Coventry earnings call this morning was notable in at least two ways - more discussion about underlying cost drivers, utilization trends and management thereof, and the growing importance of low cost delivery systems from management.

And more evidence that (most) financial analysts don't understand this business.

Here's my view on the takeaways from the call.

The per-share earnings charge of $1.18 (from work comp PPO litigation in Louisiana) was the subject of a good deal of discussion during Coventry's Q2 2010 earnings call this morning, but has to be considered in the context of the overall solid performance of the company.

Coventry actually increased guidance for the full year, marking another improvement in financials for the company that has been on a steady upward trend since CEO/Chair Allen Wise resumed his post a year and a half ago.

Commercial group membership grew nicely, while MLR (medical loss ratio) guidance decreased for the entire year. Coventry expects medical costs to increase in the second half of 2010, consistent with past experience.

In the prepared remarks part of the call, management diiscussed the implications of health reform, asserting the company's recent results show it is well prepared for reform as it is able to control MLR while maintaining membership and expanding the company's footprint in selected markets (the Mercy deal is an example)

The company's statement noted Wise's enthusiasm for results and performance of the company's clinical management programs.

Clarity around MLR regulations was the first question - unsurprisingly, given the new regulations regarding limits on insurers' administrative and other fees. Wise noted that the cost structure in one market in particular was going to improve by shrinking the company's network, selecting more cost effective delivery systems/health systems. This marked a significant change from calls as recently as last year at this time. Coventry is clearly seeking to partner with more cost efficient health systems; as Wise put it, 'we need to stop fighting over nickels and focus on overall costs'. [paraphrasing]

This was followed by a question about health plan utilization trends - overall utilization appears to have tapered off industry-wide, the question is why? Wise admitted Coventry doesn't know, although they've spent a lot of time looking at this and their preliminary conclusion is the high deductibles and copays are leading to lower utilization, coupled with expiring COBRA benefits for some employees laid off quite a while ago.

Going forward, Wise sees the market as getting more competitive, making customer service and managing the little things critical to survival and success.

Wise thinks the group health product pendulum has swung back to mid-eighties model where networks are smaller, there's less choice, and better control over cost and utilization. Coventry's going to offer products with smaller networks based on provider systems with documented better outcomes and lower costs. They will preferentially look to buy provider-owned plans as they tend to have better cost structures than non-provider-owned plans. The analyst who asked the question wasn't particularly interested in what Coventry was doing, but rather focused on pricing implications given the MLF regs coming out shortly.

That's another example of how most of the analysts following this business are out of their depth. The real issue, the key to success, for Coventry and every other health plan, is how they are going to compete in a post-reform world. Price is a result of cost structure, and the failure of the analysts to focus on cost and cost drivers shows how disconnected the analysts are.

Another analyst asked if other health plans are pursuing similar acquisition strategies. Wise noted that there just aren't that many potential acquisition targets that have good cost structures, fit geographically, and are provider-owned.

The company will be revamping its individual health product offering - in response to a question, Wise noted that the company's distribution, IT, and benefit design are all works in progress, and there's still a ways to go.

More to come after I review the transcript

Posted by at 9:27 AM | Permalink | Comments (0)

Today's Kaiser Health Tracking Poll contains interesting data about support for health reform (steady positives, declining negatives), what's much more telling is the extent of seniors' a) ignorance of basic facts about health reform and b) widespread belief that reform includes death panels and cuts Medicare benefits.

Yikes.

According to Kaiser, "Half of seniors (50%) say the law will cut benefits that were previously provided to all people on Medicare, and more than a third (36%) incorrectly believe the law will "allow a government panel to make decisions about end-of-life care for people on Medicare."

These are both factually incorrect.

Moreover, "Despite the fact that Medicare's actuaries predict the health reform law will extend the life of the Medicare Part A Trust Fund by 12 years (from 2017 to 2029), only 14 percent of seniors know this and nearly half (45%) of seniors think the health reform law will weaken the financial condition of the fund.
"

There are several ways to look at this.

The power of the anti-reform noise machine is truly impressive; death panel myth promoters are clearly effective in getting people to believe their claims, despite widespread debunking of the claim by multiple independent organizations. (One well-respected organization, Politifact.com (run by the St Pete Times, a terrific newspaper, called it "pants on fire false).

Then again, it's hard to underestimate the ignorance of the American public; we're talking about a country where 43% of the population doesn't believe in human evolution...

Seniors tend to vote in higher percentages than the rest of the population, so their concerns about reform, based at least in part on ignorance of the actual reform bill and its provisions, may well have a disproportionate impact on the election this fall.

Closer to home, health plans and insurers have to take note of these poll numbers and consider the impact on their own members.

As health plans increasingly emphasize provider network selection based on quality and outcomes data; rigorously employ evidence-based medical guidelines; and get tougher on experimental and unproven medical procedures and therapies, they are going to be exposed to the same type of fear-mongering from idiots using the public's ignorance and fear to gain notoriety.

What does this mean for you?

Health plans must - and I mean must - develop and implement programs to stay on top of the public's perception and opinions about them. Call it opinion monitoring, social network monitoring, complaint management, whatever, but do it. But this will only work if you proactively educate members and the markets about what you're doing and why. Otherwise it's purely defensive, will appear so, and will be little help when the stuff hits the fan.

