Big changes in work comp pharmacy spend

Sometimes data is so compelling you have to get it out there immediately.

CompPharma’s annual survey of prescription drug management is underway; here are quick takes from the first ten surveys.

  • 2017 drug spend dropped 13.4 percent from 2016 – the biggest decrease in the 15 years we’ve been doing the survey
  • Opioid spend decreased twice as much – over 26 percent.

Note that the huge drop in opioid spend occurred BEFORE adoption of formularies and other controls in big states like Pennsylvania, New York and California.

Note also that this is the sixth drop in drug spend since 2010.

Graph from last year’s Survey, Public version available for download here.

There are a few other newsworthy findings;

  • compound spend is down dramatically in most areas – but has spiked in a couple of states.
  • the decrease in spend is attributed primarily to lower opioid utilization
  • despite the big drops in spend, respondents (typically the executive at a work comp payer with overall responsibility for medical management) see pharmacy as MORE important than other medical service types…because pharmacy drives disability and return to work

This is very preliminary; we expect another 15 or so respondents and I’d expect things to change with more data. (if you want to participate and receive a detailed copy of the 2018 Survey Report, email Helen Patterson at HKnightATcomppharmaDOTcom)

What does this mean for you?

The work comp industry’s decade-long focus on pharmacy is delivering far better care and lower costs.

What you don’t know WILL hurt you

Insular, self-absorbed, and unaware are three traits far too common in the workers’ comp Rational Faiths

When combined with lousy marketing and poor brand identity, the outcome is akin to life in the Dark Ages – nasty, brutish, and short.

Here’s a few things I’ve learned after decades in the healthcare and workers’ comp worlds.

  • Brand Is Everything.
  • Few executives in the work comp world understand this, some healthcare people do.
  • Marketing is NOT proposal writing, powerpoint production, or event planning…yet most “marketing departments” spend most of their time and too-small budgets doing just that.
  • There’s waaaaay too much “presenting” in sales – and waaaaay too little listening.
  • No one cares about your company, your products, your results, your story. Until they believe you understand their problem and have a potential solution.
  • There are several companies that charge high prices and deliver crappy results – yet they consistently win business because their brand images are strong.
  • Companies don’t buy anything. People do.  Just because your “solution” seems to meet a “business need” does NOT mean the person who has to say Yes will say yes.

So, a few suggestions.

  1. Figure out what your brand is.
  2. Invest in it.
  3. Do marketing – real marketing.
  4. Be brutally objective. Don’t blow smoke up your boss’s shirt – or your’s.

You’re going to have a spend a lot more dollars on marketing than you ever have, get your “marketing” people involved much earlier in strategic, product development, and sales, listen to what they say and likely change a lot of what you do.

This is going to make a lot of people really uncomfortable – and that’s good. Business people who are comfortable get complacent, and complacent people lose.

What does this mean for you?

It’s really hard, and most won’t be willing or able to do this.

But the ones that do will win.

What the %$#(*& is going on with opioid policy?

I’m somewhat encouraged, but mostly confused.

Briefly, this is the problem with national opioid policy.

There’s a major disconnect in DC on what to do about opioids – criminalize addicts, incarcerate them, kill drug dealersor expand treatment, go after opioid manufacturers and distributors, increase funding for solutions, change Medicaid policy to allow more treatment options.

While these aren’t mutually exclusive, the messaging coming from the White House is wildly inconsistent.

[HHS Secretary] Azar’s emphasis on medication-assisted treatment for opioid abuse also stands in stark contrast to Trump, his boss, who typically focuses heavily on law enforcement whenever he’s addressing the epidemic. That’s the approach Trump took yesterday, telling summit attendees that cracking down on drug dealers is a key to solving the problem — and even suggesting that imposing the death penalty on them would be helpful.

“Some countries have a very, very tough penalty — the ultimate penalty,” the president said. “And, by the way, they have much less of a drug problem than we do. So, we’re going to have to be very strong on penalties.”

