Florida is scheduled to dramatically change the way hospitals get paid to care for workers comp patients, and if payers don't get their act together, they're going to be paying more - a lot more - for medical care.

WorkCompCentral reports today that a hearing, tentatively scheduled for this Wednesday to review the change, will not be held if no public comments have been submitted. That was the case as of the day before Thanksgiving.

Here's why payers should shuck off their post-prandial lethargy and get their comments/objections/concerns in to DWC.

The revised fee schedule would have payers owing hospitals 174% of Medicare for surgeries and 395% of Medicare for other compensable charges. Workers comp is already the most profitable line of business for Florida hospitals, and this methodology makes it even more lucrative.

Clarification - in the original post, I noted that "according to an analysis performed by FairPay Solutions, this methodology will increase payers' costs - today - by 181% for surgeries and 330% for other hospital outpatient services." This was actually from FPS' review of the Florida Dept of Financial Services' 2006 analysis.

Not only are the hospitals going to prosper under this new scheme, work comp networks contracted with hospitals at a percent off charges are going to be rolling in dough, as the charges are going to be much higher, and their 'savings' are going to be as well.

It's not just a price issue - Expect to see many surgeries and other services currently performed on an outpatient basis shifted to inpatient to take advantage of the much higher reimbursement. Thus procedures which were being done in offices will now be billed - at the much higher rates - by hospitals.

This isn't just speculation. South Carolina put in a Medicare+ hospital fee schedule on 10/01/06. NCCI recently filed a 23.7% WC rate increase. Even though SC's adoption of a Medicare+ hospital fee that pays hospitals less than the fee schedule proposed by Florida (140% of Medicare in SC vs 174% to 395% of what Medicare pays being proposed for Florida by DFS), paying SC hospitals more has significantly increased medical costs and utilization in SC.

For more detail on this (and be careful what you ask for), see here and here and here.

What does this mean for you?

If you're a payer, higher costs - much higher costs.

Posted by Joe Paduda at 1:39 PM | Link to this post

In 2004, California implemented a set of far-reaching reforms to its workers comp system, including several specifically aimed at cutting medical costs. One of the more drastic changes changed the pharmacy fee schedule from one based on a significant multiple of AWP to one tied directly to the Medi-Cal fee schedule (California's name for the state Medicaid program). Medi-Cal's fee schedule is actually lower than most comp PBMs' contracted rates with retail pharmacy chains; as a result most PBMs are 'under water' on their business in California or are at best at break-even.

While medical costs have come down dramatically after reform, especially in physical medicine, that has not been the case for pharmaceutical expenses.

In fact, costs increased significantly, driven by significant increases in both the average number of prescriptions per claim and the average payments per claim for prescriptions. In addition, payments for Schedule II narcotics, categorized as having a high potential for abuse and addiction, increased nine-fold after reform. Schedule II drugs are also strongly associated with extended disability duration, driving up both medical and indemnity costs.

According to the California Workers Compensation Institute, the average number of first-year prescriptions per claim increased 25 percent after the implementation of the Medi-Cal link, while the average drug cost per claim went up 37 percent. (Changes in Pharmaceutical Utilization and Reimbursement in the California Workers' Compensation System, September 2009)

The problem with physician repackaging/dispensing has largely been addressed, yet costs continue to escalate. From conversations with PBMs that dominate the state, it is clear that California's reimbursement levels don't allow them to invest in utilization management and clinical programs, both of which are keys to controlling total drug cost. Studies conducted by NCCI clearly indicate the primary importance of utilization as the driver of comp drug costs; surveys conducted by my firm have confirmed this as well, as those payers focused on managing utilization have seen their drug costs drop while payers without strong utilization controls consistently see drug cost inflation rates well above average.

Clearly, the linkage to Medi-Cal has not reduced drug costs for California's employers.

What does this mean for you?

If California doesn't rethink its approach to drug fee schedules, expect your costs to continue to increase.