Which it always does.

Posted by at 9:32 AM | Permalink | Comments (0)

The recess appointment of Dr Donald Berwick as head of CMS has incited a furor among politicians outraged at what they claim are his advocacy for rationing and fondness for Britain's National Health Service.

To support their claims, these politicians are using Berwick's own words, in a way eerily reminiscent of the recent Shirley Sherrod debacle.

It started with Glenn Beck, master of the one-word quote, and then slipped over into more mainstream politicians.

What's really troubling about all this, in addition to the blatant political motivation, is Berwick is pretty closely aligned with core conservative values.

Don Berwick is now, and has always been, a patient-centric, consumer-oriented 'radical' who's concept for the ideal system is one that is almost entirely patient-focused. Here's Berwick's ideal health plan from a piece by Ezra Klein:

"(1) Hospitals would have no restrictions on visiting -- no restrictions of place or time or person, except restrictions chosen by and under the control of each individual patient.

(2) Patients would determine what food they eat and what clothes they wear in hospitals (to the extent that health status allows).

(3) Patients and family members would participate in rounds.

(4) Patients and families would participate in the design of health care processes and services.

(5) Medical records would belong to patients. Clinicians, rather than patients, would need to have permission to gain access to them.

(6) Shared decision-making technologies would be used universally.

(7) Operating room schedules would conform to ideal queuing theory designs aimed at minimizing waiting time, rather than to the convenience of clinicians.

(8) Patients physically capable of self-care would, in all situations, have the option to do it.

"I suggest that we should without equivocation make patient-centeredness a primary quality dimension all its own, even when it does not contribute to the technical safety and effectiveness of care," he says."

Pretty radical, indeed - returning power to the patient, from the practitioner.

If Berwick's opponents just took a minute to read what the guy really stands for, they'd discover he's pretty much aligned with many 'conservative' principles - self responsibility, ownership, consumer-centered policies and practices.

Unfortunately, they just don't care about who Berwick really is - they've decided he's the stick they're going to use to beat this Administration, regardless of whether he's good, bad, or indifferent.

As Maggie Mahar noted in HealthBeat, "Thomas Scully, who led the CMS under President George W. Bush [said of Berwick] : "He's universally regarded and a thoughtful guy who is not partisan. I think it's more about ... the health care bill. You could nominate Gandhi to be head of CMS and that would be controversial right now."

Here's hoping the recent Shirley Sherrod disaster has stiffened the backbone of the Administration and caused the wingnut media to think a little more deeply before throwing bombs.

And yes, I believe in the Easter Bunny too.

Posted by at 6:21 AM | Permalink | Comments (8)

As I reported Saturday, the prosecutor who charged former North Dakota state fund CEO Sandy Blunt with felony 'theft of services' is herself under investigation for allegedly withholding exculpatory evidence from Blunt's defense attorney.

Cynthia Feland's case has been heard by the ND Supreme Court's Inquiry Board, who found enough evidence to convene a Disciplinary Board. From the ND Supreme Court website - "Formal proceedings are begun when there is probable cause to believe that misconduct has occurred that deserves a public reprimand, suspension, or disbarment." [emphasis added]

This isn't a routine, 'happens all the time' thing. Far from it. although to hear Feland tell it, this is no big deal - according to the Bismarck Tribute, Feland "said it is not uncommon for people to file complaints against prosecutors."

Well, Cynthia, let's look at the numbers, shall we?

Last year there were 349 cases that went thru the Disciplinary Board program.

192 were dismissed or the attorney was referred to an assistance program and 123 are still pending. That leaves 34 cases where there was some kind of final ruling. 17 went to a Panel Hearing. That's where Feland is headed. And the odds aren't good.

Only 2 cases were dismissed. Of the remaining cases, the Panel reprimanded the attorney in 6, the Supreme Court suspended the attorney in seven, and disbarred the offender in 2.

So Feland has a much better chance of being disciplined, or having her license to practice suspended, than she does of acquittal.

If she's not reprimanded or suspended, it's even odds if she's acquitted or disbarred.

And she has the temerity, the unmitigated gall, to pooh pooh this? A sitting prosecutor, looking at a hearing where she has just over a one-in-ten chance of escaping unscathed? And a 60% chance of losing her license, at least temporarily?

I find it hard to believe that the Inquiry Panel would find probable cause where none exists, particularly in a case where a sitting prosecutor is accused of withholding evidence from a defendant.

As a prosecutor, I'm sure Feland would love those kind of odds.

Interestingly, none of the other media outlets in the state picked this up; neither did the local AP writer (who happens to be a facebook friend of Feland's).

I'm vastly unimpressed with the media in NoDak; here's a case of potential wide-ranging import, one where a prosector is charged not only with withholding evidence, but also suborning perjury, yet it's not worthy of coverage.

Nope, not when the state fair parade's in town, by golly!

Posted by at 6:03 PM | Permalink | Comments (0)

Last Friday the news couldn't have been much worse for ex North Dakota state work comp fund CEO Sandy Blunt: the state's Supreme Court affirmed his felony conviction on charges of theft. I spoke with Sandy that day, and can only report that he was all but devastated by the ruling.

What a difference a week makes. This morning, Sandy must have a whole different outlook - the prosecutor who convicted him is herself under investigation for allegedly suborning perjury and prosecutorial misconduct.

