Work comp drug spend is going down

On average payers’ drug spend dropped 6.5% from 2014 to 2015.

And the bigger payers saw bigger reductions, with several cutting spend by double digits.

Those are the results for 30 large and mid-sized work comp payers I surveyed for CompPharma’s annual Prescription Benefit Management in Workers’ Compensation Survey.  State funds, large and mid-sized insurers, TPAs, self-insured trusts, and very large employers all participated in this, the 13th annual Survey.

The big question is – why?

Before we jump into that, allow me to address a potential criticism of payers’ drug management efforts.  This reduction is NOT because payers want to prevent their patients from getting the care they need.  Rather, payers – and their PBM partners – are focusing on ensuring patients get the drugs they need quickly and with minimal hassle, while blocking potentially problematic drugs.

This effort has paid off in the near term in lower costs for employers and taxpayers, and will almost certainly result in quicker healing and return to functionality; patients who don’t get unnecessary opioids get better a lot faster than patients prescribed these dangerous and often-misused drugs.

The Survey report, which will be out in August, will have details.  At this point in our analysis, several drivers seem to be at play here.

By far the most significant is the depth and breadth of pharmacy clinical management programs now in place at most payers.  The vast majority of payers rely on their PBM partners for most clinical management functions, with responsibility delegated to PBMs for some/most/all functions including:

  • patient enrollment
  • formulary development and management
  • prior authorization
  • pharmacist review of claims
  • prescriber outreach and follow-up
  • peer review and interaction
  • reporting
  • high cost claim assessment and intervention

This is somewhat unique in the work comp medical management world.  Unlike surgery, hospitalization, and other service types, most payers have delegated pharmacy management to PBMs.  There are several reasons for this.

  • Unlike other medical services, pharmacy is highly automated, requiring a unique electronic communication capability and expertise to accept, approve, process, and pay for the service.
  • Few payers want to invest the funds and management resources necessary to effectively manage pharmacy.  With the continued focus on reducing administrative expenses, overhead is an evil word at most insurers, so outsourcing it just makes financial sense.
  • PBMs have a lot more knowledge about pharmacy management as this is their core business.  Insurers, TPAs, and state funds have many other priorities on their collective plate, priorities that most view as more central to their core business.  They are insurers and claims handlers, not pharmacists.

That said, a handful of large payers have internalized pharmacy management – hiring pharmacists and nurses, instituting workflows specific to drug authorization, focusing on long-term opioid users, and tightening up drug formularies and approval processes.  These entities are also seeing solid payback on that investment, with costs dropping by double digits for these big payers too.

A final point that bears consideration.

Work comp PBMs, most of which are members of CompPharma (I am president of CompPharma), are doing a really good job and thereby reducing their income and profits.

They do this because this is how they win additional business; their value proposition is to ensure patients get the right medications and don’t get the wrong ones.

What does this mean for you?

PBMs are getting it done.

Steve Anderson’s Health Wonk Review

Steve Anderson’s edition of Health Wonk Review somehow manages to find new news from last week’s Republican convention.

That would be impressive enough, but wait, there’s more!

David Williams’ deep dive into dialysis – an industry that exemplifies the conflicts and adverse motivations inherent in our health care system.

A revealing look at healthcare “ministries”; a business which, at the very least, requires a leap of faith across a very deep chasm.

And a critical de-construction of President Obama’s JAMA article about ACA.

A great way to start your week!

 

Work comp pharmacy – different indeed

The US spent $322 billion on outpatient drugs in 2015 – an 8.1% increase over the year before. (subscription required)

Over the next decade, CMS expects drug spending increases to outpace overall health care inflation by a significant margin at an average annual jump of 6.7%.

Things look remarkably different in the work comp world.

I’ve been surveying workers’ comp payers (insurers, state funds, TPAs, and large employers) for 13 years and the latest data indicates most are seeing a year-over-year decrease in drug spend.  I haven’t finished aggregating the data and checking the details, but this year looks like a continuation of the decreasing drug cost trend we’ve seen over the last several years (past Surveys available here).