While there’s lots of press out about the recent White House confab on opioids, what’s really happened behind the scenes is a lot less exciting. It sure looks like the policy experts are being sidelined from the real work, which is being handled by, you guessed it, political types…

from Politico

[Senior White House Advisor Kelly Anne] Conway’s role [as chair of the WH “opioid cabinet] has also caused confusion on the Hill. For instance, the Senate HELP Committee’s staff has been in touch with both Conway and the White House domestic policy officials, according to chairman Lamar Alexander’s office. But lawmakers who have been leaders on opioid policy and who are accustomed to working with the drug czar office, haven’t seen outreach from Conway or her cabinet.

“I haven’t talked to Kellyanne at all and I’m from the worst state for this,” said Sen. Shelley Moore Capito, a Republican from West Virginia, which has the country’s highest overdose death rate. “I’m uncertain of her role.” The office of Sen. Rob Portman (R-Ohio), another leader on opioid policy, echoed…

Of course, there’s still no Director for the Office of National Drug Control Policy, but at least it isn’t being run by a 24 year old.

I’ve talked to professionals deeply involved in national drug control initiatives and policy; some are convinced Trump et al are serious about the opioid disaster and are focused on it; others say it’s all a sham, the Administration is either unable or uncaring about this, and just bounces from policy statement to policy statement without getting anything done.

My takeaway is this.

Good people in the Administration know the opioid disaster is a disaster, and want to help address it. But they can’t.

The complete and total managerial incompetence, institutional attention deficit disorder syndrome, and lack of understanding of how to govern on the part of the White House’s current occupant and his staff hamstrings any and all efforts to develop and implement solutions.

What does this mean for you?

Big problems require thoughtful and diligent approaches.

Who says gubmint can’t do anything right?

Not me.

One state fund has reduced the number of patients dependent on opioids by 60 percent over five years.

That’s 4,714 moms, dads, brothers, sisters, grandparents, sons, and daughters who can get back to living a real life, one free of opioid dependency.

BWC Ohio’s remarkable reduction in opioid usage was the result of a thoughtfully planned and well-executed approach to addressing the opioid scourge that has ravaged the state.

WIth leadership from the state’s Republican governor and a lot of work by the good folks at BWC, thousands of work comp patients have stopped taking opioids or greatly reduced their dosages. And BWC didn’t do this by cutting these patients off; the insurer paid for treatment, weaning, a wide array of programs and services to address chronic pain.

BWC’s pharmacy and therapeutics committee developed a comprehensive approach to opioids, one vetted by practicing physicians and embedded in the state’s Administrative Code. The approach requires prescribers follow a carefully crafted process, mandating compliance with the prescribing rules for all workers’ com patients.

Moreover, BWC did NOT start the opioid reduction effort until there were enough treatment facilities, programs, and trained providers to handle a big influx of patients.

I was peripherally involved in the early days of this; the State worked with a number of experts including Gary Franklin, MD, the Medical Director of the Washington State Fund (L&I). Dr Franklin was among the first to sound the warning about opioids, and as the leader of the State’s Agency Medical Directors, he was instrumental in developing and implementing the first comprehensive opioid guidelines. When Ohio started their planning process, Dr Franklin was heavily involved in helping the state develop it’s program.

Washington’s Guidelines were first implemented in 2007 – over a decade ago – and updated three years later. Dr Franklin et al were years ahead of most of us in identifying and developing comprehensive approaches to the opioid prescribing disaster.

Similar to Ohio, the impact on patients in Washington has been a major reduction in opioid prescribing and big drop in opioid-dependent patients. What’s not “reportable” is the thousands of families that haven’t been devastated and hundreds of lives ruined by opioids.

What does this mean for you?

Washington and Ohio have shown what government can do.


Work comp medical: cost vs “savings”

I still have a sports jacket I bought years ago because it was a great deal. It’s ugly and doesn’t fit right, but oh, what a deal. I keep it to remind myself that it’s not about the deal.