Posted by Joe Paduda at 7:12 AM | Link to this post | Comments (1)

The work comp managed care world can be brutally competitive, with big dollars (well, big for this relatively small market) riding on buying decisions, and the success or failure of business plans also determined by those decisions. I'll leave aside the all-too-common lack of objective, dispassionate analysis upon which many decisions are based - that's a subject for another post.

Today I want to talk about why it can be more productive - and more profitable - to walk away from business than to tie your company in knots, bastardized your operations, cut prices to the bone, and make a host of other concessions in an effort to land or keep a big account.

Because the fact is some accounts just aren't worth keeping. I'd bet if you look at your customer list there are at least two that take up way more time than any other, that constantly complain and whine and can never be satisfied and don't pay their bills on time or in full and chew thru account execs like a puppy thru newspaper. Management spends hours each week trying to please the various people at the account, a difficult task because their contacts' demands are either contradictory or pointless or poorly defined if not all three.

I've talked with several vendors over the past few months about this issue, more than once on behalf of the customer's senior management. The top execs keep hearing about the vendor's incompetence or unresponsiveness or poor service, which upon investigation is nothing of the sort.

Instead what I've found, albeit not in every instance but certainly in more than one, is a relationship that has no or poorly-defined objectives, and/or is overseen by an individual that is not competent or capable, and/or where there are ulterior motives on the part of that individual, perhaps to make the incumbent vendor look bad, or justify his or her existence by appearing tough, or to help out a friend who happens to work for a competitor.

Shocking, I know. Hard to believe this happens in today's business world, but true nonetheless.

What's a vendor to do? As tough as it may be, in some cases the best option is to walk away. Professionally and politely inform the most senior customer contact that you aren't able to meet their needs and requirements (describe those needs in writing in detail), offer to facilitate a transition to another vendor, work diligently to make that transition smooth, and when it's all over, conduct a post-mortem internally and with the now-ex-client.

And discover that you now have hours more time in the work week, much less stress, higher margins happier employees and a new appreciation for and time to focus on the customers that you actually like.

What does this mean for you?

An opportunity, not a problem.

Posted by Joe Paduda at 9:56 AM | Link to this post | Comments (1)

AIG will probably pay taxpayers backmost if not all of our investment in the once-dominant insurer. Asset sales are proceeding well, valuations of those assets are solid, the new Chartis looks to be off to a good start, and morale is slowly improving.

And where, one might ask, are the plaudits from the politicians? Or at least grudging respect for the AIG staffers who've been able to keep the company afloat while dealing with public and private ridicule?

As we enter Thanksgiving week, I'd like to acknowledge the people at AIG who've been able to continue performing as well or better than their competitors despite death threats, highly skeptical buyers, and a brutally soft market (in part due to Chartis' desire to hold on to share and premium dollars).

They've got a long way to go, and are far from perfect, but they deserve respect.

Send this to your Congressperson and Senators. Perhaps they'll have occasion to send their own message of congratulations and thanks.

There's always hope...

Posted by Joe Paduda at 8:14 AM | Link to this post | Comments (4)

If you're wondering why your TPA has been changing specialty managed care vendors more often than you are used to, it may well be because the TPA is getting paid to change.

Word from several sources at the comp trade show is some managed care vendors have deals whereby the commissions/fees they pay the TPA for the privilege of doing business are increasing with volume.

The way it works is simple, if not necessarily, or even usually, in line with clients' best interests. The vendor agrees to pay X percent for the first Y dollars of revenue, X+ for the next Y dollars, X++ for the next Z dollars, etcetera.

But some vendors are applying the higher payment levels retroactively. Yep, if the TPA delivers Z dollars, the X++ commission rate applies to ALL revenue. That's why employers are being told they can get these services at very low - or no - cost. Hat seems like a great deal is - for the TPA. Unfortunately the TPA's interests are not always, and in some cases are most definitely not, aligned with the employer's.