More than 2/3rds of payers surveyed reported a drop in drug costs in 2015, and those that saw increases usually cited unique situations as primary drivers for those increases. Conversely, payers with decreases generally attributed their success to the same factors:

  • a strong focus on clinical management 
  • particular attention paid to opioid usage
  • ongoing, concerted effort to drive generic utilization

One other key driver – payers that work closely with PBMs on a variety of programs – retail network penetration, high risk patient identification, peer review, and outlier-prescriber outreach are seeing significantly better results.

I would note that work comp PBMs are spending a lot of money and resources to cut their revenues.  [I am president of CompPharma, a consortium of worker’s comp PBMs]

While there’s no question work comp can learn a lot from group health and other payers, the remarkable success workers comp payers have had in reducing the utilization of opioids shows that Medicaid and group health could and should carefully study what we’ve been doing.

What does this mean for you?

We are making progress, and work comp PBMs are leading the way.

 

Workers’ comp fast facts

Over the last few years I’ve had quite a few calls and meetings with folks in the investment community  looking to get up to speed on the workers’ comp industry and various aspects thereof.

While the volume of calls ebbs and flows, of late there’s been increasing interest, likely due to the credit market’s interest in OneCall Care Management and other transactions.

So, here are some key datapoints for anyone looking for basic information.

  1. Total workers’ comp premium and equivalents is about $85 billion.  That includes insurance premiums from private carriers and state funds, claims, administrative, and excess insurance costs for self-insureds, governmental programs e.g. FECA, and claims costs for minimum-premium or other “deductible” type insurance plans.
  2. Workers’ comp medical costs will be about $33 billion this year.
  3. That’s about 1.25% of total US medical spend.
  4. Medical costs account for about 60% of claims expense, with indemnity expense accounting for the remainder. (adding administrative costs to claim costs gets you close to total WC premium and equivalents)
  5. Claim frequency has been dropping by about 2-3% per year for more than two decades.  That will almost certainly continue.
  6. Drug costs will account for around 15-17% of that spend, with physical medicine in the same ballpark.
  7. Most states have some sort of medical fee schedule (FS) in place, however there’s MUCH variation among and between the states.  Some only have provider FS, others have provider, drug, facility, DME and other services covered by fee schedules.
  8. Almost all provider fee schedules are based on Medicare.  However, few states directly link their FS to Medicare, so when Medicare’s FS changes, it may – or more likely may not – change that state’s reimbursement.

There’s a lot more here; if you are looking for more information, try the search box on this page – it’s up there to the right.  With about 3000 posts on MCM, chances are pretty good there’s some discussion of pretty much every comp-related topic.

btw, good sources are:

NASI.org – see the workers compensation tab

WCRInet.org – everything workers’ comp

CWCI.org – California-specific

NCCI.com – their Annual State of the Line is really good.

Life is short. Live it like David did.

A few hours ago I found out David DePaolo was killed in a motorcycle-related accident over the weekend.  Friends, colleagues, business associates all have attempted to express their feelings at this shocking news, news that anyone who knew David finds tough to believe.

Because he lived life to the fullest.

Flying his plane, riding his bike at zero-dark-thirty, cruising on his motorcycle, opining on the weighty issues of the day, confronting us with the uncomfortable truths, all attacked with passion and energy.  David delighted in disagreeing without being disagreeable, a skill he exemplified.  Even if you really disagreed with his perspective, it was always impossible to ignore him.

His last post, a brutal and much-deserved takedown of pharma giant Purdue, is classic David.

There are so many battles left to fight, so many problems demanding our attention, so much left to do, and now we have to do it without him.  Suddenly it just seems a lot harder.

We all have lost a unique person, one that made the world a better place because he cared deeply.  I’m so sorry for his family and close friends, for they knew David far better than I ever did, and thus will miss him so.

The takeaway for me is simple – at the end of life, you have only your reputation, the good you’ve done, the life you’ve led.

David left more than most of us ever will.

The VA head smack

A few weeks back I posted on the incomprehensible decision by the Veteran’s Administration to award almost all of a $6.8 billion contract to two “different” companies that are actually very closely related.

Last week came the news that the Government Accountability Office delivered an official head slap – with a 2×4 – to the VA.