(I know, I can’t believe I spent money on this)

Most work comp buyers focus on the deal they get on medical expenses, paying little attention to the quality of care delivered, or what that care actually costs.

Reality is, most buyers measure their performance by how much they’ve “saved”, not how much they’ve spent – or what they got for their dollars.

Some, like Albertson’s, are focusing on what matters – quality. But most don’t, relying instead on “savings” reports that purport to show how many gazillions their vendors “saved” by not paying duplicate bills, slashing charges to fee schedule (!), applying state rules to bills, assessing relatedness and using clinical edits.

These buyers are saving themselves to death.

Instead of bill reductions, payers should be looking at medical cost per claim. Replace network penetration with physician performance evaluation, based on total outcomes. Stop looking at denied procedures and start identifying the providers who do a great job, send claimants to them, and leave them alone.

What is scary is that many in the industry think they are making progress. They are plodding deliberately along, reading bill review savings reports, studying, evaluating, debating, discussing, re-organizing, considering, meeting, presenting, recommending other ways to “save”.

They are mistaking activity for progress, when they should be focusing on what matters – measure and reward quality. 

So, you may want to ask yourself, would you buy medical care for your family the way you buy it for your employees or insureds?

What does this mean for you?

If you do want to dig into medical, here are a few ideas.


Is work comp medical inflation increasing?

USI’s 2018 Insurance Market Outlook indicates workers’ comp medical inflation will hit 6 percent, a significant jump over recent years. A key driver is:

“a continued increase in cost shifting from healthcare plans to workers’ compensation due to the profitability challenges faced by the Affordable Care Act as well as other challenges”

I’m puzzled by the scant attention paid to medical cost in the report, and the superficial, and I’d suggest misleading attribution of cost shifting to ACA’s “profitability challenges”.

What “profitability challenges?”

Health insurers are doing quite well. Pharma and device companies are too. Hospitals are rolling in dough, with profits up 43 percent from 2011 to 2016. Sure, around 20% – 30% of hospitals experienced negative margins – but the average net margin was a very healthy 7.7%.

Medical costs drive a LOT of casualty insurance costs in the auto, fleet, workers’ comp, medical malpractice, and liability lines. The quote above is the only substantive statement in the 38 page report, and the statement itself is questionable.

Granted, I’m biased. As one who grew up in and remains firmly rooted in the healthcare world, I see things thru that lens.  That said, my take is the lack of focus on medical is due to a lack of understanding of healthcare, which in turn makes conclusions suspect.

NCCI recently changed its measure of overall medical inflation to a metric that more closely tracks what we’re seeing in work comp. The discussion at the link is pretty wonky; suffice it to say that the Personal Healthcare Deflator (PHC) tracks actual workers’ comp medical trends much more closely than the Medical CPI. (James Moore wrote on this some time ago)

(source NCCI) You’ll note that the PHC Deflator predicts a much lower rate of price inflation than the other more commonly used metrics; PHC does factor in a change in the mix of services, which I’m guessing is a key reason. (In group/Medicare/Medicaid there’s been a significant shift in the location of services from hospital to non-hospital providers which has reduced overall costs.)

It’s impossible to say how USI came up with their estimate of 6% medical cost inflation; it is possible they used the CPI or some other metric.  I’ve got a query into USI and will update this if/when I hear back.

In the interim, I’d suggest we would be well-served if the industry showed a bit deeper understanding of the key driver of claims costs.

After 30+ years in this industry, I’m still amazed at the superficial understanding of healthcare exhibited by most in work comp. The continued emphasis on network penetration and per-line and per-bill “savings”, the failure by most buyers to force insurers and TPAs to report real outcomes, and the resulting lack of real improvement in health care quality in work comp is appalling.

What does this mean for you?

We’ll dig into the drivers of medical costs more this week. It’s a bit complicated, as most important things are.

Are you being gamed?

