Nov
24

The (short term) future of workers comp managed care

The comp conference ended (for me) last Thursday; the passage of time allows for the individual impressions to meld into an overall picture of the current, and near-term future, of the comp managed care industry.
Here’s what it looks like.
The decade-and-a-half decline in frequency that has slashed the injury rate in half is causing real pain among occ health clinics. Sources indicate industry leader Concentra is seeing a decline in work comp patients, a trend that will likely be exacerbated by the steep drop in employment (when the number of people with jobs drops, so does the number of workers comp claims – for more on the impact of recession on workers comp click here). It is likely that other occ health companies such as US Healthworks are also experiencing declines in patient counts.
Together, Concentra and USHW together have almost 450 occ health clinics, and both have been adding clinics in 2008. It is too early to tell if the additions have been worth the added cost in cash or debt, but the current economic situation makes it unlikely they will be looking to expand aggressively over the near term. Unless they find clinics that are finding it difficult to make it on their own, in which case this may well be a good time to expand on the cheap.
The big game-changer will be health care reform. If, as I’ve predicted, Medicare increases reimbursement for E&M codes (cognitive services), then the clinic business could well get a major boost. Almost all WC fee schedules are based on Medicare, so any change in Medicare directly and immediately impacts comp reimbursement. Watch Capitol Hill carefully; if Congress passes legislation signed by future President Obama affecting Medicare reimbursement, clinic companies may be big winners.
Meanwhile, work comp managed care industry leader Coventry is continuing to hurt (due to non-workers comp issues), with rating agencies downgrading their outlook on the company. If anything, the workers comp business at Coventry is a plus, as the fee revenue helps to offset some of their problems in the health insurance, Part D, and Medicare Advantage sectors. Several people I spoke with at the conference confirmed Coventry is continuing to get price increases on their network and bill review products, although pricing for PBM First Script and other services (e.g. MSAs and case management) is soft.
The network business is under increasing pressure from regulators. In addition to the legal issues in Oregon and Louisiana, is is highly likely the ‘networks of networks’ will find their business model under attack as states adopt legislation/regulations forcing greater disclosure of rental network agreements, requiring positive agreement from providers (providers have to sign off on a document before they can be added to a network).
The future of networks that are mostly amalgamations of other network contracts is not promising. They will have to convince payers that their liability is under control and their value (to the payer) is greater than networks with direct provider contracts.
Good luck.
The PBM sector continues to grow, with the biggest player – Express Scripts – looking to add to the distance between itself and its rivals. Despite claims to the contrary, ESI is not winning business by using its group health contracts; a well-informed source adamantly refuted that assertion, stating that all workers comp scripts are processed under their workers comp agreements. Expect this sector to get even more competitive as ESI fights for business with newly-purchased PMSI (second largest PBM by volume), Progressive (excellent reputation for customer service), Cypress Care (aggressive, innovative marketing and strong clinical offering), ScripNet (expanding into the eastern US), and Aetna (cross-marketing to their large group health employer customers). MyMatrixx (focus on pain management) and Modern Medical (highly disciplined and responsive) are also in the mix.
Expect pharmacy to remain highly competitive, with vendors adding value through clinical services, first fill capture, and upgraded reporting and communications capabilities as companies seek to survive and prosper in what has become one of, if not the most, competitive segments of the work comp managed care industry.
I’d also say we need to pay attention to DC. If Congress calls for the Feds to negotiate drug prices, this will affect comp in one of two ways. Either comp payers will be able to piggyback on the Feds’ negotiated rates, in which case per-pill prices will come down, or (more likely) comp payers find their per-pill prices increase due to cost shifting.
Case management firms are facing the same issues confronting occ health clinics, with several folks at the major CM firms bemoaning the decline in volume. With volumes declining, and more big insurers and TPAs taking CM inhouse, expect continued pressure on pricing as Genex, Intracorp, Corvel, and Coventry struggle to ‘feed the monster in the basement‘.
What does this all mean?
External factors are the primary driver of workers comp. Medicare, the economy, and politics are all way more important than internal happenings in comp.
Look up and out if you want to know and understand.