Politico reported [subscription required]

the GAO “citing “prejudicial errors” has directed the Department of Veteran Affairs to go back to the drawing board…the office “recommended that the VA reopen negotiations with the offerers, solicit, obtain, and evaluate revised proposals; and make new source selection decisions” [emphasis added]

Oh, and the VA “misled two of the protestors during the conduct of discussions or negotiations.  These errors led the VA to make source selection decisions…that were unreasonable…” [emphasis added]

Here’s my take.

First, there’s obviously some backroom dealing going on here.  When a giant defense contractor – Lockheed Martin – that has a documented record of failing to deliver a service and its “partner” are awarded most of a “competitive” $7 billion contract, while a much smaller competitor that happens to have a far better record of delivering that service on time and to specifications is awarded a tiny piece of the contract, something stinks.

Kudos to the GAO for the investigation.  HOWEVER, it’s unknown if this investigation would have happened at all if the three competitors who were screwed on the initial deal hadn’t spent hundreds of thousands of dollars preparing a protest within a really short time frame – a time frame that, to this observer, looks like it was designed to make it damn near impossible for the losers to react to the initial contract award to Lockheed Martin.

Second, and more important, this is outrageous, and demands further investigation.

There are thousands of veterans waiting on disability evaluations, a wait needlessly prolonged by what smells like corrupt contracting by someone or someones in the VA.

One just has to listen to calls from vets whose disability evaluations are delayed for months, vets in limbo because they have no idea if they will ever get any benefits, help, or the right treatment. These are men and women suffering from PTSD, missing limbs, burned, scarred, traumatized, now subjected to the mental anguish of not knowing when or if they will ever be taken care of by the country they fought for.

I would encourage you to email the GAO and ask it to continue the investigation to determine if this should be turned over to the Department of Justice.  Here’s the email address – youngc1@gao.gov 

Because the individual or individuals responsible for this unconscionable delay deserve more than a head smack.

[disclosure – I’ve consulted in the past for one of the protestors – Veterans Evaluation Services]

The success killers

Sometimes you read things that make you squirm a bit; this article was one of those times for me.

The piece, entitled “How to Stop People Who Bog Things Down with Bureaucracy”, had me nodding my head as I replayed past experiences working for big insurance companies. We’ve all had them; there’s a problem that is readily apparent to everyone.  Maybe it’s a customer’s repeated complaints about a process or missed target or service change requirement.

A meeting is convened to figure out how to address the problem.

The discussion quickly expands the issue to identify underlying causes – changing the process means several departments have to communicate differently, share information faster, streamline a well-established workflow that will disrupt current operations as staff is re-trained.  Management metrics will be affected, and dashboards altered.

As the discussion progresses, you can feel the oxygen leaving the room.

dilbert-project-management-jokes-i12

(Scott Adams has a brutally funny understanding of management)

It’s just too big, there are too many people who need to buy in and take action to fix the problem, there are other priorities, no single person can own it and fix it.  An “action” plan may be agreed upon, which usually involves more meetings and memos and prioritization and risk assessment – and little action that actually addresses the original problem.

 

dilbert-on-project-management

Fact is, the people who point out that this or that change will require lots of other changes may well be right.

But, while they may be technically correct, when you think about what they’re really saying, they are most definitely wrong.

Wrong because organizations – for-profit, not-for-profit, governmental – all exist to serve their “customers”, and the people who focus on the obstacles to delivering for customers are coming at this bass-akwards.  Instead of thinking about the issue from their organization’s perspective, they should be looking at it from their customer’s.

Here’s how the HBR article described these well-intentioned managers…

Energy vampires are often smart, well-intentioned managers who inadvertently slow the company down with too many questions, too much analysis, too much process—and not enough action. They exist in the organization to administer various systems and processes that in isolation seem necessary, but in aggregate simply clog up the works and slow the company down.

Customers don’t give a rat’s rear end about your internal processes or metrics or management meetings.  They have a need – get this service delivered this way to me in this amount of time – and successful organizations attack problems from that external perspective.

