Illinois’ workers comp costs – drivers and solutions

My post on Accident Fund’s ground-breaking analytical work generated a good bit of discussion, some public and much not, some appropriate and some a bit confused.

To clarify, allow me to address a few issues.

1.  As I said yesterday, Illinois has the highest medical costs in workers comp, driven in large part by the second highest fee schedule. WCRI’s CompScope report (12th Ed., ppg 10-11) provides an excellent comparison of medical costs among the study states; IL’s medical costs are – by far – the highest for both lost time and medical only claims (as defined by WCRI).

2.  I did NOT say IL’s workers comp costs were the highest – the state is fourth in that category.  Some readers evidently conflated “medical” with “workers’ comp”; medical is a component of workers comp costs, along with indemnity and administrative expense (ULAE and ALAE).

3.  There are several contributors to IL’s medical cost problem.  The highest outpatient facility costs, an easily-gamed fee schedule, no real employer direction, and high – I would suggest far too high – utilization of physical medicine at prices much higher than those in surrounding states are among the major drivers.  Internal HSA data from several large payers indicates the average number of PT visits for work comp claims in IL was above 15 in 2010; if anyone has more current data I’d love to see it.  This was substantially higher than states surrounding Illinois.

So, what’s to be done?

Well, start with identifying the best providers – defined as those who adhere to evidence-based medical guidelines and deliver the best outcomes: shortest disability duration, lowest medical and indemnity expense, sustained return to work.  Note that patient satisfaction is not automatically included.  Unfortunately some WC claimants don’t want to return to work when they’re physically ready to do so, and therefore don’t like providers who try to get them back quickly.  That’s not to say patient satisfaction should not be factored in, just that one has to be careful when doing so.  Much of what I’ve seen re patient satisfaction doesn’t adequately address this potentially-confounding issue.

Next, develop strong relationships with those selected providers – pay them fairly and quickly, don’t bother them with needless UR requirements, help them schedule ancillary services when and where necessary, and let them know you’ll be monitoring their performance on an on-going basis.

Direct injured workers to those good providers – this can be done in every state except New York. There’s an industry-wide misunderstanding of “direction”; it is legal in every state (but NY), however in some states the claimant can decide where they want to go, while in others the employer can require an injured worker go to a specific provider (or choose from among selected providers in states such as GA and PA).

Finally, monitor and measure outcomes, provide that data to providers, and continuously tweak your network.

Which leads us back to the Accident Fund’s CareAnalytics(tm) approach.  Notably, the analysis of providers did not factor in network participation or discount arrangements, rather it focused on outcomes.  As Jeff White reported in his public presentation at WCI in Orlando, desired outcomes include:

  • adherence to evidence-based medical guidelines
  • total claims cost
  • claim duration
  • medical cost
  • addiction and dependency prevention

Finally, I’d echo what George Anstadt MD, former president of ACOEM, said yesterday in a comment on MCM: “glad to see insurers looking at good outcomes and recognizing that Occupational Medicine specialists are a great value, as a group, and that within that group are an experienced and ethical sub-group who save insurers even more money and get even better health outcomes for workers and their employers.”


Claims, analytics, good docs, and process improvement

For several years, the Accident Fund (HSA consulting client) has been making major investments in data analytics and working on ways to use their new-found knowledge to reduce costs and improve outcomes.  Now, the results of those efforts are becoming apparent.

Claims costs are coming down, driven by rapid referral of selected claims to top occ med physicians.

AF’s program identifies higher risk claims and claimants, alerts adjusters and case managers, and, when necessary seeks to move the claimant to one of the top docs.

The program, which recently won an award for innovation, is under the direction of Jeffrey Austin Whitedirector of Medical Management Practices and Strategy for Accident Fund Holdings.  In a press release Jeff said “It’s a huge honor to receive this award and it is truly reflective of the hard work of our claims representatives, risk case managers and operating companies…This is a major accomplishment of custom software development to meet our business needs and improve efficiency while also giving us a competitive edge.”

So far, the program has helped identify high-risk claims faster, improved policyholder satisfaction, and reduced claim costs for targeted claims in excess of 20 percent.

Jeff reported on these results at several recent conferences including August’s Workers Comp Institute in Orlando.  Here are a few highlights:

  • the more work comp experience a physician has, the better their outcomes are.
  • the most experienced docs’ claims costs were 20% below the least experienced
  • a lot of claims are handled by docs with zero experience in comp
  • claims handled by occ med docs were 20% less costly than average

The net -“change of provider based on experience is an effective cost containment strategy.”

While others are talking, planning, and getting ready to get ready, Accident Fund is doing.  Kudos to Chief Claims Officer Pat Walsh, VP Claims Lisa Riddle, and Jeff White.