I’ve had a number of conversations of late with self-insured employers about their workers’ comp “savings” reports; one thing that keeps coming up is how- and why – vendors ‘game’ the numbers.

(this post is a follow up to a post I did seven years ago…)

Perhaps the greatest variation is in bill review “savings” – and the fees attached to those “savings”.

Bill review savings are reported as a percentage below the applicable fee schedule or, in states without fee schedules, usual and customary rates or billed charges (depending on the vendor and state). Savings are also attributed to application of state rules, for example a denial of an assistant surgeon’s fee or physical therapy 59 modifier. These savings don’t generate additional fees for the vendor as they arise from mere application of state regs and fees.

One would think this is an objective result, and therefore there should be little variation among and between vendors, and in an ideal world, one would be right.

However, there is almost always a bit of judgment involved in determining what the ‘right’ fee schedule amount is and what state rules apply. The complexities are many, and the justifications, while often thin, are given to payers unequipped to refute the vendor’s statements.

Then there is the gamesmanship where savings that should be attributed to fee schedule or application of state rules are put in a different bucket, a bucket that just happens to generate additional fees for the vendor.

Let’s look at the ‘why’ vendor BR savings vary.

Simply put, follow the money.

Most bill review services these days are priced on a flat charge per line or per bill; Most BR vendors also charge for additional ‘value-added’ services on a percentage of savings basis – typically 25% of savings delivered on top of fee schedule/UCR cuts. That’s where the…variation usually lies.

The financial motivation is obvious; the vendor gets the same fee for processing a bill whether they deliver $1 or $1000 in BR savings, but their compensation for ‘value-added’ services is based on the savings that are delivered – the higher the ‘savings’, the greater the fees for the vendor.

Therein lies one explanation – perhaps the most significant one – for the wide variation in BR savings percentages. In my consulting practice I’ve had access to reports from several of the larger BR vendors, and the variation can be as much as 300 percent from vendor to vendor. Yes, you read that right – one vendor’s bill review “savings” in a state can be three times higher than another’s.

Almost always the vendor with the lower FS savings delivers great results from ‘nurse review’, ‘complex bill review’, ‘coding edits’, ‘unbundling and upcoding review’, or whatever they call it – suffice it to say that the savings delivered from these ‘extra, value-added’ services – when added to the ‘standard’ bill review reductions – are usually only a bit higher than other vendors who don’t have all those extra, value-added add-ons.

That’s not to say that some savings can – and should – be derived from careful and professional review of bills – coding and clinical reviews are often helpful.

How can you protect yourself?

  1. Ask competing vendors to reprice a set of bills and provide savings numbers in aggregate and for each bill. Compare reductions from application of FS and state rules from the vendors, and on individual bills.
  2. Where there’s wide variation, ask the vendors for an explanation, and don’t accept mumbo jumbo BS.
  3. Make very sure your vendor knows you are holding them to the same standard they used in repricing your sample bill.
  4. Ask your colleagues if you can see their savings reports, and compare the savings allocations to your reports.
  5. Ask your broker, consultant, or adviser for their views, and get them to share de-identified client savings reports with you.

What does this mean for you?

The bad actors are known to many – make very sure you know who they are.

Single Payer is Inevitable.

It’s going to happen. The US healthcare system will collapse.

It’s hard to say what’s the worst thing about American healthcare; the outrageous cost, the crappy outcomes, the endless paperwork hassles, the ridiculous rules, the dead and damaged patients, the huge financial burden for taxpayers and families.

American healthcare sucks.

For people, that is. For insurers, pharma, device companies, it’s never been better. 

People are dying younger every year. Infant mortality rates are worse than any other developed country. Costs are going up. More and more people are uninsured. Rural hospitals are closing. Employer premiums are unaffordable.

All while pharma, device companies, and for-profit healthcare companies are making billions and the tax cuts are increasing families’ costs and generating huge profits for health insurers.