What caused me to squirm is this.  I’m really good at the strategic view, at understanding customer needs and verbalizing them, but I can also be too quick to point out the potential obstacles and organizational changes and issues involved in meeting those needs. That can flip the discussion from where it should be coming from – the customer’s side – to what’s best for the organization.

In so doing, one concedes the field to the energy vampires, the “this is the way we do it here” people who keep things running smoothly – and directly away from success.

A few relatively simple things you can do to address this very real problem.

  1. Keep problems simple.  Don’t overcomplicate things.
  2. Eat the elephant one bite at a time.  Sometimes there are issues that require lots of organizational change; don’t try to do it all at once.
  3. Start with high-value changes with a very high chance of success.  This builds momentum and credibility and support.
  4. Reward intelligent risk-taking, and dis-incent the overly cautious.
  5. Accept some downside, understanding that overall, the net result is what matters, not ensuring every effort is a successful one.

What does this mean for you?

Think about the last meeting you had about a customer issue, and what is happening as a result of that meeting.  I’m hoping your organization focused on the “how” and not the “why we can’t.”

Thursday catch-up

Swamped these days, so here’s what I don’t have time to opine upon in any depth…

In eight years, “Health spending growth…is projected to average 5.8 percent—1.3 percentage points faster than growth in the gross domestic product—and to represent 20.1 percent of the total economy by 2025.” [emphasis added] HealthAffairsarticle notes the main drivers will be changes to the economy, higher prices, and an aging population.

So, what are we going to do about this?  When considering candidates’ health care platforms, it is always helpful to start from where we are today.  To that end, Michael Joyner MD has an excellent briefing that builds on the HealthAffairs piece, with more info on what we spend, who spends it, and what we get for those dollars.

Spoiler alert – When you deduct estimated cost of unnecessary spending, US health care costs are about in line with other countries’.

Folks interested in what workers’ comp patients think of work comp should tune in to WCRI’s webinar on July 28.  WCRI surveyed patients in 15 states and will report on their findings across a broad spectrum of issues; a written version of findings is also available.

And those interested in the financial future of work comp can check out Fitch’s report on same; hint today’s flush days are not likely to continue.  (hat tip to WorkCompWire for the head’s up)

A troubling point:counterpoint discussion of opioids and chronic pain illustrates the biggest problem we face with this issue; to the general public, anecdote is often more powerful than data.  David Deitz MD PhD provides the scientific background for why limiting opioid use is a critical public health issue, and why opioids aren’t particularly helpful for many chronic pain sufferers.  The “counterpoint” is NOT a fact/research/science based expert, but one person who suffers from chronic pain.

This is not a terribly helpful way to educate folks about the issue and I would suggest ill-serves the public.

Mark Pew of PRIUM has a cogent perspective on California’s prescription monitoring program.  He’s all in – and, quite correctly, suggests everyone else should be as well.

Finally, the pending sale of ExamWorks is generating controversy, with some stockholders not pleased by the price offered, the possible conflict of interest of some of the parties, and various other complaints.  According to the NYTimes, opponents of the deal contend “lawyers at Paul Hastings, a law firm based in Los Angeles, were in cahoots with management and the investment banks to sell the company at a below-market price, something ExamWorks vigorously denies.”

Methinks they oughta be darn glad they’re getting 35 bucks a share.

Got to get back to work…

 

Construction labor fraud is screwing everyone

Following up on last week’s post on construction industry’s workers’ comp premium fraud problem, I realized that it’s way more than that.

We’re talking about insurers put at huge risk due to liability for work comp fraud.

Taxpayers footing the bill for medical care when laborers without insurance get hurt AND paying higher taxes because laborers get paid in cash.

Laborers getting screwed out of a reasonable paycheck by labor brokers who force them to take lower pay in untraceable cash.

Honest contractors unable to compete with others who bid based on fraudulent labor practices.

Citizens not getting jobs because labor brokers know they can get undocumented workers to do the same job for a lot less, with zero risk of complaint from those workers.

I interviewed Matt Capece, of the United Brotherhood of Carpenters and Joiners of America, who’s been all over this issue.  Matt has been talking with insurers, agents, brokers, employers, law enforcement, and the the Feds about this for some time.  While progress is being made, it’s quite clear that this is a huge problem in several key states.

