Month: May 2013

May
30

Hawai’ian Drug Summit – weird goings on…

Posted by Joe Paduda on Thursday, May 30th, 2013 | Comments

I attended and was privileged to speak at the Hawai’i Rx Drug Summit, held yesterday in Honolulu. Focused on opioids and drug controls but with a heavy emphasis on physician dispensing of drugs, the Summit also featured a random guy videotaping me, a guy who claimed he’s working on a documentary about the dearth of doctors on the Islands.

That line made no sense, as I wasn’t speaking about anything remotely related to that issue, yet he had three (!!) separate cameras recording both of my talks – and one followed me around recording me as I chatted with other attendees…

The guy, one Michael Cooper, claimed he was doing this on his own, was not affiliated with any other entity, and was funding this documentary all on his own.  I informed Cooper, in front of the 300+ people, which included law enforcement, that he could only use the video or any recording of me for the documentary and no other purposes whatsoever. Cooper agreed – again in front of the entire audience.

We shall see what develops; given my “popularity” with the physician dispensing crowd, I thought it might just be that somehow they’d want to record me saying something they could twist or slant or use to further their cause….

Here are a few of the highlights.

Tim Dayton of auto insurer GEICO spoke, noting 60% of auto loss costs are for auto repair, but losses are trending lower due to better, more efficient repairs and competition.  However, the trend in other coverages – especially PIP (medical coverage) is getting much worse.  In fact, GEICO needed a rate increase of 75% – 89% increase for PIP for some of their insurance lines, and ended up with a 25% rate increase for PIP.

A big driver is – surprise – physician dispensing.

Dayton is, to his dismay, quite knowledgeable about drug costs, drug pricing, and physician dispensing.  He opined that some very smart peole had figured out how to exploit a rule that had been written with the best of intentions – he was referring to a HI rule re reimbursement for drugs for medical treatment.   Dayton cited SpeedGel (you remember that, right?) and the “evolution” in pricing for that “medication”, it was $24.95 originally, then $59.95, then $258.96, now $416.01 at 140% of AWP, the reimbursement required by state regulations.  And all with barely a change in the wonder drug!

Dayton was followed by Paul Au, the risk manager for the City and County of Honolulu, where drug costs went up from $400k to 1.8 million over ten years; and a  half-million over two (1.25 to 1.78 from 2011 – 2012).  This was driven almost exclusively by physician dispensed drugs, which happened after a large dispensing entity entered the islands. (this could be mere coincidence…)

For the City/County, physician-dispensed drugs now account for 19% of scripts, 50% of costs; the cost is up 650% over 8 years.

This at a time when claim counts have declined by 300 claims, or 20% or so while drug costs are up 570% on a cost per claim basis.

I spoke twice – first on opioids (yes, again…) and then on physician dispensing, citing CWCI’s ground-breaking research, and debunking the five myths of physician dispensing (improves access (not), improves outcomes (actually worsens them), requires higher reimbursement due to higher cost for repackaged drugs (absolutely false), MD-dispensing is necessary to get life-saving drugs started immediately (completely untrue), reduces disability duration (actually increases it).

The Summit was put together by Kristy Kobayashi of CorVel, and sponsored by CompToday, Genex, ESI, PacBlue, and Allied Managed Care.  Kudos to those folks for sponsoring…

more to come.

May
29

Affordable Care and Workers’ Comp – a miss

Posted by Joe Paduda on Wednesday, May 29th, 2013 | Comments

Kudos to NCCI for devoting an hour at their annual issues symposium to a discussion of medical care and cost drivers provided by the Mayo Clinic’s Douglas Wood MD.

Woods noted – “If the entire country could achieve [quality improvement and cost reduction] results like the top ten states we could reduce spending by a third without reducing – and likely improving – quality.” 

And that’s pretty much what ACA seeks to do, in its convoluted, politically-driven, sausage-making way.

Wood noted that we have to not “ration” but be “rational”.  He reviewed the SGR (something that has been covered in detail in this blog) as a way to show that price controls do not equal cost (or quality) management.

As the “Choosing Wisely” campaign demonstrates, many common procedures don’t add any value. (about 5 of the 800 attendees have heard of this campaign…) This isn’t value defined as improved patient safety/better clinical outcomes/patient satisfaction, but rather functional health (sound familiar, workers’ comp folks?).