Late this week sources informed me that the state's bar association was about to begin a formal 'trial' of Cynthia Feland based on evidence she withheld information from Blunt and his defense attorney. While this isn't an actual criminal proceeding, it is quite serious, as the allegations, if upheld, are grave enough to result in Feland's disbarment for life.

As I reported months ago, "I contacted Feland several times over the last few weeks, asked her directly about this situation, and she refused to address the key question - had she provided Blunt with a copy of the State Auditor's memo which cleared Blunt of any malfeasance related to Spencer?..." You can read her response to my query, but here's the net - The prosecutor has no record of providing the defense with a document that would have allowed the defense to prove that the prosecution's main charge was not a crime.

While I couldn't force the issue, the state Bar Association, and the county sheriff, have.

The details are beginning to come out. This morning's Bismarck Tribune had a front-page, above-the-fold article detailing the allegations against Feland. Although Feland pooh-poohed the proceedings, according to the Tribune, "Sending a case to the Disciplinary Board for formal proceedings means "basically, they're making a finding that there's probable cause that misconduct occurred," [ND Supreme Court Clerk Penny] Miller said."

As assistant prosecutor, Feland personally led the state's prosecution of Blunt.

The evidence was brought to the attention of the ND Bar Association by Steve Cates, author of the North Dakota Beacon and one of Sandy's long time supporters. Case has diligently and persistently pursued the facts in this case for more than a year and a half, poring over thousands of pages of transcripts, reviewing each and every exhibit and scrap of evidence.

In the course of Cates' research it became apparent that Feland had failed to turn over exculpatory evidence, evidence that would have proven Blunt's contention that a state auditor had reported that most of the charges against him should never have been brought.

Not only did Feland withhold evidence, but she knew, before she brought the charges, that several of the charges weren't crimes. And even more seriously, Feland suborned perjury by getting a key prosecution witness, Jason Wahl, to lie on the stand.

Feland isn't the only prosecutor in hot water over their mishandling of the case. According to the Tribune, "The documents obtained by the Tribune said the Inquiry Committee West also found that Riha [Feland's boss] was issued an admonition for violating rules 5.1(a) and (b) of the Rules of Professional Conduct by not making sure that the attorneys in his office were conforming to the rules of professional conduct. The admonition also was issued against Riha for violating rule 3.8(d) of the Rules of Professional Conduct for his office not turning over a Nov. 8, 2007, memorandum from Jason M. Wahl in the state auditor's office to Feland."[emphasis added]

The Wahl memo indicated Blunt's actions regarding a discharged fund employee, actions that Feland had said were illegal, were perfectly legal.

Sources also indicate, and I have confirmed, that the county sheriff has launched a criminal inquiry into Feland based on alleged perjury charges. The charges stem from Feland's statement to the judge at Blunt's trial that all charges against Sandy had been sent to Blunt's defense counsel before trial. It now appears that Feland knew this wasn't true.

At long last, the truth is beginning to come out. Blunt was convicted, and his conviction upheld, due to prosecutorial misconduct. Simply put, he was railroaded by a prosecutor who accused him of crimes he didn't commit and lied to the judge during the trial.

Sandy can't get his life, or his reputation back. Here's hoping he makes the Burleigh County prosecutors pay for what they did to him, and make it abundantly clear that these criminal actions carry a very heavy penalty.

Posted by at 5:19 AM | Permalink | Comments (0)

Several clients have asked for more detail on how the reform bill will change Medicare reimbursement for physicians and other non-facility providers. Here's the synopsis.

First, note that this pertains only to reimbursement changes contained within the reform bill. There are a host of other initiatives, ideas, pending changes, and reimbursement 'tweaks' outside the bill that will also impact reimbursement.

Reimbursement for primary care services - provided by some internists, family practice docs, pediatricians, PAs, and nurse practitioners - will increase 10% between 2011 and 2015. After 2015, the increase - which is described as a 'bonus' - will theoretically expire.

The key word here is 'some'.

To get the increased compensation, 60% of the provider's charges for services over the last (to be determined) months/years must have been for primary care.

There's also more funds for some general surgeons - a 10% bonus if they provide 'major surgical procedures in health professional shortage areas".

That's it for the easily described changes. Now here's the more complex.

1. Bundled payments - there's a national pilot program authorized under reform that would allow for bundling of payments for an entire episode of care, as opposed to the current fee for service (FFS) methodology. Under this scenario, a group of physicians, ancillary care providers, and facilities would get paid a flat amount for a specific condition/diagnosis.

2. Post 2014 and the Independent Payment Advisory Board - Starting in 2014, the IPAB would be required to recommend specific Medicare spending reductions in any year in which Medicare's per capita cost growth rate exceeded a specific target. IPAB's recommendations are more than just idle talk; they would become law unless Congress passed an alternative proposal that resulted in identical savings. Some provider types are excluded for a limited time (this is too deep in the weeds to go into here).

There's more in the bill, but it is for very specific services, types of providers, and geographic areas yet to be identified - in all, few providers will be affected.

For more detail on the bill's impact on reimbursement, click here.[opens pdf]

What does this mean for you?

Remember this is just the reform bill - it is highly likely other changes driven by other bills, regulatory changes, and miscellaneous factors will have as much - if not more - impact.

