Title: Senior Vice President of Strategic Development, CompPartners
Resume: Prior to his involvement with CompPartners, Swan worked as a national account representative with Travelers’ Insurance.
Schools: Swan earned a bachelor of arts in music from Pepperdine University.
Swan, one of four founding members of CompPartners, has been a key player in the development and advancement of medical provider networks (MPNs) and health care organizations (HCOs) in California's workers' comp system. Swan was also active in efforts to reform the system that were spearheaded by the California Coalition on Workers' Compensation.
What are the top three issues in California workers’ comp today?
I would say permanent disability and pharmacy are my clear top two. Pharmacy is an area that's really hard to manage and we haven't managed the drivers. Pharmacy makes up 20% of medical costs. If a person is truly disabled they need more medicine and Medicare requirements take on a much more significant role than ever. Ten years ago pharmacy was 5-6% of medical costs. There is an average of three medicines per claim and they average about $100 [per medicine.] It hasn't been managed great. That's why I think pharmacy is a big issue. As for permanent disability, we have a real disconnect between what we have in statutes and the actual permanent disability benefits people are receiving. There are legal decisions affecting that. The tune of SB 899 was to give less permanent disability on the lower side of the injury scale and more permanent disability on the higher side and reduced permanent disability in the middle. What we got was no permanent disability on the lower, high permanent disability on the high side, and, overall, a little higher in the middle. A buddy of mine with a really nice medical provider network found that doctors aren't filing accurate final permanent disability reports… they aren't fitting with AMA guidelines. Everybody has a story like that where it hasn't worked out well: either those who deserve permanent disability benefits aren't getting them or individuals who are receiving them don't deserve them.
Are we headed for a hard market, and if so, when will it come? How long should we expect it to last? What are the repercussions?
Yes, we’re headed for a hard market. Costs in medical and costs in permanent disability are sure to go up. We’re going to lose the governor and unless the employer community can reach across the aisle to the labor community and come up with good solutions, we’re going to have some really bad legislation in the near future. What you’re experiencing is people feeling pressure, spending money in utilization review: They’re spending too much there. Medical provider networks aren’t working very well because doctors with less-than-stellar outcomes have infiltrated and gotten themselves into some medical provider networks and so it’s really hard to get the savings that we hope for from medical provider networks. With Medicare set-asides… the costs of claims will go up. Carriers can’t address these problems statutorily. People will go settle claims and what should be settled for $55,000 come back as $155,000 settlements. We need to change expectations for closing claims.
Are medical provider networks a help or a hindrance? How should they be improved?
They don’t take away, and they don’t really add. If they want to do something spectacular, they would go back to health care organization requirements and make everyone go through that process and deliver a complete product. If they just allowed APOs to have lifetime clients … that would be really great for the system. If you’re a carrier you have to have a broad enough network to cover all possible takes, whereas, if you’re a self-insured employer, you can build a medical provider network around your job site. It’s still hard; they still have challenges with their medical provider networks even if they really like their medical provider network. The people that put together Southern California Edison’s network, they built a network to really meet the needs of their employees. They did a really good job of getting the right injured people to the right physician, but even they still have leakage. [Some injured workers] still get put into random hospitals every once in a while and there are challenges in delivering the product. Theresa Muir really designed a medical delivery program tailored to the types of claims they were going to have. It’s more difficult for carriers though.
How should utilization review be improved?
Utilization review is a tough thing. I see a lot of companies look for ways to do less utilization review and be more selective with utilization review, but I think that the complexity of utilization review makes that hard to do. Of all the different programs we rolled out in 2008 and 2009, utilization review was the most important in lowering medical costs and getting treatment to injured workers. We had problems with medical treatments before that were detrimental to people’s health. Utilization review has given us the ability to create a scientific baseline. For most companies this is the best way to go. There are some companies who haven’t done that well. There are some people who haven’t done well with how they ask for certain things from companies and medical carriers. Some people don’t have time to interface with physicians to come up with modified treatments. There may be a better way to do this with better communications. Retroactive utilization review on a quarterly basis to determine membership in a medical provider network would work well with self-insured, but not with others. Most of the kinks are worked out in UR. [We could improve] if we had doctor-to-doctor conferencing to work out treatment plans for the best outcome of the employee. Where we’re at now is certainly really, really good—better than other states.
What needs to be done to improve return-to-work?
That depends on whom you’re talking about. If you’re talking about a self-insured employer, you can modify jobs to put people in. It’s tougher for small employers. The 15% up or down of permanent disability has proven absolutely un-administer-able. Nobody has gotten that right and no one has the funds for it. It was a nice try but it doesn’t work. I don’t know… it really comes from the employer and the employee. That’s kind of a personal issue. We really need to educate everybody that the longer you’re off work you increase your chances of being permanently disabled and being permanently injured. Even if you don’t want to go back or [as an employer] bring someone back, that needs to be put aside for the moment and the person needs to be brought back for their health. One of the things we can do, if we take some of our health and wellness initiatives, instead of keeping that in the group health area, if we could roll that into pre- and post-injury methodology. We could help people with the recoveries they need. Times are tough in the workplace, so that is making this harder. Do you keep limping workers around? [It’s a tough question right now.]
What do you see, other than medical, as the next big cost driver?
Drugs can take away pain, but they can also disable. If we don’t create a culture, a wellness culture, that wants to be not only not in pain but also healthy, we need to find a way to be healthy and not on drugs. Surgery and surgery related costs are a big driver but the long-term driver is drugs. We’ve got to find a way to treat people and get them well and get them off drugs. That’s a hard thing to do. Pharmacy regimes and pain management are important in getting people to function without pain, but they can create disability of a different nature.