Funny thing is, the last best hope for our Frankenstein-like healthcare system was the ACA. Based on a Heritage Foundation/Republican plan, the ACA relies on a hybrid private/public system, using Medicare and Medicaid regulation to drive innovation and improve care.

That’s being gutted by the current controllers of Congress and the White House, who have no plans to fix anything.

This will continue until it no longer can. No one knows when voters will rebel, but they will.

And when they do, we’ll have single payer.

Hey Washington, where’s the health care fix?

It’s a hell of a lot easier to blow something up than to build a replacement.

Especially when you don’t care about a replacement.

Fact is, we – you, me, taxpayers, governments – cannot afford our current health care “system.”  And it is getting more expensive every day.

Congress and the President are continuing their efforts to weaken and hobble the ACA, and they are generally succeeding. Without enforcement of the individual mandate, fewer young folks are getting insurance, increasing premium for us oldsters. The number of Americans without health insurance is up, health care costs are rising, and future Medicare costs are escalating.

The misguided and ill-intentioned “work for Medicaid” effort is going to create a whole new governmental bureaucracy, raise costs, and have zero positive impact. Medicaid changes are going to lead to hospital closures, especially in rural areas and inner cities. 

Health care costs were $3.5 trillion last year – and they’ll top $4 billion in two years. That’s a meaningless figure – until you realize our national and your personal budget is going to get whacked.

But it’s worse than that. The bi-partisan budget deal and tax cuts will exacerbate our already-huge national debt, screwing our kids and grandkids. The biggest driver? Health care.

And Congress’ and the President’s solution is nowhere to be seen.

Where’s the “replacement” the GOP has been talking about? Where’s the “market-based solution” to our health care crisis? Where’s the plan to lower drug costs?

Have you seen anything from Congress or the President that gives you any hope they have any plan?

These politicians aren’t interested in governing, don’t care about your costs or your kids’ debt, and hope you don’t pay attention. They have no political courage, no interest in doing anything that might cost them the next election.

What does this mean for you?

Nothing good.





Friday catch-up

Buried under two projects this week – here’s what crossed my desk while I was trying to do actual work…

First, after the horrific tragedy in Parkland, I recalled this data point – the US has a significantly higher child mortality rate than other developed countries.  Gun violence is a major driver. A child age 15 to 19 in the U.S. is 82 times more likely to die from gun violence than such a child in the other countries.

More than 1500 of our kids die from gun violence every year.

The next time someone blathers on about “American Exceptionalism”, show them this graph.

Big spenders – 

We’ve long known that a few people account for a lot of health care spending. New news indicates this is more true now than ever; 5% of patients accounted for 53% of spending in 2015. What isn’t as well known is there’s a LOT of turnover in that 5%; fully two-thirds of the people in the group this year weren’t big spenders last year.

Consistently High Turnover in the Group of Top Health Care Spenders  Implications abound:

  • high risk pools can’t cover these folks if they can’t predict who they are
  • insurance is needed to protect us from the risk we need high cost services

Drug costs

From Adam Fein, news that the rest of the world is following in the work comp world’s footsteps at least when it comes to moderating drug cost inflation. There’s a lot of great information in Adam’s post, much of which refutes generally accepted wisdom or common knowledge.  One item of note – utilization – the volume of pills – was almost flat last year across all payers.  

Webinar on IME Reports  

Independent medical evaluations (IMEs) are a critical component of workers’ compensation and other disability benefit systems. Unfortunately, IME reports often lack quality, customer satisfaction of the various stakeholders is not measured, and TQM is rarely, if ever, applied to medicolegal and IME work.

On Wednesday, February 21 at 3 pm ET, Noon PT, Christopher R. Brigham, MD , a world-class expert on independent medical evaluations (IMEs), will host a unique, no cost webinar on “IME Reports: Assuring Excellence! ” 

You can register at this link

Have a safe weekend, and please demand your elected officials stop ignoring the causes of gun violence