Update – The wages of sin in Maryland – a mild slap on the wrist

In response to several requests, click on the link for details on charges pending against Maryland Orthopedics physicians.

When a doc knowingly overtreats, increasing the risk of adverse outcomes, potentially harming patients, and drives up costs with little apparent regard for patient safety or approopriate treatment, one would hope they’d be sanctioned pretty harshly.

Not in Maryland. 

Jen Jordan reports “This group of physicians [Franchetti et al] routinely performed injective therapies regardless of efficacy, up-coded (say for instance a sciatic nerve block when only trigger point injections were performed or claimed multiple level or bilateral procedures when the facts didn’t line up), dispensed excessive quantities of drugs at extremely inflated prices from within their own offices (despite the many retail pharmacies within a mile of their various locations) on top of the ineffective injective therapies with little to no detail in the medical record other than prescriptions were renewed so as not to draw attention to the quantity and dose, and essentially bilked insurers in Maryland out of millions of dollars over at least the last decade if not longer. They put patients’ lives in danger.”

Did the doc in question, one Michael Franchetti of Maryland Orthopedics, lose his license?  Was his license suspended?  Go to jail?


He’s on probation, has to have a few of his cases peer-reviewed, pays a nominal fine to the state board of physicians, and complete a few tutorials on ethics and billing.

Oh, and he’s still a “HealthGrades recognized doctor” too; so much for those doc rating sites…

Yep, he’s still “treating” patients, sticking needles into people and prescribing opioids, continuing on as if nothing had happened.

This is a travesty, a sick joke, a blatant disregard for patient safety, a complete abdication of responsibility on the part of the Maryland State Board of Physicians.

The conduct of this…”physician”, his overtreatment and overbilling and wanton disregard for patient safety is stunning, as is the pathetic penalty he’s paying.

One patient received 50 steroid injections over a four year period, and 34 scripts for controlled substances – which were dispensed by this doc’s practice – at prices up to 17 times the retail price for the drugs.

Another patient allegedly received 140 nerve blocks over 14 years along with 150 scripts for controlled substances.

If you aren’t outraged/disgusted/shocked, you can read the consent order agreed to by this poor excuse for a physician here.

So, what does it take to get your medical license suspended or revoked in Maryland?  Turns out, the Maryland Board of Physicians has a long history of lax enforcement, handing out relatively mild sanctions if and when it finally got around to doing anything. 

Jen’s outraged.  And you should be too.



Coventry work comp’s Q3 numbers are out

And they’re rather middling...

Q3 workers comp revenues were $188 million, down 3.6 percent from Q2’s $195 million and about the same from Q3 2011.  While the loss of ESIS’ pharmacy and other business in January was significant, Coventry has mitigated much of the loss with “client expansion and new sales.”

With the acquisition of Coventry (the entire company, not just the work comp division) by Aetna in the offing, we can expect more noise about the coming sale of the work comp division – but it’s just noise.

It isn’t going to happen.

Recall Aetna’s CFO Joe Zubretsky’s positive statements about work comp, and there’s this from a colleague with direct contact with Aetna and Coventry

“this [the CFO’s statement] is very consistent with Aetna’s outreach to us and a few other WC TPAs early this year to find partners for integrated plans. They don’t want to get into the WC TPA business (good for them) but they want to have good integration and smooth operating links with a few TPAs with whom they can put together WC/FMLA/AM/STD/LTD plans– and maybe loop in the healthcare as well.”


Work comp pharmacy – the latest scam

Gotta hand it to those…”entrepreneurs”, they are one creative bunch. One day it’s repackaging drugs at hugely inflated prices, then compounding drugs (oops, how’d that turn out??), next its some bizarre new way to measure muscular strength.  That good ‘ol American in-ja-noo-ity sure found a home in work comp!

Here’s the latest example…stick with me here folks, this is probably happening to you too…

PMSI, through its PBM Tmesys, has received claims for Voltaren Gel 1% in 100gm tubes billed using a NDC indicating it was a repackaged medication (NDC 35356-0187-03).

Since that’s how Voltaren Gel comes from the manufacturer, the good folk at PMSI found it a bit odd that the drug was “repackaged” and assigned a NDC different than the manufacturer’s NDC.

So, PMSI contacted the repackager (LAKE ERIE MEDICAL AND SURGICAL SUPPLY) to gain additional information as to what they are repackaging. As it turns out, LAKE ERIE MEDICAL AND SURGICAL SUPPLY is taking the manufacturer’s product, relabeling with a LAKE ERIE MEDICAL AND SURGICAL SUPPLY proprietary label, assigning a new NDC and AWP (the new AWP being 2.8 times that of the manufacturer AWP) and selling the relabeled product to physicians within and outside of New York for physician dispensing.

side note – Lake Erie is the top repackager used by Automated Healthcare Solutions, the physician dispensing “technology” firm/lobbying powerhouse.

