Yeah - Yet Another Tectonic Shift in the Insurance Landscape
Jul 22, 2021

Film maker Richard Diaz once observed that "Most doctors are prisoners of their education and shackled by their profession." The rate at which physicians are changing career paths now makes us wonder if he may have been onto something. Fewer docs seem to be happy being in individual or small group independent practices. The stampede for the exits and into the arms of Big Medicine is unprecedented and it has potentially serious implications for maintaining and managing the provider networks so dear to workers' comp program managers.

Let's check out a few stats courtesy of a recent physician employment report prepared by healthcare consulting firm Avalere for the Physicians Advocacy Institute (PAI):


During the recent two-year period studied, 48,400 physicians left independent practice to become employed in a corporate environment of health systems, insurers, or private equity groups, resulting in a 12% increase in corporate employed physicians.


Where'd they go? Well, 18,600 of the 48,400 physicians that changed employers went to work for a hospital employer, resulting in a 5% increase in physicians employed by hospitals. Some 49.3% of all docs are now employed by hospitals and another 20% by other corporate entities.


A blue light special? Meanwhile, a total of 20,900 independent practices were bought out by corporate entities, both very large practice groups and hospitals.

OK, why do we care? What we are seeing here is the continuing consolidation of medical resources. More and more of the docs practicing in the US work for very large entities. What do you expect that to mean when it comes to negotiating network arrangements? Remember that, while hospital charges drive general health care costs, in comp the primary driver of medical costs is physician fees. Combine this with the fact that only about 1 to 2% of our national medical spend is comp related and come to your own conclusions about negotiation leverage and the future of conventional medical PPOs for comp.

What we see is one more reason to start focusing on the clinical quality of care in managing comp claims. Yours truly was one of the people building one of the first national comp PPOs back in the late 1980s. The game was all about discounts and savings reports*. As the negotiating power nowadays moves further towards the clinical conglomerates, this is not a strong position. What will continue to help us all manage costs is directing injured employees to the best docs with proven superior clinical outcomes. The savings in time and money that flow from avoiding unnecessary and inappropriate "care" will not be dimmed by the ongoing consolidation of medical practices and docs.

Think about changing a few questions about comp medical management on your next RFP. Don't ask the usual questions about discounts. Instead ask about clinical quality management and how that gets people back to work sooner and with less expense. There is no such thing as a good discount on poor, mediocre, or unnecessary medical care.

*True story from 1994 (I was there). On seeing a network savings report, the CEO of one major comp carrier said, "According to this report I've saved enough money to buy France. So where's all my money?"

Another alternative to PPOs?


Think of the Frequent Flyer Miles!

It's Friday afternoon. The CEO stops by your office, pops his head in and asks, "Hey, I'm flying into space next month on _____________ (fill in your favorite space carrier here). Am I insured for that? Do we need to buy some coverage? Let me know Monday." With that he waves, wishes you a great weekend and disappears down the hall. Now what?

OK. Stop hyperventilating. We have some precedents to take a look at. A report in Business Insider gives us a look at how two companies have dealt with this question already and it offers some insight into the age-old question of when to insure and when not to. Turns out, according to reports from industry insiders, that both Branson and Bezos are completely self-insured for their forays into near space*. The spacecraft were apparently insured but not the passengers. Indeed, Virgin Galactic has previously said that all passengers will have to sign a contract agreeing that they're fully liable for their own safety.

Of course, we're in early days with private space flight. Insurance providers told The New York Times' DealBook newsletter that regulators will soon require liability insurance policies for trips into space. There's enough data on rocket launches for brokers to put prices on these types of policies, they said. Well, that's reassuring. "The big question for the insurance industry is whether this is more like aviation insurance or more like current space policies," Neil Stevens, senior vice president of space products** at the insurance broker Marsh, told DealBook. "There hasn't been a situation where insurance markets haven't stepped up."

Feeling better now? We cite this development as an example of how quickly markets are adapting nowadays. Insurance may be in danger of tarnishing its reputation for glacial responses to the new century. Self-insurance may still make sense for many outré risks, like sending your CEO into space, but don't discount the alternatives. Come Monday, casually ask your CEO how much he's worth to the company so you can get some competitive quotes.

*Suborbital flight up to the mesosphere/thermosphere interface may be thrilling and hazardous, but it's really driving from Philly to Pittsburgh and back.
**Remember Sputnik in 1957? Who knew back then that the little beeping ball would lead to a thriving market in insurance for space products? No wonder we defeated the Soviet Union.