Nov
21

Florida – the end of the happy times

While I and a few thousand other industry folks have been conferring in Las Vegas, the world (most inconveniently I would add) has been marching forward without us. In Florida, it looks their progress is headed right for the edge of a metaphorical cliff.
Florida’s workers comp regulatory bosses yesterday approved a change in the way workers comp payers will reimburse outpatient facility bills. According to WorkCompCentral, Florida regulators will:
“begin drafting a rule to base outpatient fees paid to hospitals on the Medicare Outpatient Prospective Payment System. But the fees would be adjusted using Florida-specific multipliers based on the usual-and-customary charges now employed to establish outpatient fees…Under the new system, the Medicare-based fees would be adjusted by a new factor created by a hospital’s usual and customary charges, by 174% for outpatient surgeries and 395% for other outpatient services.”
Okay, here’s why this is a bad idea.
First, Medicare fees are for treatment of elderly folks. Not working age, employed people. As a corollary, providers treating Medicare patients are not concerned with functionality or return to work. CMS has repeatedly stated their reimbursement methodology is specific to their population, and discouraged use of that methodology by other payers.
Second, The reimbursement scheme pays hospitals 74% more than Medicare for surgeries and four times Medicare for other outpatient services. This is insane. Workers comp is already the most profitable line of business for Florida hospitals, and this methodology makes it even more lucrative. It is indeed unfortunate that the Sunshine State has the second highest percentage of working folks without health insurance, but why make workers comp payers cover their medical bills? No, there’s not a direct link, and no, this wasn’t expressly addressed (as far as I know as I wasn’t at the hearing) but from here it sure looks like workers comp payers are being asked to help facilities cover the underpayments from Medicaid and provide funds to help treat the uninsured.
Oh, and these costs will now be the highest in the country.
Third, basing reimbursement on charges is just nutty. Providers increase charges around 14% every year This methodology now locks in a 14% trend rate for outpatient hospital services in Florida. Take it to the bank (if yours is still in business) – the slope of the inflation line is about to steepen dramatically.
Fourth, according to sources present at the hearing, there are serious problems with the methodology and data used to support the three member panel’s decision. Florida State University health economics guru Gary Fortier submitted a brief that stated that the methodology being used by the Department was “fundamentally flawed,, and in my opinion the study and methodology used cannot be relied upon….to make policy.” Fortier also warned that once this payment system, which encourages greatly increased utilization of hospital services to treat WC patients, is put in place it will be hard to change even if payments become more tight-fisted in the future.
Mike Malloy, former managed care analytics expert at E&Y, gave details about how easy it will be for hospitals to game their charges and drive up employers’ costs under the proposed system.
And FairPay Solutions (HSA consulting client) presented industry statistics illustrating how paying hospitals 333% more to treat WC patients than they are paid by FL group health plans creates such significant financial incentives that it will inevitably lead to greatly increased treatment of work comp patients by hospitals and cost Florida employers several hundreds of million of dollars more.
As I’ve noted here and here and here this is going to end up costing the comp industry in Florida a lot more than many think.
What does this mean for you?
the end of the happy times in the Sunshine State.