Posted by at 7:51 AM | Permalink | Comments (2)

HWR guru and lead organizer Julie Ferguson's got the editor's pen this week, and uses it to great effect with the Dog Days of Summer edition.

Julie's focused on post-reform 'what now' and 'what's this mean' issues, covering those devilish details with contributions from Uwe Reinhardt, Jaan Sidorov, Maggie Mahar, and other great writers on all things health.

Posted by at 10:11 AM | Permalink | Comments (0)

The good folks at NCCI just released a report [opens pdf] detailing workers comp medical cost drivers; there are two 'headline' findings; severity is increasing at a slower rate, and the price of medical services is becoming a larger contributor to overall cost increases.

(The studies are based on lost time claims closed within 24 months of accident, so an increase in the length of time claims are open or the number of claims open longer than 24 months won't show up.)

A quick side note than we'll discuss these and other findings. The study covers experience through 2006, thus changes over the last three plus years are not considered. As I've reported here and NCCI has covered in many papers, several components of medical have seen rather significant changes since 2006: pharmacy costs are up; facility costs are spiking; surgical expenses, driven in large part by implants have increased dramatically in several ares; physical medicine costs in several jurisdictions are down and imaging expenses appear under control, due in large part to the impact of networks.

The big news is the increase in utilization has tapered off; we haven't seen fewer medical services, but we also haven't seen continued growth in the number of services provided to claimants. I'd hasten to add that while this is good news, we're still dealing with too many services delivered to to many claimants.

The bleeding isn't getting worse, but it's still pretty bad.

The price issue is troubling. Most of the 21% increase in severity was due to higher prices for medical services, this at a time when the utilization of provider networks, offering discounted pricing for medical services, has grown significantly. PPO penetration, on a national average basis, is in the 60% range with wide variation among states - NJ and FL commonly see rates above 85%, while Texas and California are closer to 50%.

PPO penetration has increased significantly over time, yet prices have also grown. There are several potential explanations for this:

a) a change in utilization patterns over time, wherein more expensive procedures are used more often. This doesn't appear to be the case, as the NCCI study accounted for changes in service type.

b) an increase in fee schedules. again, this doesn't appear likely as most fee schedules have seen modest increases, with a couple notable exceptions.

c) increased provider pricing in UCR states. I'm thinking this has undoubtedly contributed to price increases. UCR pricing (usual, customary, and reasonable) are based on charges (not payments) for that procedure in that area in the preceding time period. Historically, UCR increases by double digits each year.

d) increased provider leverage in contracting. There's no doubt this has contributed to cost increases, as we've seen in California, Illinois, and many other states.

What does this mean for you?

You will want to assess how the prices you've been paying for specific procedures (and the number of procedures themselves) have changed over the past few years to see if NCCI's findings re price and utilization have continued since 2006.

Posted by at 6:49 AM | Permalink | Comments (0)

Some physicians and physician groups are quite upset about insurers' recent moves to offer employer customers tight, small networks of providers based on quality and cost criteria. In an effort to block these new plans, the AMA and other groups are focusing on the few problems with ratings and avoiding the larger issue - some physicians are just bad actors.

What they should be doing is working closely with health plans and regulators to ensure the rating process is transparent, fair, and objective.

Insurers, governmental agencies, employers, coalitions, organized labor, all have been involved in assessing provider performance, many for years. CMS has launched several initiatives including measures for nursing homes, hospitals, and more recently, a nascent physician quality reporting program.

In the private sector, a Mercer survey [purchase required] indicates 14% of large employers were using such "high-performance" health-provider networks in 2009, an increase from 12% in 2008.

According to the AMA, "Physicians' reputations are being unfairly tarnished using unscientific methodologies and calculations." The complaint appears to be based in part on concern that individual physician ratings may be derived from too few data points and some physicians may treat more severe or complex cases, and therefore their ratings will suffer - unfairly.

Health plans responding to the concerns contend they have dealt with the issue by rating physician groups instead of individual physicians.

The AMA's contention has some validity, just as the health plans' responses should be taken seriously.

The larger point is simple - networks based in large part on provider ratings are absolutely, inevitably the wave of the future. Some provider organizations, including the Minnesota Medical Association, have already bought into the trend, are engaging with payers, and helping to improve the assessment process.

The attempt by some 'provider advocacy' (my term) organizations to stop or hinder this is misguided and eventually counterproductive. Throughout history, guilds and labor organizations have tried to protect all members, including members they should censure, in an effort to keep control of their industry. Eventually, these efforts all fail.

What does this mean for you?

Providers would be well served to focus on substantive issues in provider rating systems, and realize protecting the bad actors hurts all providers and helps none.

Posted by at 7:34 AM | Permalink | Comments (6)

I don't understand why those who believe health reform is socialism don't have faith in the free market's ability to control costs and deliver quality.

Here's why I'm confused.

Several large health insurers have decided its time to get serious about managing costs; they're introducing plans with limited provider networks and either no coverage for out of network providers or high deductibles and co-insurance/copays.

The plans, introduced by United Healthcare, Aetna, Wellpoint and others, are currently only available in a few markets as the healthplans test market receptivity.