Here's an example. If a PT vendor controls utilization, and prevents cases from exceeding a reasonable number of visits, the employer wins. But if the case goes on and on, and the vendor does not or cannot or will not end the treatment, then more bills mean more 'savings' which mean more revenue for the vendor - and not coincidentally, the TPA.

What does this mean for you?

If your TPA hands you a deal that sounds great, watch your wallet. What drives revenue for many TPAs is driving up your costs.

Posted by Joe Paduda at 8:21 AM | Link to this post | Comments (2)

The exhibit floor at the workers comp conference is abuzz with rumors about sales; companies on the block, new transactions for TPAs, and new business for vendors.

Amongst the rumors are several that don't appear to be based on fact, including the pending sale of Medata. When asked about the transaction, CEO Cy King looked incredulous. King stated "there's lots of interest in the investment community and no interest on the part of Medata. It's just wishful thinking."

Sedgwick has been capturing business from competitors at a rapid rate. Loew's will move to Sedgwick shortly as will Boeing. The word in the market is Sedgwick is pricing their claims services at extremely competitive rates; 20% to 30% under the incumbent. The big TPA is also pushing their managed care vendors hard for price reductions. OK so why?

It could be that Sedgwick is prepping for an IPO. Management stock options will vest in the event of a deal, UHC has been divesting other non-core assets, and the company is recruiting big names, all activities commonplace at companies looking to sell.

Among other companies reportedly on the block are MCMC (no surprise there), and Bunch and Associates (I've asked Bunch about this and it has been repeatedly denied, but the rumor persists).

More to follow, including corrections where necessary.

Posted by Joe Paduda at 11:28 AM | Link to this post | Comments (1)

It's good to be back in Chicago.

The 'comp conference', the shortened title given to LRP Productions' annual National Workers Comp and Disability Conference, has recently been exiled to, of all places, Las Vegas. (Does anyone else see the slightest bit of irony in a risk management conference convening in the gambling capital of the nation?) Fortunately for wanna-attendees this year's show is in Chicago (a city I like a while lot more than Vegas), a burg less likely to get the thumbs-down from corporate travel execs than Sin City.

I digress.

Here in random order are impressions from day one.

I'm impressed with the amount and variety of innovative approaches to old problems in evidence on the exhibit floor. That's not to say that all are promising or even potentially useful but the level of effort is impressive.

For example, Coventry is actually talking about small networks. I know, I know, they've been talking about small networks for years but word is they may actually be doing something. More on that next week.

PMSI's work on upgrading and strengthening their clinical programs, while not complete, is already bearing fruit. Look for more from this once-dormant PBM as it continues to invest in staff, systems, and technology.

Medata is promoting their proprietary UCR database, Tally. Unlike other UCR databases, Tally has not been successfully challenged in court. For payers concerned about litigation, this may well be a viable alternative.

Broadspire is reportedly working on new approaches to triage and early case management, building off their eTriage application/utility. This is not a standalone effort, but part of a larger initiative to revamp their approach to, and capabilities in, managed care.

Among other impressions - there are more private equity/venture capital types in attendance than in any other recent year. As I've indicated in earlier posts, activity has been heating up significantly of late, with the FairPay deal just the most recent.

And finally, there's actually a Pet Insurance company exhibiting. Why, I don't know. What pet insurance has to do with work comp or disability is not readily apparent.

Anybody have any ideas?

Posted by Joe Paduda at 10:17 PM | Link to this post | Comments (2)

And it is coming from all directions. California may be in the process of significant changes due to recent court decisions and the hangover from reform. Texas continues to debate, discuss, and deliberate alterations to their current system. The regulatory and legislative fronts in other states are noticeably quieter, but that silence is more than overcome by the noise from outside the regulatory system.

Brutal competition continues for what little self-insured business is left, while TPAs struggle to differentiate in a market crammed full of me-toos. Complacent carriers have invested little in adjuster education, training, systems, and decision support tools - partly because they have little to invest, but also because they aren't thinking strategically.