Nov
20

Two new network offerings

My quest for an actual provider-centric network is not complete. But there are a couple of companies that look to be off to a good start.
By way of background, most networks tout their huge directories of lots of providers, their discounts, and not much else. They sell their network by electronically matching their provider database against the prospect’s 1099 data (historical payments to providers). The better the match, the better their chances of landing the deal. At one level this makes perfect sense.
I’d suggest that this methodology is fatally flawed; the payer is asking the wrong question. By identifying networks that have as many docs as possible that already treat the payer’s claimants, the payer is asking for nothing other than a cheaper per-unit price. Yes, they will get a lower price per service from the docs they like, but they will also keep in the network docs they do not like at all – the ones who don’t return adjusters’ calls, don’t understand workers comp, do lots of unnecessary PT in their offices, and dispense drugs at outrageous markups.
Harbor Health takes a different approach – they have developed a process and analytical capability that enables HH and their clients to analyze sort thru their gigabytes of data to identify the providers that meet their definition of ‘good’. The analysis includes claims data as well as patient satisfaction and claims satisfaction information and billing/admin data to identify physicians who meet (customizable) criteria. HH is also building networks. To date, most of their customers have been large self insured employers (SoCal Edison was one of the first, and Sears is their latest).
After spending a half hour discussing Harbor Health’s process, methodology, ranking system, and approach, I’m impressed.
FairPay Solutions (current HSA consulting client) has built a physician-only network in Florida that is currently being evaluated by several large payers and soon to be implemented in Florida by one. FairPay also has access to a wealth of data, and has mined that data using sophisticated criteria as well as local knowledge in their development effort. The folks FPS brought in to develop the network came out of the old Choice Medical Management, acknowledged as the premier network company in the Sunshine State.
FairPay is, quite intelligently, building a physician-only network. There are any number of companies that do an excellent job of managing physical medicine, drugs, DME/HHC, imaging, and hospital costs. What FPS is focused on is the physician who controls how these other services are utilized.


Nov
20

Las Vegas – the sort-of perfect analogy for workers comp

Las Vegas is a weird setting for a workers comp conference. The hyperactive, eternally lit, wildly exciting town that is ‘Vegas’ makes for a bizarre counterpoint to the world of risk management – a business that works very hard to be steady, buttoned-down, predictable, and is certainly not glamorous.
Then again, the boom-and-bust that plays out every minute on the felt of the craps tables and poker games is workers comp in miniature.
Right now the sense seems to be the comp industry is starting to recover from the years-long soft market. Vendors throughout the hall are seeing employers and insurers focusing more tightly on cost drivers, on risk management and loss prevention. Risk managers are looking for new answers, different ways to attack the problem of rising medical costs that has been the one constant in this highly cyclical industry. The vendors’ perspective is borne out in conversations with managed care execs, who are getting much more attention from large employers interested in ‘real managed care’, who want to delve into the details, the workflows, outcomes, and results. No longer satisfied with ‘yeah, we’ve got that managed care stuff’, employers are (finally) getting serious.
About time.
For too long employers have been satisfied with ‘me, too’, cookie-cutter approaches to managed care. Most every large payer uses the same network, the same case management and UR schemes, pretty generic bill review and some amalgamation of specialty managed care vendors. They’ve been talking about outcomes oriented networks for years, and far too complacent when vendors have consistently failed to deliver on their promises to actually build them.
Yet employers haven’t been completely complacent. While the market’s been soft, employers have beat the bejesus out of their TPAs and carriers, demanding more and more coverage and service at ever-lower costs.
Now it’s coming back to them. Medical costs are rising, the power is shifting to the other side of the table, and there are few new and promising answers.
The good news – there are a few answers. I’ll talk about them later today.


Nov
18

the comp conference – first impression

before I even hit the floor (exhibit, that is), it became evident that the big thing this year is…MSAs!
Really.
For those of us who were under the impression that the Medicare set-aside business had peaked some time ago, it looks like a lot of folks were reading the tea leaves differently. With “a lot” defined as seventeen.
There are no fewer than 17 vendors that list MSAs (of something very close to that) in the conference guidebook. Most sell other services as well, a few specialize in MSAs, and there are a couple law firms that do the legal work part of the MSA process.
With that much competition, it’s pretty apparent the MSA business is fast becoming commoditized, with prices likely falling rapidly. Sources indicate Coventry has been hit hard, and ha recently shut down an MSA office, laid off some of the staff, and transferred the remaining work to another Coventry location. This may well be an astute decision as competing in a commodity market is not a good long term tactic for any but the most focused, and Coventry’s attention is clearly elsewhere.
For those just entering the fray, get efficient quickly, deliver great customer service, don’t overpromise or commit to things you don’t control (eg acceptance by CMS) and communicate well and often with adjusters. And be prepared for shrinking margins.


Nov
18

Off to Vegas!