Kudos to these insurers for finally getting serious about managing cost. While they are concerned about the potential for a repeat of the consumer backlash seen in the nineties, I'm betting the consumer backlash will be minimal.

The political backlash is a whole different story; more on that in a minute.

Most employees are all too aware of the rising cost of benefits; they have seen their premium contributions increase dramatically as the benefits plan has slimmed down. While some aren't going to be happy if they have to pay more to see their favorite doc or go to the nearest hospital, their anger will be tempered by the knowledge that they are better off than many of their neighbors who have no insurance at all.

That wasn't the case in the early nineties. Since 1993, the number of people without insurance has increased almost 20% to 52 million from 43.9 million.

Just as the benefits landscape has changed, so has the political. We're already starting to hear some politicians complain that employers' changes are evidence that 'ObamaCare' isn't working as advertised, that the President's promise that reform would allow you to keep your current plan wasn't true.

These critics probably know their argument is specious at best. The reform legislation was specifically designed to allow employers to maintain control over their plans, the thinking being the free market will develop solutions to the cost and coverage problem.

And that's precisely what is beginning to happen, albeit slowly and in baby steps. Health plans have realized that risk selection isn't the path to success, quality and cost of care and more effective member health management is.

There's a bit of hypocrisy, or perhaps more kindly, ignorance among those who criticized 'Obamacare' for its 'socialist' leanings and now fault reform for benefit plan changes implemented by employers seeking market answers to rising costs.

The cost control steps included in the reform legislation are weak, scarce, and small; stronger cost controls were discarded in order to get the bill past lobbyists and their friends in the Senate (and to a lesser extent, the House). As a result, we're left with a bill that - de facto - relies on private insurers and employers to develop tools and methods to control cost.

Critics can't have it both ways. Either decry the bill for its weak cost controls and governmental 'takeover' of health care, or slam it for forcing employers to change plans to control costs because the bill doesn't do enough.

Trying to both results in one argument refuting the other.

Posted by at 8:17 AM | Permalink | Comments (7)

There's a good bit of activity on the regulatory front as states with work comp pharmacy fee schedules consider possible changes to address the myriad issues inherent in AWP.

A little background will help frame the issue.

First, it's important to understand the fee schedule amount is only paid if the script doesn't go thru a PBM, and the vast majority of scripts do go thru a PBM, ensuring the carrier/employer/fund pays substantially less than the fee schedule.

My firm's survey of large payers indicates network penetration was 82% in 2008. Therefore, fewer than one in five scripts are paid at fee schedule.

Some think setting a fee schedule at Medicaid solves the problem neatly. Were it only that simple.

Let's look at California, which is the only state using Medicaid (known as Medi-Cal in CA). In point of fact, drug costs per claim are up 72% despite a fee schedule reduction that cut price more than 25%. Clearly, the lower fee schedule did NOT control cost.

I believe what has suffered is the clinical management of drugs; as evidenced by CWCI's recent report narcotic opioid usage is up 600% over the last few years. In addition, cost per claim is up dramatically - driven primarily by utilization.

Medicaid could be used as the basis for a reimbursement calculation, however Medicaid has several inherent problems.

First, it is a political football, subject to the political winds. This has caused significant problems in New York already, and has led regulators in California to prevent implementation of the lower MediCal reimbursement rates for work comp. As state budgets become increasingly constrained and as Medicaid greatly expands, we will undoubtedly see more states seek to reduce program costs by price reductions - simple, politically palatable, and score-able.

Second, Medicaid doesn't cover a some drugs used in comp, especially pain meds and drugs that are not on individual states' Medicaid formularies. As states seek cost reductions beyond those available from simple across-the-board fee cuts, they will move to tighter formularies covering far fewer medications, reference pricing, and other mechanisms that will effectively limit the drugs on the 'fee schedule'.

As a result, a Medicaid-based fee schedule would be the subject of ongoing lobbying activity and legislative/regulatory action as it requires constant 'maintenance'; legislators change reimbursement, drugs came on and off formulary, prices go up and down.

In terms of alternatives, WAC, AWP, and some of the other methodologies are inherently flawed. However there are other standards - standards such as Federal Supply Schedule, Average Manufacturers' Price that are not subject to the same flawed processes as AWP. Examining these may help stakeholders assess their usefulness as an alternative.

(for a synopsis of the various pricing metrics, click here.

What does this mean for you?

1. Fee schedules for drugs are not applicable to most drugs paid under workers comp as PBM rates apply.

2.States will move away from AWP; it will be important to understand the alternatives, their pros and cons.

Posted by at 10:07 AM | Permalink | Comments (1)

There's a bit of confusion in the comp pharmacy management space, as there appears to be contradictory evidence from two respected sources about the use of narcotic opioids in workers comp.

First, everyone agrees there's just far too many claimaints getting far too many far too potent narcotics. Perhaps not in those exact terms, but close enough. Heavy duty, potent, potentially addictive, divertable, high-street-value drugs are dispensed far too often in comp.

But there is a bit of disagreement about exactly what's going on.

First, CWCI, the always-authoritative California Workers Comp Institute, has been researching and reporting on this problem for several years, and their data shows the use of narcotic opioids is increasing. Dramatically.

