that small, expert-physician networks will gain significant share, I’m throwing in the virtual towel. There’s just too much money being made by managed care firms, insurers and third-party administrators (TPAs) on today’s percentage-of-savings, huge generalist network/bill review business model. Yes, there will be press releases and articles and speeches; no, there won’t be more than a very few real implementations.

10.  Medical marijuana will be a non-event. Amid all the discussion of medical marijuana among workers’ comp professionals, there are very few (as in no) documented instances of prescribing/dispensing of marijuana for comp claimants. Yes, there will likely be a few breathless reports about specific claims, but just a few. And, yes, there may also be a few instances of individuals under the influence of medical marijuana incurring workers’ comp claims, but these will be few indeed.

There you have it – here’s hoping I’m more prescient this year than I was last.

This article first appeared on Managed Care Matters on Jan. 5, 2014.