The annual gathering of the tribes is happening, in Las Vegas this year, as the National Workers Comp and Disability Conference opens this evening.
Here’s what I’ll be looking for.
1. any palpable evidence of outcomes-based physician networks – or any networks that do not have large, yellow-pages-sized directories of physicians who are selected based on their ability to fog a mirror and give a discount below fee schedule or U&C. Coventry talked about such a network at their annual client meeting in Naples, but it has yet to make an appearance.
2. the next big thing – a few years ago it was emergency preparedness and recovery, then pharmacy management, then imaging and workflow, then brand spanking new networks. What will it be this year? outsourced claims? medical tourism for orthopedic surgery?
3. which company will get the award for most blatantly misogynistic marketing? Will it be cheerleaders, women in skintight superhero costumes, or shoeshine ladies? Don’t these vendors know that many risk managers are female? that more than a few companies are woman-owned and/or run?
4. will the private equity companies once again be wandering the halls, buttonholing entrepreneurs and grilling booth staff on performance, competitors, and new customers and products?
5. will we hear the same old stuff about return to work, teaming case managers with adjusters, safety and loss prevention or will there be something new and fresh?
Any bets?


Nov
17

Cavalcade of Risk – post election

This two week-post-election edition of the Cavalcade of Risk combines a bit of prognostication about the directional impact of the political winds, a lot about the economy and impact thereof, and a few posts that manage to be both topical and intriguing-ly random.
upfront disclaimer – somehow I managed to offer to host CoR in the middle of the annual workers comp conference – an incredibly poor decision on my part as this is a rather busy time for your author. That’s my excuse for the brevity of this edition. But, hey, it’s a quick read!
First, here’s Julie Ferguson’s contribution – warning, it addresses the burning question – what to do if you own a bar and the bartender’s nude?
We’ll begin with health-related submissions, and no better way to kick off the CoR (and over the ant hill) than with Bob Laszewski’s post on the failure of the free market in health insurance. Bob’s oservation is straight forward – since HillaryCare went up in flames, the free market had fifteen years to prove itself. It failed miserably. No excuses and no whining.
What’s next? Louise takes Bob’s logic another step with her contribution, wherein she makes the case for allowing individuals to ‘buy in’ to Medicare.
Maggie and Niko of Health Beat follow up with a discussion of the possibility of a dramatic restructuring of physician compensation – shifting more dollars to primary care and away from specialists.
Nancy Germond from D&B (corporate bloggers are coming!) contributes her views on the likely implications of a Blue Washington.
I have a somewhat different perspective; my take is there will indeed be health reform, although it will not be in a single massive bill.
Economist Jason Shafrin reveals one of the many obstacles to meaningful health reform – patient pressure as docs who actually use decision support systems find that patients feel, well, that this makes them less ‘physicianly’.
Khan contributes a post on an issue of concern to those of us with older progeny; Health Insurance Options for Students.
Long-time contributor and pharma expert David Williams is of the opinion that big pharma may be preparing to shoot itself in the foot. Alvaro Fernandez continues our brief sojourn into the world of pharma – his post details the new sleep therapy – and it isn’t a pill.
Henry Stern, LUTCF, CBC informs us about what happens when politicians go too far in expanding programs – and it isn’t anything good.
In the non-health-related world, LAL believes the next meltdown will be in auto debt, pointing out that the average car loan is about $25k..
A very well done review of the current liquidity crisis and how it impacts the financial environment is up at VoxEU. The
http://www.workerscompinsider.com/archives/000963.html
Onto the property and casualty insurance world…
Eric Turkewitz has done a masterful job researching a key liability issue, personal injury due to President Bush’s Dog Biting a White House Reporter (Can Bush Be Sued?).
Jon Coppelman somehow draws a link between frozen embryos and workers comp. Really.
Workers Compensation expert James Moore reports on some interesting developments in West Virginia’s Workers Comp program, and a state-run but commercially insured risk pool for problem industries.