From a brief, very un-scientific poll of a few friends at payers, it turns out transactions for this “repackaged” product are relatively common, most (if not all) coming from a pharmacy in Flushing NY.

Also, you have to ask yourself why are they doing this?  My guess is that this pharmacy figured out that the margins are better if they process this as a repackaged drug than as a typical dispensed item.

It caused some of PMSI’s folks to wonder just how it works.  Are they squeezing out the gel and putting it into tiny tubes?  Turns out they are just putting a new label on it.  So the plan works like this:

a)      Get a cheap tube of a drug.

b)      Take the tube and do nothing to it.  File for a new NDC.

c)       Get the new NDC – create your own expensive AWP.

d)      Put new label over old label – charge a lot more money.

Michael Rosenblum (a PMSI VP and pharmacist, and the one who figured this out) tells me that normally this drug comes in packages of 3.  So maybe what these guys are doing is breaking the package up as single tubes, creating a new NDC, slapping a new label on it, and charging the same price for one tube as would be charged for 3 tubes…

To quote another PMSI exec, it “Looks like a crazy system has gone insane.  In the case of Voltaren Gel, the act of putting a new label increased the cost 2.8 times the original cost.”

Not crazy, just another day at the office in the work comp world…

What does this mean for you?

Check those NDCs now, stop paying the inflated prices now, demand refunds for any bills already paid, and get your SIU on this now.


Why health care costs too much

If you go into the hospital for surgery, there’s about a ten percent chance you’ll be back – victim of a surgical infection, gastrointestinal problem, or other complication.

Of course, this being healthcare, (in general) the facility isn’t financially penalized for the problem.  In fact, they’ll increase their revenue – up to $58,000. So, the more re-admissions, the more revenue for the hospital (on average, they get about $1.2 million a year more due to re-admissions).

Fortunately, CMS and a few other payers are taking steps to help hospitals reduce re-admission, with the most important step being a refusal to pay for some re-admissions.  That’s helping to concentrate the efforts of many providers, who are working hard to figure out what causes re-admissions and what to do to forestall them.

That’s not to say that ALL re-admissions are due to hospital error, infection, or other issue – some patients just have problems.

But – and it’s a big BUT – many re-admissions CAN be prevented – BUT absent a financial motivation, there’s just no reason for the hospital and providers to do much to prevent them.  In fact, there’s 58,000 reasons to not try.

Today, our reimbursement “system” rewards excess treatment, expensive technology, over-utilization.  If we are to gain control over our costs and improve our (very mediocre) outcomes, we have to reward good performance and penalize bad – while working with the poor performers to help them improve.

CMS is leading the effort, starting with its decision to not pay for “never-ever” events, continuing with reductions in reimbursement for selected diagnoses, and then expanding to cover more in 2015.  And where CMS leads, other payers will benefit – as hospitals ratchet up their performance, re-admissions for all payers will decline, lowering costs while improving outcomes.

What does this mean for you?

Why are you paying for poor performance by healthcare providers, when you wouldn’t get paid to fix your own work if it was less-than-acceptable?

Time to rethink your provider contracts…



Killing compounds and workers comp – UPDATE

Update – this morning we find out that only two states – MO and TX – test compounded drugs, and their findings are alarming indeed.  The strength of the potions concocted by compounders can vary greatly, with Texas determining a quarter of the compounds they tested were “too weak or too strong” and MO finding the potency is as much as three times higher than the compound was supposed to be.

Although the FDA’s ability to regulate compounders is very limited, the agency studied compounds produced by12 different pharmacies a decade ago; a third of the products failed one or more standard quality tests.  Another test in 2006 found the same results.

According to the NYTimes, the “International Academy of Compounding Pharmacists suggested that [compounding pharmacists] respond to any request for samples by saying, “We do not compound or distribute ‘samples’ of any of our prescription medications to anyone.” And if a compounded drug was on the premises, the trade group added, a pharmacist should say it was awaiting pickup by a patient…the memo is emblematic of the industry’s frequent and often successful attempts to fend off regulators at a time when concerns are growing about the quality of compounded drugs and the uncertain provenance of their ingredients, some of which originate in China [emphasis added] and flow through various repackagers and middlemen with little scrutiny, according to interviews with health experts and government records.”

Original post – When will we hear of the first workers comp claimant to die from a faulty compounded drug?  Has it happened already?