Is it realistic to deal for more cost-cutting reforms in exchange for increasing PD benefits?
I think that we can all agree that at the higher levels of permanent disability benefits we need a better compensation model. We need to address that. The problem in our state is that so many little things become permanent disability issues. As people get older, they fall apart. I can’t blame my boss. On some of the smaller issues the permanent disability is more than adequate. Although injuries come out at work a big part is age. We can all agree that a better compensation model is warranted for the truly disabled. People who are abusing the system, getting benefits when it’s not a true disability, [need to be cut] out. Most payers and self-insured clients [support] benefits for real cases and that we may not have a model for that yet. I don’t know where we can cut out to pay for that. That’s kind of in the permanent disability mist. We could take from those who don’t really deserve it and attribute those dollars to those who deserve them and we’d be in a better spot. The doctors that work for me, because we’re not a payer, they want the best medical outcome. I don’t know if you could cut medical services. We could definitely get people off of drugs to reduce disability in some cases. Is there a better way?
What role, if any, do you see workers’ comp playing in the Obama Administration’s health care debate?
If you look at Medicare side and the legislation passed a couple of years ago that requires all comp and liability carriers to report claims that line up with Medicare. You’re looking at a way that he’s planning to finance that. That’s going to drive the cost of workers’ comp up. Instead of being able to settle a claim between you and a claimant right away, costs could increase to take care of Medicare’s interest. That’s the only tie-in I really see. We’re not headed towards a dramatic change.
What is the effect of more than $1 billion in payroll being absorbed by the self-insured groups?
Self-insured groups are an area that when things are rolling well, they’re great. The problem with self-insured groups is that the only reason you go into a group is when you would be better off financially not being completely insured. When things get tough financially though, in every state, these types of programs can have problems having the adequate reserves set aside. They go into self-insured groups to reduce their costs against something that might happen in the future. If a few people in a down market have problems it gets tricky to make sure you have adequate reserves. The people managing them did a good job initially making sure the capital was adequate. I don’t know how that holds together in an economic downturn.
Are loss adjustment expenses leveling out or are they still climbing? What is the cause?
People are actually reducing loss-adjustment expenses because they want to and I don’t know if that’s true or not. If you can invest a dollar and get one back, you’ll do that every time. I don’t know if there’s a magic bullet yet. It’s always tricky when you have a downturn in the marketplace. Everyone’s looking for ways to save a nickel, but where do you save a dollar? Where’s the nickel come from? Most of my clients are trying to find a way to reduce the expense of doing utilization review. So are we, we’re coming out with a new software system to revolutionize and be more efficient in providing this service to people. It’s taken a few years to develop to be useable, but that’s why I think people want to reduce these costs and put it into other areas.
Is medical severity going to continue to climb or is it just a blip?
Medical severity: what is it based on? [Is it up because] if you’re having fewer claims is it just because people are reporting fewer? Is there really a drop in claims or just in reported claims? The only people reporting in that case are the severe ones. I don’t think people are less safe in the workplace than they were five years ago. Employers haven’t lost the value of safety and prevention in the workplace. I don’t think that that’s going to continue. I’m not sure that there are fewer overall claims, I think there are just fewer reported claims. That is going to skew the numbers towards severity. I don’t know that there are more truly harmed people. Age is a big driver on disability. A 30-year-old can bounce back better than a 50-year-old. That gets back to the issue of an aging workforce. Age is a factor in severity. More adults are working and young people are not working. That may lead to more severe claims. No clear answer. You need to look at it from other sides though. Our aging workforce has been talked about for 15 years, but it does mean something.
Are there any changes to claims frequency?
That always happens whenever there’s reform: There’s a lull. Everything comes to a screeching halt. As things work themselves back to the court systems and we figure out how things are going to work again, claims go back up. In group health, you have a doctor and there’s no incentive not to seek treatment. In workers’ comp, there may be a time when you don’t want to rush in to get something treated because you need to see how it’s going to work. It’s like dental, people don’t need to rush in, but when they do sometimes it can be worse because they have a bunch of problems come up at once that weren’t getting dealt with little by little. The same happens in workers’ comp, they were hesitant to report injuries right away but then it gets exasperated and then people have to report them. People are less likely to report injuries when the market is down because they worry for their job. Claims are higher when the market is up and people think they can afford their injuries. I don’t see the fast numbers on that. I know that overall people who are taking risks can feel the costs creeping up. [You typically don’t report immediately] unless you have a real hard and fast injury, but a lot of compensation is not [these immediate injuries.] It’s more like getting carpal tunnel from 15 years of working a typewriter. These types of injuries are a big part of compensation. The work that you’re doing is causing these injuries. They’re more of a cumulative type nature than a specific trauma.
What does the workers’ comp community need to do going forward?
I think that we really need to look at what it will take to close claims. The medical community is in flux in our state. There are a lot of providers that have gone from individual businesses to being part of IBA or part of in-house HMO, like Kaiser. That changes how people practice. I think with medical provider networks, we’re seeing more and more orthopedic groups getting workers’ comp specialists who aren’t necessarily great treaters. That’s not a great situation. Medicare set-asides, what Medicare is going to require from payers, may have a bigger impact on total costs and claims. It definitely has a bigger impact than it did five years ago; especially with an aging workforce and we need to look at that. We don’t have a proper place to appeal that. I don’t know what we need to do to change that, but we all need to be aware of it at least.