Nov
17

When health insurance…isn’t

Friday’s New York Times had an excellent piece about the major changes occurring in the type of policies gaining traction in the group health insurance market – consumer-directed health plans with high deductibles. According to the NYT’s Milt Freudenheim, more than a hundred large companies, including Nissan and Delta Airlines are now offering one plan – a high deductible one. The corporate types interviewed for the article claimed their employers had changed from other options to the single high-deductible one because
While Nissan and Delta are contributing to the deductible account, they are the exception rather than the rule. Only a quarter of employee HSA accounts actually have any funds in them. If, or more accurately when, the worker or a family member gets care, they will have to pay for that care with post-tax funds from their regular cash flow – if not, it likely goes on the credit card, where it not only is paid with post-tax dollars, but it may well add to the family’s debt burden.
Although consumer-directed health plans have struggled to gain traction, it looks like we can expect more and more employers to adopt them – gaining a significant reduction in costs in the first year, with some, albeit unconvincing, evidence of slightly lower costs in subsequent years. I’d note that the evidence is rather thin, and the cost savings may well be due more to adverse selection (healthier folks choose HSA plans when they have a choice, with their less-healthy coworkers sticking with HMO or other richer plans).
While I’d like to believe the benefits folks from Nissan and Delta are doing this to encourage better spending habits and healthy behaviors, the real reason they’re dumping their richer plans is cost. Both companies have been and will likely continue to be hammered by the recession, high energy costs, and declining demand. Health care plans cost $13,000 per family – it’s no wonder employers are switching to lower cost alternatives.
No, companies changing to consumer-directed health plans are doing it to cut costs. But they may well find their efforts backfire.
The underpinnings of CDHPs lie in the economic theory of “Moral Hazard.” Journalist-author Malcolm Gladwell describes this as the belief that “insurance can change the behavior of the person being insured” and notes that it is popular among many economists and think-tank types and, consequently, has been influential in shaping health care delivery systems. The idea is that if insurance covers the bills, people are more likely to seek care and run up unnecessary costs.
The Moral Hazard theory falls short when confronted by the rather uncomfortable reality of actually having health care services rendered to one’s own person. Why would anyone want to subject themselves to surgery or hospitalization if there were an option to avoid it and just go fishing instead?
But on the surface, the concept makes some sense. Most people would be careful about getting an MRI if they knew they had to foot the bill, but perhaps too careful. People will not simply avoid discretionary care; they will avoid necessary care, as several studies indicate. One Rand Corporation study concludes that when individuals are required to pay more for prescription drugs, they don’t take them as they should. This leads to nasty physical and financial problems, such as more strokes, which cause lots of pain and cost lots of money to fix when a few blood-pressure pills might have sufficed. As far as drug copays go, increasing consumers’ costs actually drives up total medical expenses. It’s not a great leap to think individuals with high deductibles will likely wait before scheduling an appointment with their physician to see if a problem just goes away on its own. In a time when the Centers for Disease Control describe diabetes as “a runaway train,” is it economically wise to foster measures that discourage preventive care?
The coup de gras for CDHP is its old nemesis, the real world. CDHP’s fatal flaw is that the “consumer” part is directed at the wrong people. Half of U.S. health care costs are spent on five percent of the population. A deductible has little impact on the purchasing behavior of these folks; they’ll blow through a few thousand bucks in a couple of months
Conversely, over two-thirds of Americans spend less than a thousand dollars a year on health care. The only effect a high deductible will have on these folks is to discourage the use of preventive care.
Consumerism is not all bad – health care shouldn’t be “free” for anyone. Requiring people to share in the cost of their care should be a part of any serious reform effort. The fix for CDHP is relatively simple – get rid of high deductibles, which are unaffordable for many and may well discourage preventive care, and replace them with coinsurance per service to ensure patients have some financial skin in the game. Insurance companies should keep an income-indexed out-of pocket-maximum, while covering preventive services and maintenance medications at very low copays to encourage their use.
I”d add that employers really interested in reducing costs over the long term do have another alternative – buy a CDHP plan, and then fund the deductibles. One company has saved their clients significant dollars with this hybrid approach.