This isn’t hyperbole – compounded drugs have blinded victims and killed before – a  young woman using a topical anesthetic, a patient treated for pain, nine deaths from defective solutions produced by an Alabama compounder, and the most recent  – and worst – outbreak of meningitis.

In all, there have been at least 200 “adverse events” involving 71 compounded products over the last twenty years. Yet lax – or non-existent – regulation continues to this day.  Compounding pharmacies are regulated (for the most part) by the states.  The reality is many states are poorly equipped to deal with the issue, and many states really don’t do much to regulate/monitor/enforce regulations related to compounding pharmacies.

This from Michael Cohen, an expert on the issue:

Compounding pharmacies should be testing and monitoring the environment in which products are compounded, training and closely supervising staff, adhering to the recognized standards for compounding safety that were formulated by the United States Pharmacopeia (in Chapter <797> of the USP) and detecting process deviations before they cause harm. Yet, an analysis of recent cases of contamination of products from compounding pharmacies that have led to adverse health outcomes revealed that breaches of standards, unsafe staff behaviors, untrained and unskilled personnel, improper use of equipment, extended beyond use dating outside of manufacturer labeling without sufficient testing, and/or a general lack of good compounding skills had been involved in almost all cases.Without federal oversight and/or greatly improved state oversight of compounding pharmacies, patients will continue to be harmed.

So…why aren’t the Feds more involved?

Glad you asked.  Turns out there have been repeated efforts to increase oversight of compounding pharmacies, however they have been stymied by effective lobbying from, among other groups, the International Academy of Compounding Pharmacists.

The IACP claims “compounded medicines are a critical part of modern, individualized health care and provides them the necessary tools to ensure that access to personalized medication solutions remains possible.”, yet they’ve been instrumental in successfully blocking federal regulation of “mass-compounding” thru an effective lobbying campaign involving Congress.

While compounding advocates talk about the need for individual, customized medicine, they lobby to prevent oversight of what are really drug manufacturers masquerading as compounders.

The result is now evident – 23 dead patients, and more may be coming.

For workers comp, the implications are clear. The drug produced by NECC is used in treating back pain via epidural steroid injection, an all-too-common procedure in comp.  As of now, there are 281 infected patients, and with an incubation period of up to six months, many thousands of patients agonizing over their potential fate.

What does this mean for you?

If you are a workers comp payer,

  1. Figure out if any of your claimants may be at risk.  The list of affected facilities is here.
  2. Search for the facility name in your medical bill data, along with the CPT codes associated with ESI.
  3. Identify any claimants that may have been affected, and get your medical director and nurse case managers involved.
  4. Get your subro folks involved.
  5. Oh, and tell your Governmental Affairs people to ask Congress to fix the oversight problem.  Unless you want to repeat this process again.


Workers’ comp – an easy target for rogues, scoundrels, and cheats

This morning David DePaolo’s post describes the evolution of theft in California’s workers comp system, walking readers from physician dispensing of repackaged drugs to compounds (next up – blatant overuse of drug testing!).

David notes:

“The complaint…says Cyrus Sorat, owner of Health Care Pharmacy and Deutsche Medical Services in Tustin, Calif., paid 208 doctors to prescribe compound drugs to injured workers needing topical analgesics. Sorat promised to pay the doctors an unreported fee for each prescription they wrote, and also agreed to handle billing and recover receivables on behalf of the physicians, according to the complaint.

Seven of the doctors named are in Florida, Arizona, South Carolina and Puerto Rico, with the rest in California…

The complaint describes a complex scheme [wherein] the doctors named were allegedly paid kickbacks to prescribe the drugs, and the receivables for those prescriptions were then “handled” by the mastermind through several collection/management agencies and bill review companies that were created in a sophisticated scheme of fraud.”

Coincidentally, there’s also news [sub req] out that California regulators are – at long last – trying to close the loophole in the law that allows providers to get paid twice for the same medical device, a practice that, while technically legal, is most certainly not ethical or reasonable – it costs employers and taxpayers over a hundred million dollars a year…

That good news is somewhat overshadowed by a report from Michigan that an effort to restrict reimbursement of repackaged drugs to the cost of the underlying, non-repackaged drug may well be futile.  The language under consideration does NOT reflect that requirement, and repeated efforts to get the regulators and legislators involved to correct the oversight have met with no success.  If the regulation is approved, there is some faint hope that a court case may lead to an interpretation favorable to linking reimbursement to the underlying original manufacturer’s price.

Ideally, regulators will correct the oversight by inserting the word “original” into  R 418.101003a(1)c…just after “Online” and before “manufacturer’s”…

If not, Michigan’s taxpayers and employers will continue subsidizing the lifestyles of the rich  and famous.

I’m sure they’ll be okay with that…