The soft market is going to end - its got nine to fifteen months at the outside. Yet few insurers or TPAs are ready - they've been so busy cutting costs, reducing overheard, laying off talented and experienced WC pros that they are in no way shape or form ready to respond to rising medical costs, a renewed emphasis on return to work, loss prevention, and basic claims management. Not to mention the personal angst experienced by the folks left after the reductions - they're so busy concentrating on keeping their heads down and staying out of the line of fire many aren't worrying nearly enough about the next turn of the cycle - when costs start to head back up, and payers are woefully unprepared to do anything about it.

Add to the mix health care reform and its attendant impact on workers comp (cost shifting, changes in Medicare's RBRVS, pharma price increases), a sharp rise in work comp medical expense, and a surge in claims that will come when employment rises once more, and you've got the makings of a pretty ugly picture.

The stuff isn't going to hit the fan until mid 2010 at the earliest, and early 2011 at the latest.

Are you preparing?

What does this mean for you?

If your company isn't ready, get your resume updated...

Posted by Joe Paduda at 9:39 PM | Link to this post | Comments (3)

The chances of some variety of health insurance reform passing are looking more likely and big pharma is getting ready.

By raising branded drug prices nine percent (so far) this year., and this at a time when the Consumer Price Index fell by 1.3%.

You may recall the big press event when pharma and the White House announced their 'agreement' whereby pharma would agree to not fight reform in exchange for reductions of about $8 billion a year in pharma costs. That deal is either off the table, or it wasn't carefully enough crafted on the front end, because drug companies have been steadily raising prices for brand drugs this year, evidently in anticipation of big changes in the future. In fact, it looks like the increase so far this year more than compensates for the agreed-upon 'cuts' announced earlier.

Readers will remember the last time drug prices jumped significantly was just after the Medicare Part D program went into effect, when the largest quarterly increase in years just happened to coincide with the beginning of the program.

There are political as well as practical implications of these price increases. From a political perspective, pharma may be doing to itself exactly what healthplans did with the disastrous release of the PwC 'report'. Health plans thought they had a deal with the Administration, only to infuriate the White House and Congressional Democrats with the flawed and incomplete 'analysis' (even though the concept was right and conclusions accurate, the presentation killed any chance of objective consideration).

With the release of this analysis, Congressional Democrats have yet more evidence of the profit-driven mentality that many believe is directly responsible for our dysfunctional health care system. Do not be surprised if the reaction from Congress is loud, fast and brutal.

What does this mean for you?

This is more of an issue for group and Medicare/caid operations than for workers comp, as comp has a greater percentage of generic fills. But there's no doubt all payers' drug costs are going up significantly this year.

If you're a PBM, get ready to explain higher drug prices.

Posted by Joe Paduda at 6:50 AM | Link to this post | Comments (3)

A few items of note have been accumulating on my desktop, each of them interesting/important but none worthy of a full post. Here they are for your enjoyment and edification:

- In a top candidate for worst idea of the month, WorkCompCentral reported [ sub req] today that the South Carolina Hospital Association wants surgical implants carved out of hospital bills and paid at 100% of the invoice price. You know, the invoice they draw up themselves in the finance office...

- Sources tell me there was a dustup at the Maine Workers Comp conference involving a representative from an IME company and a judge. The disagreement ended up in a fistfight, which resulted in the IME rep getting fired. I'm wondering if cocktails were involved, or if this was the result of a heated discussion over some fine point in Maine's workers comp regulations. Or both?

- Word comes to MCM from North Dakota that there is a petition circulating demanding the Governor investigate Cynthia Freland, the prosecutor who may well have broken the law in her quest to convict former ND state WC fund CEO Sandy Blunt of something...anything. Fifty signatures are required, and sources in the far north tell me they are well on the way.

