Paduda: How'd I Do in Predictions for 2023 (Part 2)?

Thursday, January 4, 2024 | 0

Here’s the second half of my annual predictions and how they panned out. Part 1 can be read here.

Joe Paduda

6. The growing impact of global warming will force changes in risk assessment, management and mitigation; technology adoption; and claims.

The predicted (heat injuries, wildfires, hurricane intensity, sea level rise) and unforeseen (atmospheric river-driven flooding, landslides, destruction) changes in climate and weather will lead to more and different injuries and illnesses, higher risks for firefighters and public safety workers, and unpredictable problems related to polluted stormwater runoff, water-borne disease and perhaps invasive species.

Expect revisions to both federal and state OSHA regulations, especially around heat and outside workers, along with calls for better planning to prepare for severe weather events.

False. Regulatory changes take way longer than they should. California is poised to mandate heat standards for indoor workers; the Golden State has had outdoor worker standards in place for almost two decades. Oregon instituted indoor and outdoor heat regulations in 2022, and Colorado, Minnesota and Washington also have regulations in place.

And the feds are still dillydallying, damn it.

But there were no other changes in 2023.

7. Payers and perhaps regulators will make significant efforts to address rising facility costs.

As for-profit health care systems look to pad record profits, and nonprofits seek to survive, payers will be looking for better cost-control answers than simply doing more of the same stuff they’ve been doing for the last two decades. Network discounts (NOT THE SAME AS SAVINGS) are declining as facilities wise up to most payers’ lackadaisical/ineffective attempts at employee direction and unsophisticated contracting strategies.

Smarter payers will deploy multiple payment integrity layers, both pre- and post-payment. All should demand more — much more — from their bill review vendors/technology suppliers, all of which have long refused to entertain the thought that they could do much better.

False. Complacency reigns supreme.

8. Premiums will increase, mostly late in the year.

As infrastructure, green energy, re-shoring of chip manufacturing and EV incentives ramp up in the fall, so will employment. While there’s disagreement among economists (yeah, who woulda thought??), expect big hiring in categories from archeologists and bridge builders to wireless broadband construction workers. Manufacturing, heavy construction, trades and logistics will all be hiring, as these tend to be higher frequency (more claims than average) and higher severity (claims are more severe and costly), which means higher premiums and more claims.

Oh, and mark me down for one who does not see a significant recession in our near future. I know, I’m no economist (they disagree a lot about this), but hiring is too strong, these major investments are on the horizon and inflation is coming under control, all indications that a “soft landing” is more likely than not.

True. A soft landing appears far more likely than not, and hiring remained solid in the last months of 2023. Employment in manufacturing construction jumped big last year.

9. Senate Bill 1127 — aka the CAFE Act (California Attorney Full Employment Act) — will cause heartburn and consternation among Golden State employers and taxpayers.

SB 1127 shortens the period for employers to determine the compensability of claims, a change which will lead to, among other problems, more initial denials and less time for injured workers to receive medical care while their employer researches the claim. Further, SB 1127 appears to allow for penalties of up to $50,000 for claims that are “unreasonably rejected” by the employer, but the bill doesn’t define what constitutes an unreasonable rejection and doesn’t exclude claims that are already closed.

Expect attorneys to look for the golden ticket case: one that they think will establish precedence, and pursue it like a starving person at a Vegas buffet (or cafe’).

There’s good news, too: I don’t see much else on the regulatory horizon that is cause for concern.

To be determined. Awaiting input from folks more on top of this than I am.

10. More consolidation among payers and service providers.

Despite a major drop-off in financial investors’ interest in work comp, we’ll see more consolidation as “strategics,” aka third-party administrators and service providers acquire smaller TPAs and service providers. This is a classic mature industry. Scale is key, significant growth will mostly be driven by acquiring competitors or companies in complementary or related services, and margins are in peril.

The bad news is that 2023 prices will likely be a good deal less than in the recent past. Fewer potential buyers, less interest from PE firms and a growing recognition that workers' comp is a declining business (what took these people so long to see this?!) are all contributors.

False. Deals that closed were few, indeed. Those that did close were all strategic, not financial buyers. While I got the strategic buyer thing right, I overestimated deal volume.

Enlyte bought Therapy Direct. Sedgwick tried and failed to do a recap; sources indicate valuation was a major sticking point. The giant TPA wasn’t alone, as at least two other attempted sales didn’t materialize.

Ametros sold for a ton of money, but that wasn’t a “work comp services” transaction per se.

Accuro Solutions acquired Splashlight, adding to Sccuro’s service portfolio.

The drivers noted above — fewer buyers, lower prices, less interest from PE firms — were major factors, along with interest rates.

Notably, as predicted, international M&A activity dropped by about 20%, with private equity and venture capital deals down almost twice that. And prices declined as well due to the factors listed above.

Overall score: Five true, four false, one to be determined.

Reflecting on these results, it’s clear that my optimism overtook my cynicism (and experience). Expecting regulators and work comp payers to get their acts together and do something meaningful about worker exposure to heat and widely acknowledged rising facility costs was just dumb.

Joseph Paduda is co-owner of CompPharma, a consulting firm focused on improving pharmacy programs in workers’ compensation. This column is republished with his permission from his Managed Care Matters blog.