In contrast, one of the largest work comp PBMs, PMSI, recently published their results which indicate a decline in usage of this type of drug early on in the claim cycle. I asked Maria Sciame, PharmD, PMSI's Director of Clinical Services what she thought might account for the decrease in the use of opioid analgesics in the acute phase of injury.

Here's her take (and I quote):

1. increased physician awareness of the potential negative effects of opioids

2. additional organized opioid monitoring strategies (mandatory reporting) associated with opioids may have reduced "off the cuff" opioid prescribing

3. increased awareness of pain management guidelines that call for non-opioids for the initial treatment of mild to moderate pain

4. decreased prescriber fear regarding the use of non-steroidal anti-inflammatory agents over the past year...remember the FDA warnings that have been issued within the past few years regarding the negative cardiovascular affects associated with NSAID use...started with Vioxx...physicians are becoming less cautious and have regained their comfort level with the use of NSAIDs again; thus, replacing narcotics for acute injuries with NSAIDS.

There are a couple other factors worth considering.

a) PMSI's business all flows thru a PBM, whereas CWCI's script data is from payers that use PBMs and some that don't (even in this day and age, some payers don't use PBMs; go figure). PBMs have clinical management programs in place to address things like early usage of narcotics.

b) CWCI's data isn't specific to early usage, whereas PMSI's is (in this instance)

c) CWCI is specific to California; PMSI's is national and as NCCI has reported, there are dramatic differences in prescribing patterns across states. NCCI's research also indicates narcotic usage across the country has stabilized somewhat of late after several years of consistent increases.

So, what does this mean for you?

If you aren't using a PBM, get with the program. If you are, find out if they are actively, assertively, and effectively managing narcotic opioid scripts and claimants on those scripts. If they aren't, find out why not (hint, it may be because you're not able to provide data or support their efforts, if that's not it, they've got some explaining to do)

Ask for data on narcotic usage for claims less than a year old, and older ones as well, and decide if your results are acceptable.

Posted by at 2:00 PM | Permalink | Comments (2)

The work comp pharmacy benefit management industry is growing increasingly sophisticated, and the release of PMSI's Annual Drug Trends Report this morning adds to the trend.

Many of the larger work comp PBMs produce similar reports, providing deep insights into cost drivers, the effectiveness of solutions, and trends that anyone with any responsibility for med loss would be well advised to read.

Here are the quick takes from my admittedly not in-depth read of PMSI's effort.

1. Price was up significantly last year, climbing 4.7%. This is heavily influenced by the price increases pushed thru by big pharma on brand drugs last year in anticipation of health reform.

2. Utilization was up only slightly, driven by more days supply per script.

3. Mail order utilization was up 3.6%, which undoubtedly contributed to the higher utilization as mail order scripts tend to include more days' supply than those dispensed by retail stores.

4. The average number of scripts per injured worker was 11.1 in 2009. Yep, eleven point one. That's a lot of drugs.

5. The report includes an interesting chart graphically illustrating the impact of the age of the claim on scripts per claimant; claims a year old typically had around three scripts at an average price per script of thirty bucks or so; in contrast ten year old claims had 23 scripts averaging over $180 each.

6. Generic efficiency (the percentage of scripts that could have been filled with a generic version) remained at 92%. This is driven by several factors, including state regulations (some have mandatory generic language and others are considering adopting it), PBM and payer intervention and outreach, and the 'macro' pharmacy market's introduction of new brands. Generic efficiency and 'conversion' is key to cost management; according to PMSI (and consistent with other reports) each one point increase in generic utilization reduces cost by 1.4%.

7. Pharmacy in comp remains primarily, and I'd argue overwhelmingly, driven by pain. PMSI's data suggests over three-quarters of drug spend was for pain management - one of the key differences between work comp pharmacy and group/Medicare pharmacy.

8. Our old nemesis OxyContin again accounted for a lot of comp dollars, with 9.9% of spend allocated to the brand and generic versions. On the good news side, Actiq and Fentora usage declined significantly (type 'actiq' into the 'search this site' text box above and to the right for plenty of reasons why this is a very good thing).

9. Finally, the average days supply of narcotic analgesicvs was up 6.4% while the number of claimants getting those drugs actually declined. This may be due to those claimants who could use alternative meds getting off narcotics (or not starting on them in the first place). As a result, the claimants still taking these drugs are more likely to need more meds.

There's a lot more meat in the report, lots of detail on which drugs are driving how much utilization, changes in utilization by class of drug, and most importantly, the impact of clinical programs on utilization and drug mix.

What does this mean to you?

Two things.

While PMSI is one of the largest PBMs, remember that these data refer to their customers' experience and therefore may not be exactly equivalent to your book of business. That said, don't use that as an excuse if your stats aren't up to snuff - instead look for ways to get better.

As you pack for that summer vacation, grab a copy of your PBM's report (go to their site and find it there, or call your rep and have them send it over) and perhaps a couple others.

You know you want to, and you can always hide it inside a Cosmo or Men's Health to prevent mocking stares from the knuckleheads on the next beach towel.

Posted by at 8:08 AM | Permalink | Comments (0)

Getting employees to change unhealthy habits, exercise, eat right, and do all the other little things that make for better health and lower health care costs is fiendishly difficult. As a nation, we've proven that if anything, trying to change behavior is a losing proposition.

But every now and then there's a glimmer of hope, with evidence that some change is possible - and sustainable.