Which leads to ACA’s components intended to improve value delivered for dollars spent, focusing on reimbursement based not on per-procedure but episode-based payment – with a warranty for complications.  Wood reviewed the basics of ACA (presentation here).  About 19 states will have their own exchange, 25 will use the federal exchange, and the remainder will have a hybrid, or partnership arrangement.  Some of the larger national insurers don’t want to participate, but may change their minds if lots of employers and individuals buy policies thru the exchanges.

Wood delved into several related topics, many of which are old news to the better-informed medical folks out there, but new news to most in the workers’ comp business.  This included shared decision making, appropriate use criteria, and creating healthy communities.

Now, what’s all that got to do with work comp?  ACA will help “make healthcare more affordable” was Wood’s initial statement, but beyond that he didn’t connect the dots; there are several potential impacts on workers comp (tight access to specialty providers, better health status of claimants, no need for WC payers to pay for non-WC conditions when caring for injured workers, etc.), none of which he noted.

On balance, an excellent presentation on PPACA, but no understanding of workers’ comp or how it will impact WC.

 

May
24

Random observations from NCCI

Posted by Joe Paduda on Friday, May 24th, 2013 | Comments

NCCI’s conference is perhaps the best-produced workers comp conference I’ve attended.  Great support for speakers (thanks Mona Carter, Peter Burton, Lisa Lancelotti, Linda Simmonds et al), well run, tightly organized, and substantive as well.

Several single-state payers I spoke with at the conference said they attend NCCI, and other national conferences and affiliate with national trade groups (AIA) for a very good reason – they know it is important to keep abreast of national trends, share ideas with other payers, and avoid the perils of navel-gazing.  Less insightful regional payers don’t see the value, and will regret their myopia.

The keynote – David Gergen – was excellent.  Great to hear his perspective; Gergen is even-handed, deeply knowledgeable, and a good speaker.  Posted on that elsewhere…

Aron Ralston’s talk (he of the 127 hours; he’s the guy trapped by a boulder in a canyon in Utah who had to chop his own arm off to escape) was compelling – to say the least.  He talked little of the pain, the horror of near death by dehydration (reportedly one of the more awful ways to die), the personal misery – he didn’t ignore it but did not make that a main theme of the speech.  One cannot imagine the terror, much less the physical misery he suffered while trapped for five days. He used the trauma to focus his attention – and the audience’s – on identifying the important things in life; Not your typical NCCI talk (but I’d rather listen to Ralston than Krauthammer any day).  A risky choice for NCCI, and one that – by all accounts – was an excellent one.

I spoke on Thieves, Profiteers, and Enablers, a quick summary of physician dispensing, overprescribing of opioids, and the growth of compounded medications, physician-dispensed durable medical equipment and physician-office-based drug testing.  Notice a common thread here?  These are physician-centric…

Alas, I felt like I was preaching to the converted…

Attendance at the end-of-the-conference research discussion was high, proving that there is a large audience for the more analytical presentations.  There was a lot of discussion, attendee input, and dialogue, with many relevant points, observations, and recommendations for refinement or methodological modifications.

A couple more posts to come on the annual confab, stay tuned!

May
20

Kudos to CorVel

Posted by Joe Paduda on Monday, May 20th, 2013 | Comments

I’ve often had issues with CorVel for their billing practices and other matters, but I’d be remiss if I didn’t applaud the managed care firm for their willingness to fire a doctor that was allegedly prescribing Wasabi Rub, theramine pills, Gaba-2k rubs, and surface EMGs, some of which were allegedly upcoded to needle EMGs – and then refusing to discuss these treatments with peer review docs.

The incident happened – of course – in California, where CorVel and Dr Douglas Rogers have been in litigation for several years over CorVel’s summary termination of Rogers from their workers comp MPN. The court case is somewhat complicated by CorVel’s failure to follow their contractual obligations in terminating Rogers, but the court nonetheless upheld the decision. (Decision is here)

What makes this case so important is it “balances” an earlier case, known as Palm Medical, where SCIF (the state fund of California) refused to admit a provider to its MPN.  Ultimately the court found in the provider’s favor, much to the dismay of the insurer and employer communities.

The CorVel v Rogers case gives payers hope that they can terminate a provider who fails to meet the obligations contained in their contract with the payer, obligations which should – and almost always do – include requirements that the provider follow applicable treatment guidelines, respond to requests for consultation with peer review physicians, and otherwise treat appropriately.

That said, CorVel could have lost the case as it did not follow the “three-step” process in terming Rogers.

What does this mean for you?

Word to the wise payer – if you’re asking the providers to follow the contract, probably a good idea if you do too.  