MCM – How do you know this is a problem?

MC – In FLorida, Georgia, Colorado, Oklahoma, Tennessee the vast majority of the industry is affected. When we go onto job sites in Florida, on 8-9 out of 10 sites we hear from carpenters that they are getting paid cash. [emphasis added] Malls, store fit-outs, office renovations, government buildings are all affected.

It’s a big problem in TX, but less so than those other states.In TX there is a base of contractors who are resisting lawless practices

.MCM – What will help slow this down or stop it?

MC – Fraud in the industry is growing. The problem is so large that legislation hasn’t shut it down but has given law enforcement more firepower when a case is found. One of the things that needs to happen is a step up in criminal prosecutions going up the contract chain, and not just stopping at the labor broker. When upper tier contractors start seeing accountability then you’ll see some roll back.

MCM – Are there legislative solutions?

MC – When we talk to legislators about this problem, they don’t know it is that big and are shocked it is that big, then we have to face the other vested interests who want to fight against improving the law or adequately funding law enforcement because they believe it is somehow hurting or over-regulating small businesses.

Good employers, including small businesses, are losing market share and revenue and need protection. Different states have different level of commitment to attacking this. There are very few national construction associations interested in controlling or addressing this issue.

MCM – What’s holding law enforcement back?

MC – When you have law enforcement agencies that aren’t properly funded, when laws are made difficult for them to enforce, when enforcement agents are laid off, when organized labor is weakened, then there are fewer referees on playing field. Bad guys can commit payroll fraud, get away with it, and take over markets.

MCM – What are the top three things that will most help control payroll fraud?

  1. Insurance industry practices need to change from tracking COI’s to underwriting and auditing practices to root our corrupt construction businesses.
  2. Contractors that use labor brokers are putting insurers at increased risk so their premiums should be higher.
  3. The insurance industry needs to join with stakeholders on investigating corrupt contractors and giving federal and state law enforcement agencies adequate tools and resources.
    [emphasis added]

So there you have it.

Corrupt construction firms, aided by crooked agents and brokers, are stealing from taxpayers, insurers, state funds, and workers.  

What does this mean for you?

This is an issue where labor and management can and should work together much more closely. 

Purdue Knew.

According to an LATimes article, Purdue pharma knew about rampant diversion of Oxycontin for years, and never informed the DEA.  Instead, the giant, family-owned pharmaceutical manufacturer continued supplying huge quantities of its most powerful version of Oxy to pharmacies, racking up $31 billion in revenues in the process.

Sure, Purdue eventually informed officials – years after “the clinic was out of business and its leaders indicted.”

In the interim, just one physician, in one clinic, in just the first few months it was operational, prescribed 73,000 80 mg pills.

This from the LATimes:

A sales manager went to check out the clinic and the company launched an investigation. It eventually concluded that Lake Medical [the clinic] was working with a corrupt pharmacy in Huntington Park to obtain large quantities of OxyContin.

“Shouldn’t the DEA be contacted about this?” the sales manager, Michele Ringler, told company officials in a 2009 email. Later that evening, she added, “I feel very certain this is an organized drug ring…”

Purdue did not shut off the supply of highly addictive OxyContin and did not tell authorities what it knew about Lake Medical until several years later when the clinic was out of business and its leaders indicted.

By that time, 1.1 million pills had spilled into the hands of Armenian mobsters, the Crips gang and other criminals. [emphasis added]

LATimes reporters Harriet Ryan, Lisa Girion, and Scott Glover have done a remarkable job chronicling the devastation wrought by the flood of Oxycontin into California, a flood that spread pills across the country and directly contributed to the 194,000 deaths from opioid painkillers since 1999.

According to the article, Purdue knew about this activity, delayed reporting it to officials for years, and kept supplying tens of thousands of these horribly addictive pills to pharmacies Purdue’s own representative was “very certain” involved an organized drug ring.

194,000 dead Americans.  $31 billion in revenues.  Millions of shattered families. A company owned by one of the richest families in America, a fortune built on creative ways to generate scripts – and on addiction and diversion.

Sometimes what passes for legitimate business in America horrifies me.

Where’s the class-action law suit?