Earlier this week the Orlando Sentinel had a front page article about one company's very successful campaign to help its workers shed some pounds. The company, Total Medical Solutions (HSA consulting client, altho I take no credit for this success), started a team-based weight loss program that has resulted in the disappearance of hundreds of pounds, bonded workers from different parts of the company together around a common goal, and led to some significant business for area clothing stores.

While the benefits for workers are apparent - better health, greater self-esteem, more energy - there are also long term benefits for TMS in the form of (hopefully) lower medical expense for costs associated with obesity. Diseases including hypertension and diabetes are strongly associated with obesity; returning to a healthy weight can dramatically reduce the chance someone will contract these conditions.

There's another benefit - TMS grouped their workers together in teams, teams that crossed department and positional lines. Execs from one department found themselves allied with line workers from another area; accountants with call center staff, operations with marketing (now there's an idea...) - all working together to lose weight.

I've got to believe that this sharing of a common goal will have other benefits, in the form of renewed commitment to corporate objectives, a better ability to work together, and a stronger sense of team.

Kudos to the folks at TMS for finding a creative way to help their staff get healthier.

Posted by at 11:47 AM | Permalink | Comments (0)

In the work comp world there's an oft-used term used to describe medical costs - 'severity'.

I'm beginning to think that word itself is a problem, and perhaps is part of the reason the work comp payer community has proven itself, with few exceptions, unable to effectively manage medical expense.

There are any number of meanings for the term itself, but as it is used in the claim world 'severity' refers to the medical cost of a claim, or when used more broadly, medical costs overall (e.g. Severity of lost time claims increased in 2008 by xx%).

Severity is something that sort of just happens - a claim is either really severe or it isn't. Severity is driven by uncontrollable factors and thus we can only deal with the fallout, or results, or impact of severity.

Severity happens.

It does, but only if we let severity 'happen'. In reality, medical costs are much more controllable than many think; severity doesn't have to happen to you, unless you passively allow it to. But because we've grown accustomed to hearing things like "claims costs increased driven by a 9% increase in medical severity", we think 'oh well, there's that severity again, yawn..."

What we should be doing is asking a lot more 'why' and 'how' questions, and using the answers, or lack thereof, as the basis for actions to control severity:

- why is severity increasing?

- what specific areas and types of medical expenses are up?

- is there a region or state that appears to be up more than others?

- what are we not doing and why are our present programs not controlling cost?

- how do our results compare to our competitors? why? what are they doing differently?

Because the fact is, 'severity' is controllable - if you're willing to ask the hard questions and address some perhaps uncomfortable answers; able to concede that your programs aren't really 'best in class', and willing to adjust, retool, and revamp processes to drive better results.

In my experience most comp payers aren't willing to do what it takes to control severity. And that's why 'severity' controls them.

Posted by at 4:38 PM | Permalink | Comments (5)

Today's WorkCompCentral edition [sub req] reported on an emergency revision to Illinois' state workers comp fee schedule that will change the methodology for repricing surgical implant devices.

The move is a response to what the Illinois Workers Comp Commission described as 'price gouging'. In the announcement, [opens pdf] the state noted "some providers have inflated their reported charges for implants so high that the final reimbursement is as much as 33% over the average cost from other providers.

The previous rate was set at 65% of billed charges; the new reg sets reimbursement at 25% over manufacturer's net invoice price. The rationale for this? The "reimbursement rate is reasonable. It provides a significant profit margin while providing cost-containment and certainty for payers. In addition, in order to arrive at an accurate provider's cost, the Commission decided that the invoice price would be net of any rebates but also that actual and customary shipping costs for the implants additionally would be reimbursed."

What does this mean?

Well, using an invoice plus is better than a discount off billed charges, which has to be the most easily-gamed pricing methodology every conceived. Factoring in rebates is a good step as well; to my knowledge IL is the only state that considers the impact of rebates. And stating reimbursement is for the NET manufacturer's invoice price will help forestall gaming the invoice as well.

The challenge lies in determining what 'rebate' means, how it will be determined, reported, and factored into pricing, and how 'net' will be defined.

As I noted in a post a while back, The problem lies in the documentation of the paid amount. Most payers ask for a copy of the invoice, which, on the surface, makes sense - this is what was paid.

Not exactly. What the invoice doesn't show can include:

- volume purchase discounts

- rebates

- "3 for the price of 2" deals

- waste (some surgeons use the cage from one kit and screws from another, so the payer is paying for more hardward than is actually being used)

- internally developed invoices (documents prepared not by the supplier but by the provider)

This last point is the crux of the issue. Hospital systems often buy in bulk, with several implant kits shipped and billed; this obviously makes it impossible for the provider to produce the invoice for the device used in a specific surgery, as they never got one. Thus, many providers develop the invoice for a specific implant kit themselves.

There's another problem with implants - when they are defective, the patient has to go back in for more surgery. And the WC insurer has to pay. The only way to mitigate risk is to track the model and manufacturer for each implant - yes, it's work, and yes, it's work worth doing.

Finally, even the original invoice is for a device with a markup that is, well, huge. One analyst estimates gross margins are in the 80% range...driving profit margins that are the envy of any payer or health system.

