Message from David Donn

Around 2000 through 2001, I noticed concurrent trends happening in the workers’ compensation managed care space (comprising products like medical bill review, hospital and provider PPO, UR and nurse and medical case management) – there was tremendous growth in the number of bill review companies to well over 50 and a tripling of bill review and PPO software lease companies to almost 20 (they lease their software to insurance companies and TPAs primarily). There was also an increasing complexity of cost containment services and options available to the employers. At the same time, the available time and resources at the purchasing decision level - Risk Managers and executives at all levels within workers compensation - was being reduced through budget cutbacks, layoffs and resource shifting. This was creating a volatile situation for the employer because they knew they needed to have and monitor these cost containment services but didn’t have the time, knowledge in some cases and resources to do it.  The clients became largely reliant on what the managed care service providers including the TPAs supplying these services were saying and doing and trust became a primary policing system. Monitoring and oversight was being done without comprehensive comparative pricing and performance data, inside knowledge, and few “tools” at their disposal to sharpen performance and fees.

It’s interesting that these are the same conditions that exist today with the exception of the number of service providers that has shrunk somewhat because of acquisitions and mergers. The space however is still very crowded.

While at EOS (the then workers compensation division of Health Net and now merged into Coventry) I regularly met with CFOs, Risk Managers, Vice President, Managers and Directors of Workers’ Comp) that shared their program’s design, pricing and performance arrangements with me.

The managed care is a business with as many moving parts as a car engine and with the exception of the true hobbyist who likes to fix his or her own, most people rely on their mechanics to be dealt with fairly and honestly.

Prior to entering the workers comp managed care business in 1992, I was a stock analyst and bond trader. In that space there are investment management consultants, advisors to CFO type people on matters of investment choice, how much should be allocated to stocks versus bonds or cash, US versus foreign and pricing and performance techniques. Their advice was objective, they took no money from the money managers they oversaw and their role was to provide objective, unbiased advice to their clients to enable them to maximize their corporate and personal financial goals and not do just average. They took no comfort in being average. This was the business model that I wanted to bring to the workers’ compensation managed care space. Materially improve the financial and operational performance of these programs and tangibly prove results – no soft dollar junk, real hard spendable dollar improvements that would make a CFO type person very pleased.

This is a particularly relevant comparison because work comp managed care companies are managing your money. They are managing your medical and non-medical dollars and there is a lot of money at stake on the cost and performance side. You don’t have to bid your program to get improvements, you can restructure too and both will have tangible impact.