- In the ramp-up heading to next week's annual work comp conference in Chicago, a preliminary and very unscientific poll indicates the new new thing is ebilling, and/or claims systems, and/or the renewed interest of the private equity/venture capital folks in work comp managed care.

- Speaking of which, the level of interest among the people with money to invest in work comp managed care is definitely up, although valuations are not. Typical multiples for deals closed, in process, and under discussion are in the 6 - 7.5x EBITDA range, with the high end rarely seen. There have been two factors limiting activity; low valuations are keeping owners from putting their companies up for sale, and the continued tight credit markets have made it difficult for investors to secure debt financing for deals. That said, the FairPay deal closed earlier this fall, and there are two others in the space that are said to be close to 'done'.

Posted by Joe Paduda at 6:30 AM | Link to this post | Comments (2)

There are some things I just don't get. Bungee jumping, the Ruta de los Conquistadores, body piercing are near the top of the list, just under equity investors' reactions to health reform.

And it doesn't look like my health investor puzzlement is going to end any time soon.

Several news items collided in my inbox this week; passage of the House reform bill and multiple analyses thereof; a report that health plans' medical costs and profitability are worsening, yet many health plan stocks are selling close to their 52-week highs. Huh?

Let's start with the health plan medical cost report. The good folks at Mark Farrah and Associates published an analysis that, among other things, noted:

- the top eight health plans (covering 59% of the nation's total insureds) lost 836,000 members in the first half of 2009

- commercial membership was down 1.45 million while MA and Medicare Supplement was up 405,000

- Medical costs are trending higher, and medical loss ratios are as well

The net - profitability has declined, costs are increasing, and membership is dropping. Yikes.

Now, investors don't seem too worried about these trends. In fact, as of this morning, they seemed to be enamored with the health plan sector as stock prices are up over nine percent over the last month, compared to an S&P that's just over flat.

Next, health reform and the recent House and Senate bills. What I see that's scary is the lack of a strong mandate coupled with an end to most underwriting of medical coverage means people can sign up for health insurance when they need it, stop paying premiums when their care is completed, and then re-up if and when they need care again.

Let's call this the Massachusetts Problem, after what's been happening to health plans there.

This isn't conjecture or theory. It's reality, and it is taking place in a market with a much stronger mandate than the one in the Senate Finance bill.

Finally, a few selected statements from stock analyst types:

- "There were two recent developments of particular concern to WellPoint investors, since the company is a relatively big player in the small-employer and individual markets. First, the Senate Finance Bill included strict insurance market reforms but a weak individual mandate, which could lead to adverse selection, higher premiums, and a smaller market for individual and small-group policies." (Morningstar) Yet Morningstar rates WellPoint a five-star stock

- They also may not be hurt as badly by a federal health care overhaul as many analysts first worried. Congress is debating ways to cover the uninsured and reduce costs, and health insurance stocks have been sensitive to this debate for months. Shares sank at the start of the year when the reform debate picked up steam, but they have recovered for the most part as the threat of a strong public option that would compete with insurers faded. A possible tax on insurers based on their market share remains a concern. But overall, analysts say the sector remains on sound footing heading into the next few quarters. [notice no discussion of the impact of the end of underwriting coupled with a weak or nonexistent mandate...perhaps it was edited out] istockanalyst

- "I think they're getting a really bad shake in the current environment," FTN Equity Capital Markets analyst Peter Costa said. "But the core businesses are there." istockanalyst

United Healthcare is also a top rated stock, and is trading near its 52-week high.

Analysts may say health plans are somewhat insulated from the individual market, where the underwriting issue is really problematic. True, but as more companies drop their group plans (a multi-year trend that has accelerated this year), the size of the individual market will grow - and health plans will have to get into or expand their offerings in that market if they are going to increase revenues (a mandatory requirement for publicly traded companies).

So here's where this all leads. Without a strong individual mandate, health plans are going to lose buckets of money insuring people after they get sick. How that translates into a 52-week high is beyond me.