Thanks to WorkCompCentral for the heads’ up.

May
17

Where’s manufacturing going – and why should you care

Posted by Joe Paduda on Friday, May 17th, 2013 | Comments

David Chavern of the US Chamber of Commerce focused on manufacturing in his talk at NCCI, and his talk was one of the most important I’ve heard for we in the workers comp world.

Why? Because manufacturing jobs drive workers comp premium.

The manufacturing jobs we have lost are predominantly relatively low-skill level, low-tech, low-value-added sectors such as textiles, clothing.  That said off-shoring of higher-level jobs such as semi-conductors has also been significant – but this off-shoring is now viewed as a mistake.  We’ve lost the ability to innovate via rapid product evolution, by tapping into the knowledge and experience gained thru the manufacturing process companies that leads to continuous upgrades in products.  If the folks on the floor are 8 thousand miles away, don’t speak the same language, and there’s no way to for the engineers and designers to interact with the folks who make the widgets, American companies can’t increase productivity, reduce waste, eliminate unnecessary parts or processes, or improve product quality.

That’s been changing for some years now as manufacturing jobs have been returning to our shores – and this “trend” will increase.

To drive manufacturing, education and training is critical – you can’t run a CNC machine if you can’t do math.  There are 600,000 jobs open today for machinists, welders, technicians, and other higher-skill levels and many have been open for some months – there just aren’t enough trained people to meet the demand. Yet, as David Gergen noted earlier, we are failing to educate young people for the jobs that exist today; this has happened in my home town where the education budget is continually challenged as providing education on topics that voters didn’t have – and claim today’s kids don’t need.  That’s precisely the kind of short-sighted non-thinking that got us in this mess, and will keep us stuck here.

Energy cost reductions will help bring these jobs back as well; our electricity rates are much lower than competitors in Europe and some Asian countries.  Of course, energy production drives heavy industry jobs – another big driver of workers’ comp

The net – manufacturing drives workers’ comp, manufacturing is going to continue to grow. Many of these jobs are going to be higher-skilled and likely lower-risk, while others are going to be high risk – energy production and equipment manufacturing.

Again, no discussion of the impact of all this carbon production on climate change, and the impact climate change will have on the nation and the insurance industry.  Another big miss.

Much to consider.

May
17

NCCI – Gergen’s observations

Posted by Joe Paduda on Friday, May 17th, 2013 | Comments

A few random observations and perhaps an insight or two.

Keynote speaker David Gergen noted this morning that the recent favorable news about the deficit and its impact on debt may well be counter-productive as it takes the pressure off Congress and the President to deal with the debt while investing in education and infrastructure.  Soundbite – Mexico is investing more than we are in infrastructure.

Mexico.  

Gergen also does not believe there’s going to be much progress in Washington over the next few years; Obama’s over-reaching post-election has come up against the newly-energized GOP’s belief they can wait him out and win the mid-terms.  That reality, combined with the current crop of controversies, makes for a DC not focused on strategic issues such as long term deficit reduction, infrastructure, education – and therefore little of the important work will get done.

Long term, Gergen is much more optimistic, primarily due to American energy independence – lower energy costs and energy security will bring manufacturing back to our shores – and already is (Gergen didn’t have anything to say about the potential implications for climate change, a notable miss).

He is also a big fan of the millennial generation, citing their enthusiasm for helping others (a quarter of Spellman College graduates and a fifth of Harvard’s applied to Teach for America) and willingness to serve both in the military and other volunteer/low-paid-but-critically-important jobs).

May
16

NCCI’s regulatory and legislative update

Posted by Joe Paduda on Thursday, May 16th, 2013 | Comments

Day One is concluding with a discussion of legislative and regulatory trends, a panel of legislators and then your devoted author discussing “Thieves, Profiteers, and Enablers”; the bad actors infesting workers comp.

Peter Burton led off with his discussion of what’s happening nationally on workers comp reform/evolution/changes.  He led with medical cost containment initiatives; Peter sees this as the dominant theme in the regulatory world.  The Sandy Hook shootings are leading to legislative initiatives around expanding compensability of medical injuries (SB 823); there’s some concern that Connecticut’s workers’ comp costs, already ranked second highest in the nation in the Oregon premium rate ranking study, will increase if SB 823 becomes law.

Maryland’s privatization of IWIF (to be called Chesapeake Employers) which will likely happen in a few years did not make much progress this year; an effort to control pricing for physician dispensing of repackaged drugs was not successful.  Alas.