Nov
14

WCRI – Practice pattern variations in workers comp

Once again the fall is here, which means it is time for the Workers Compensation Research Institute’s annual meeting (today and tomorrow in Boston) and the National Workers Comp and Disability meeting (next week in Las Vegas).
Today’s kickoff began with a review of how the system has evolved since the WCRI’s inception in 1983. Peter Barth PhD began with the historical perspective.
A presentation on worker outcomes and variation in medical treatment patterns by Dr Sharon Belton indicated there were significant variations in the treatment patterns for back injuries across states. Dr Belton suggested that the design of the work comp system may be what is affecting both treatment patterns and outcomes. That sparked a question from your author regarding the potential impact of external factors unrelated to workers comp, such as practice pattern variation that have been documented in the Dartmouth Atlas. With workers comp accounting for less than 2% of national medical costs in a system dominated by Medicare, Medicaid, and private payers, the other, larger payers are likely to have more impact on treatment patterns than work comp.
Responding to my question and a similar one from Peter Rousmaniere, Dr Rick Victor, Executive Director of WCRI, said the Institute has looked into this. Although they are not ready to publish the results, Dr Victor said words to the effect that, when looking at state level data, there is almost no correlation between practice pattern variation as documented in the Dartmouth Atlas and workers comp back surgery rates. The (possible) implication is that reimbursement and other workers comp system idiosyncrasies are causing physicians to vary their treatment patterns.
My sense Is the degree of interstate variation is a result of the aggregate of local medical treatment patterns. What I’d really like to know is does the back surgery rate for workers comp mirror that reported in the Dartmouth Atlas. One example of this variation is this: The back surgery rate in Miami is less than one-fifth the rate in southwest Florida.
Historically there is solid evidence illustrating the impact of compensation and reimbursement on practice patterns; the treatment of insured v uninsured patients at hospitals is but one example. The real question is this: “is the variation among/between states as important or significant as the intrastate variation?”


Nov
14

WCRI – best presentation award goes to…

Perhaps the most insightful presentation of the entire WCRI conference was this morning’s session, where Dr Kathryn Mueller of the University of Colorado gave a detailed summary of the current, rather pathetic (my word not her’s) state of the medical care delivery system, population health, and the health care financing system. Dr Mueller’s central contention (and one with which I wholeheartedly agree) is that health reform is coming, and with it will come fundamental changes in the way health care is delivered, the virtual ‘location’ delivering that care, and the evaluation of care.
And this is going to dramatically affect workers comp.
Dr Mueller noted that today health care is delivered episode by episode; diagnosis, care plan, treatment, assessment, and repeat steps 2-4 until the situation is resolved (again, my summary of episodic care, not her’s). Her view is that this episodic model of care will change to one based on functional outcome management – care focused on returning the patient to functionality, and maintaining that functionality.
This will be in large part driven by the growing influence of chronic care and need to develop a better care model to address chronic care, one that will heavily emphasize patient education and monitoring. It will also require a different ‘location’ of care – more on that in a minute.
Where the mainstream, i.e. non-workers compensation health care delivery system has not been focused on function or outcomes, these issues have been central to workers comp. Dr Mueller observed that physicians are not trained to deal with functional recovery, and don’t take this rather significant issue into consideration when treating patients.
As my kids would say, ‘True that’.
She also believes, with reason, that most high cost claims are not medically catastrophic, but rather are chronic, high cost cases due to the management of the case. (see Bernacki JOEM 2007 July).
Think about this. While there are undoubtedly really horrible injuries – significant third degree burns over a large part of the body, crushing injuries, multiple trauma, some of the more potent blood-borne disorders caused by needle sticks – most of the high cost claims are not ‘high cost’ due to the medical condition itself, but because we in the workers comp industry just don’t manage medical well.
Dr Mueller sees the medical home model as a big part of the solution in workers compensation, as the medical home will be the dominant model for delivery of care throughout the health system in years to come. Studies indicate the home decreases medical errors and improves the quality of care delivered. Notably, the medical home model is NOT a primary-care gatekeeper model – but rather a model wherein the physician is tasked with and responsible for coordinating care and educating the patient.
One other takeaway from Dr Mueller’s talk. She noted that “provider networks are not necessarily medical homes”; to date, provider networks have been based on changing/reducing fees, and have not been based on “quality”.
Amen.