The net? Kudos to IL for recognizing and addressing this issue. Now it will be up to payers to enforce the regulation, by demanding the actual invoice, not one developed in the basement. They may also want the provider's notarized statement that the invoice is the real, actual, honest-to-goodness true price net of rebates, discounts, etc.

Posted by at 7:37 AM | Permalink | Comments (3)

I've just about had it with the GOP's demagoguing about deficits.

The party of fiscal responsibility, of low taxes and small government, of controlled spending and personal responsibility - that party - seems to have rediscovered its roots of late, with strident calls for fiscal restraint, an end to wasteful government spending and strict adherence to pay-as-you-go guidelines.

This from the party that added over $9 trillion to the deficit the last time they passed a health care bill.

Let's return, for just a moment, to the early and mid oughts, the halcyon days of the Bush Administration, when the entire government was under the firm control of the fiscally prudent.

Here's what those wise stewards of the nation's wealth did.

Point One
Pass Medicare Part D with no funding - short term, long term, any term. Hell, they would've been more fiscally prudent if they'd included a few hundred million to bet on the horses. At least that would have shown some desire to pay for the thing. But no, the GOP decided to NOT set aside funds, or raise taxes, or cut other programs; they just passed Part D, committed to paying for it out of 'general funds' and to hell with the future.

The latest Medicare Actuary report indicates the GOP-passed Part D program has contributed $9.4 trillion to the $38 trillion Federal healthcare deficit. (page 126)

The Bush-era GOP makes President Obama, Pelosi, Reid, and the rest of those spendthrift Dems look like a bunch of cheapskates; even a GOP analysis finds "the new reform law will raise the deficit by more than $500 billion during the first ten years and by nearly $1.5 trillion in the following decade."

Point Two
Prevent CMS from basing reimbursement on effectiveness. As I said a couple months ago, "'the Republican Congress and Administration was responsible for preventing Medicare from considering any cost-benefit criteria in determining whether and what Medicare would pay for procedures, drugs, treatments, devices, etc. Yep, these deficit hawks thought it was just fine for we taxpayers to be forced to pay for procedures with very little efficacy. (Medicare Modernization Act)

Hmmm, wise stewards indeed...

How'd the GOP get away with this? Simple. The Republicans suspended Congress' PAYGO rules, the requirement that any bill that spent more money had to be offset by more revenue or cuts elsewhere.

By the way, those PAYGO rules? The Dems reinstated them.

From all the caterwauling from the GOP side of the aisle, you'd think that Mitch McConnell, John Boehner, Newt Gingrich et al were well practiced in the art of controlling spending, of not spending what you don't have.

And you'd be wrong.

According to the Wall Street Journal, speaking about a recent effort to extend unemployment benefits, McConnell said "The principle Democrats are defending is that they will not pass a bill unless it adds to the deficit," McConnell voted for both Part D and MMA.

Speaking about the health reform bill a couple months ago, Rep. Paul Ryan of Wisconsin, "the top Republican on the Budget Committee, said "Hiding spending does not reduce spending. We all know this bill is a budget Frankenstein. It is a house of cards. It is going to give us a huge deficits now and even larger deficits in the future." Ryan voted for Part D and MMA.

Here's party leader Newt Gingrich: "Republicans, I think, are going to draw a very firm line against any kind of tax increase that would kill jobs, and that's very hard for liberal Democrats to live with because all of their plans require bigger spending, higher deficits and more taxes, and it's a fundamental disagreement about the nature of the world."

I could go on, but you get the point.

What does this man for you?

I've had, and voiced, deep concerns about the health reform bill and its associated costs. What makes me, and should make you, really angry is the demagoguing by elected officials who've done exponentially more to damage our fiscal future than even the most pessimistic assessment of the health reform bill.

Posted by at 6:46 PM | Permalink | Comments (8)

Coventry Health will be taking a $278 million charge against earnings to cover the company's fine plus interest and legal costs resulting from last week's Louisiana appellate courte ruling in a workers comp PPO network case.

On a per-share basis, the bill is $1.18 pre-tax.

the charge will be partially offset by improved earnings from other sectors, including Medicare Advantage Private-Fee-for-Service. According to Zacks, the "2010 EPS outlook was also revised to $1.57−$1.72 in view of the impact of the charge, down from the prior range of $2.35−$2.50 per share. Excluding the charge, Coventry anticipates the EPS outlook to increase by 40 cents per share to range between $2.75 and $2.90."

Since moving back into the executive suite over a year ago, CEO and Chairman Allen Wise has done an excellent job turning the company around - refocusing the company on its core businesses, shedding underperforming and inefficient operations and profit centers, even revamping the way the company negotiates provider contracts to focus on Medicaid, Medicare, group, and individual health businesses.

The quarter-billion dollar charge is undoubtedly the subject of much discussion at the company's, executive committee meetings as it will suck cash out of the coffers that would have been used to acquire more regional health plans and help Coventry prepare for the post-reform health insurance world. It is also notable as it comes from a division, workers comp, which heretofore had been a cash machine, generating significantly more profits than its rather modest top line would predict.

For now, Coventry appears to be weathering the storm, recently announcing the acquisition of a couple of regional health plans and predicting continued improvements in operating earnings.

Whether this continues may depend in some part on the outcome of the company's appeal of the LA case.

Posted by at 9:30 AM | Permalink | Comments (0)