Disclosure - I've sold all my health plan stock holdings and don't have any financial interest whatsoever in the sector. Not because I don't think there are some good companies out there in the healthplan business (Aetna's probably at the top of the list), but because provisions in the two health reform bills will kill off the entire industry.

Posted by Joe Paduda at 8:42 AM | Link to this post | Comments (5)

Friends and colleagues Jay and Louise at Colorado Health Insurance Insider host this week's edition, featuring the Simpsons explaining all things health policy - as only the Simpsons can.

Great stuff, all in one place for your edification!

Posted by Joe Paduda at 8:30 AM | Link to this post

Because that's what it is going to 'cost' to replace the current Medicare physician reimbursement scheme with something else. And make no mistake, as Trudy Lieberman of the Columbia Journalism Review points out, most of the nation's physicians are adamant about 'fixing' Medicare reimbursement.

The issue is the Medicare Sustainable Growth Rate (details here). The net is simple - if the SGR formula/process is eliminated, a quarter trillion dollars gets added to the deficit, because that's the amount the formula/process says has been paid to docs over and above SGR 'limits'.

Current Congressional protocol requires CBO to 'score' any and all health reform proposals; unsurprisingly the SGR 'fix' has not been included in any reform measure, because it will push the cost way, way over a trillion dollars.

Thus, thru legislative legerdemain, Congress is avoiding talking about and being held responsible for the real cost of reform.

As long as we have to 'fix' the SGR - and I'm not arguing that Part B (physician reimbursement) doesn't badly need fixing, hows' about we 'trade' SGR elimination for some real reform, like, say, bundled pricing for specific procedures/conditions? Like, maybe, a flat cost for treating an asthmatic patient over a year including facility and physician and lab and other costs?

Or, for those chronic patients with more than one condition, a formula that pays for all their care based on a multiplier indexed to the number, cost, and severity of their conditions?

Or a requirement that all physician bills from practices that don't have all patients on a share-able electronic medical/health record are paid under a non-fixed SGR, while bills from practices using 'certified' EMR are paid under a new schema?

Pretty draconian, you say? Not as draconian as anteing up another quarter trillion bucks, I respond. Sure it will be hard and take some time and isn't easy and all that other blather. It's a huge knotty ugly problem, requiring some ugly solutions, and none of them are going to be perfect. But they will be a damn sight more perfect than what we have if we don't get reform-with-cost-control done this time around - family health care costs above $30,000 within ten years.

It's time we got more from stakeholders than just their agreement to not block reform. We need a good more arm-twisting and a lot less gentle cajoling.

What's the net?

Watch to see how Congress and the President handle the SGR redo issue. Do they use SGR as a lever, or do the docs use it as a club?

Posted by Joe Paduda at 7:01 AM | Link to this post | Comments (5)

You gotta see this.

I'm much embarrassed to inform you, dear reader, that Tinker Ready of Boston Health News published the latest - and greatest - of the health wonkosphere last week, while I was asleep at the virtual switch.

Tinker's HWR is here; you have to see the video of the AHIP singers.

No, really, you have to!

Posted by Joe Paduda at 7:24 AM | Link to this post | Comments (1)

Paraphrasing Sen Ron Wyden (D OR) produces the most accurate soundbite description of the House' health reform bill.

Is this the best we can do?

If the answer is yes, we're in deeper trouble than even I thought. I'm really disappointed with the Republicans. They are supposed to be the budget hawks, but instead they've spent their time railing against abortion funding, illegal immigrants, and death panels, along with scientific research and taxes on device manufacturers. Instead of attempting to govern responsibly, they've abandoned all morality in their quest to re-energize the lunatic fringe of their once-dominant party. Now comes news that Maine's Susan Collins is convening news conferences to rail against the cost of the bill.

With all due respect, Senator, this isn't exactly new news. Now you're getting concerned about cost? After nine months of debate, discussion, and appearances on Meet the Press? Not to single out Collins; at least she's finally saying something rational about cost.