Quick Take 1:
Elsa Meets a Risk Manager!

If Michelin were to award stars for succulent understatement or if the Motion Picture Academy gave an Oscar for the finest appreciation of irony in an on-line publication, Robert Wilson, publisher of, would have a shelf full of said prizes. In a recent post he opens the question of how the remote work issue runs smack into a major risk concern - when to close a facility for the safety of your people due to things like hurricanes or other widespread types of cat events.

Back when your faithful correspondent worked for a major carrier located in the bowels of central New Jersey*, we had a serious internal crisis whenever major weather events occurred. Slogging through snow and ice was virtually a test of loyalty and only a formal declaration of an emergency by the governor excused us from getting the dog team together and mushing off to work, despite the very considerable risk to our people in driving through Arctic blasts back in the day when most folks did not have all wheel drive cars.

Bob's discussion of his take on remote work and its practical uses is light hearted but also serious and it provides a useful window into how one executive sees the balance between employees working at home or in the office in ways that speak to how you run a successful company without getting lost in productivity decimal dust. More to our point, the work from home conundrum is at least as much about managing risk as managing productivity. How does this work out in your world?

*Just a few miles from the locations used in filming The Sopranos, if you're wondering.

As we were saying...


Quick Take 2:
Tee for...?

When is a tee shirt a straw in the wind? Well, we think we just saw one blow past. It's hard to get a handle on the burgeoning plague of supply chain risks, but a recent news item offers food for thought. Try this from the Akron Beacon-Journal:

"There are not many commonalities among computer chips, chicken wings and tee-shirts, but one is that they are all becoming increasingly hard to find." Yes, gentle reader, the ubiquitous tee shirt is becoming scarce for the apparel shops that do custom designs. No surprise - the supply chains are backed up for just about every clothing manufacturer*.

The article goes on to point out that there are problems plaguing nearly every step of supply chains across a myriad of industries, including the portions that take place in the U.S. These issues include getting in and out of ports in a timely manner and lack of equipment. For example, chassis, which are specially designed trailers used to transfer containers from trucks between ports, terminals, and warehouses, are in short supply, as are containers themselves.

One of many unanswered questions is whether the supply chain crisis is merely a temporary acute reaction to demand rebounding from the pandemic or does it warn of larger, structural issues which may plague us for years to come? Your faithful Journal has been tracking this issue for some time now since supply chain disruption presents a major risk management problem. Are we now looking at a future of managing scarcity in addition to - or in place of - logistical optimization? If so, this may signal a whole new approach to specific risks as well as ERM generally.

We don't have to go too far back in history, maybe 200/250 years, to study the economics of scarcity and how that permeated every aspect of business and society. That past was a very different place. A package of modern tee shirts would have cost a fancy bit of money in 1780 when supply chains were sailing ships.

*And where do you sit wearing your unavailable tee shirt? Patio furniture is also in very short supply.

Kathy and Ron Scheetz owners of the Akron Shirt Factory in Norton show a shirt made for the Summit County fair as they talk about their experiences with delays and shortages with getting shirts and supplies for the shop on Wednesday June, 30, 2021.


Say It Isn't So...

So, is this glass half full or half empty?


Neither an outdoor patio nor social distancing barriers are encompassed by any reasonable definition or construction of 'direct physical loss of or damage to' property as that phrase is readily understood. A new patio (and the other modifications) is an improvement and not damage.

That is the essence of the position taken by a carrier in rejecting a client's claim for COVID-related damages based on the cost of such premises modifications as outdoor seating and new internal partitions. Out here in our neck of the woods we see local restaurants, retailers, and others petitioning their planning commissions to make many of their new "emergency" arrangements permanent because customers like them. Like new work from home accommodations, these modifications may become yet another part of the next normal in a world where dates are either BC (before COVID) or AC (after COVID).


Words to Remember

The question comes from a non-canonical gospel, the Acts of Peter, but the question is not apocryphal.

         Quo vadis? (Where are you going?)*

We have come through the refiner's fire of COVID, but have we learned anything? Do we go back to the same old, same old - or do we understand the world and each other a little differently now? Does our path forward change, however imperceptibly?

*If you are of an age, you'll recall that Quo Vadis was a blockbuster movie back in 1951, before we had the concept of "blockbuster". Its Academy Awards were deserved. A centurion meets a Christian slave - and the Roman Empire goes to hell. Thinking of having a movie night? Check it out.


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