Much discussion of Florida; the resolution of the four-year-long repackaged drug problem; rate increases (6.9% this year, third straight year of increases), and the final resolution of a key court battle will have an impact on work comp in the Sunshine State.

Tennessee is looking or comprehensive reform, moving to an administrative from a court-based system (SB 200) which will be effective 7/1/2014; there will be benefit adjustments as well.

Some parties in Illinois are looking to potentially create a competitive state fund, while employes want to strengthen the industry causation standard.  No word on when – or more likely if – these or other possible changes will come co fruition.

Oklahoma’s the biggest mover, with opt-out passed and the state fund moving to a mutual model as the most visible changes; however other moves will result in a 14 percent reduction in work comp costs.

May
16

Bob Hartwig on macro factors – drinking from the firehose

Posted by Joe Paduda on Thursday, May 16th, 2013 | Comments

More discussion over macro factors driving workers comp – the always energetic Bob Hartwig Ph.D. followed Dennis Mealy.  Hartwig was his typically rapid-fire self, dispensing insights, quick takes on economic data, the impact of catastrophes and myriad other topics faster than I could record them.

You can get his presentation slides here shortly.

Overall, Hartwig was pretty optimistic, especially about the recovering economy; private sector employment was up 6.74 million jobs since 2009, while governmental employment declined more than 600,000 jobs.  Hartwig forecast unemployment to dip below 7 percent in the last quarter of 2014 – or perhaps earlier.  As payroll is a main driver of workers’ comp premiums, this is good news indeed.

Overall, the larger employment picture has returned to a level we haven’t seen since just before the recession; mass layoffs are way down, hours worked has moved back up, and hourly wages, while not all the way back, are up significantly.   The overall economy has been – and continues to be – dragged down by the sequestration to the tune of about a half-point of GDP growth.  Fortunately private housing starts are accelerating, driving up construction employment which has partially offset the impact of the political impasse. Manufacturing employment is also up by more than a half million jobs. 

Amongst all that good news is the number of discouraged workers – those who have stopped looking for work – has declined by some 14 percent, but is still quite high relative to historical levels.  More troubling yet is the growth in Social Security disability rolls, which has gone up dramatically over the last two decades.  SSDI claim frequency is up nearly 30% since 1996 – while WC lost time frequency has dropped by almost 50 percent.  (more on this here)

Hartwig made a major point of the P&C industry’s continued ability to pay claims, contrasting that ability with other financial institutions’ less-than-robust stability – evidenced by the 500 banks that failed post-recession.  However, the continued lower-than-low interest rates available in the bond market will require better underwriting results – a lot better – if workers comp payers are going to stay even, much less generate a bit more margin.

 

 

May
16

Work comp frequency and severity – Mealy reports on 2012

Posted by Joe Paduda on Thursday, May 16th, 2013 | Comments

Part 2 of The NCCI State o’ the Line; aka the Dennis Mealy farewell tour.

There was a good bit of discussion re frequency in his SoL report, with Mealy noting there was a sharp decline in relatively low-cost claims early in 2008/9, but little change in the number of high cost claims. This is consistent with other research indicating employees are reluctant to file claims in a recession for fear of losing their jobs; however those with major injuries really have to file.

Indemnity severity (cost for wage replacement) was up just a point over 2011; not surprising given the continued tough employment situation – wages weren’t up, so wage replacement costs weren’t either.

Medical severity was up 3 percent, overall “not bad” according to Mr Mealy.  Recall workers’ comp is just 2 percent of total national health spend, thus we are more affected by external factors than in control of our own destiny.  There are structural changes working their way thru the medical community, driven in large part by efforts to prepare for PPACA implementation in 2014 that are likely having a significant impact.

Somewhat surprisingly, the medical CPI is actually running a full point higher than lost time medical severity – only the second time in memory this has happened.

There was a bit of discussion about the impact of health reform on workers’ comp; I remain convinced the overall impact will be quite positive; I was puzzled by some comments that ACA might increase cost shifting.  As ACA will ensure somewhere around 20 – 30 million more Americans have health insurance, there’s no question there will be LESS need for providers to cost shift post-ACA than there is today.  

Those uninsured are getting free care today, and that care will be reimbursed tomorrow. Even if that reimbursement is at Medicaid levels, that’s a heckuva lot better than zero reimbursement.

That said, I’d also note access to key specialties – think orthopedics – is going to be very tight this time next year as pent-up demand meets insurance coverage.