While there's plenty of blame to pile at the door of the Republicans, it is the Democrats who are to blame for coming up with a huge entitlement program set up to do nothing but grow.

Cost containment as proposed in the bill is in the form of cuts to Medicare totaling about $420 billion, including:

- $155 billion (about) from price cuts to hospitals,

- reductions in Medicare Advantage subsidies,

- increasing drug rebates payable to CMS, and

- requiring CMS to negotiate with pharma for Part D drugs.

Then there's a potpourri of funding for Accountable Care Organizations, better primary care coordination, research on quality and effectiveness, and other should-have-been-doing-all-along initiatives.

As for real cost containment, methods/techniques/tools that can actually reduce cost over the near term in the public and private sectors? Bupkus. Nada. Zippo.

Sure, at some point in the future this research will result in data we can use to recommend more changes. But by that time we'll be broke, and China will own everything of substance.

Oh, and when insurance underwriting reform kicks in health plans will have to take all comers, yet at 2.5% of adjusted gross income, the mandate penalty is not tough enough to force compliance. What we'll get is individuals and families buying coverage when they need it, only to drop it when the condition is fixed/surgery completed/rehab over. And under the terms of the House bill, you could fall off your motorcycle, buy insurance, get treated, and then stop paying premiums when your rehab is over.

I'm no fan of the insurance industry, but that just isn't fair. And lest you think this isn't going to happen, talk to Charlie Baker, former CEO of Harvard Pilgrim Health in Mass. It's happening in Massachusetts today.

Drastic times call for drastic measures. If we aren't going to seriously consider Wyden-Bennett - and more's the tragedy if we don't, then we need cost containment with teeth.

How about starting with normalizing treatment costs for specific conditions? The huge and wildly inappropriate variation in practice patterns and costs associated with conditions such as COPD and back pain and prostate cancer and diabetes and dozens of other conditions have to stop. Medicare should, and could, gradually ratchet down reimbursements across the country till they are match global reimbursement for care delivered by delivery systems that are demonstrably efficient and deliver quality outcomes - Mayo, Lahey, Geisinger, et al.

Or develop an all-payer fee schedule (similar to the one in Japan) allowing all payers access to the Feds negotiating power.

Crazy? Sure. But the current bills will not reduce cost inflation. And therefore, sure as the sun comes up tomorrow, within ten years you will be paying $30,000 for family coverage. And pretty poor coverage at that.

What does this mean for you?

Despair? Disgust?

Posted by Joe Paduda at 6:20 AM | Link to this post | Comments (5)

The use - and misuse - of technology in medicine is not only a major cost driver, it is also a major cause of unnecessary pain and suffering.

Far too many carotid endarterectomies were performed in a misguided effort to reduce

If we are to have any hope of slowing down the rate of increase in medical costs, we have to stop the abuse of unproven and potentially harmful technology.

WorkCompCentral [sub req] has a great piece on a program run by the State of Washington that does just that. The Health Technology Assessment program "assesses various devices, procedures, medical equipment and diagnostic tests, then issues recommendations that public payers must follow[emphasis added]. Those public payers include the Department of Labor & Industries, which runs the state's monopoly workers' compensation program."

According to an article in the New England Journal of Medicine, HTA determines reimbursement on these technologies for programs including:

"Medicaid, the workers' compensation program, the state government employee benefit plan, and the corrections department [which] provide $2.9 billion in benefits annually to approximately 773,000 Washington citizens through direct fee-for-service plans"

Before the wingnuts start spouting about death panels, know that the HTA has been widely accepted by politicians from both parties, it passed with a single 'nay' vote in 2006, supported by both the state Hospital and Medical Associations, and while individual conclusions may draw opposition, the program itself is viewed very positively.

The process is rigorous. According to the NEJM;

"The program's assessments are based on a thorough, systematic review of the evidence related to the effectiveness, safety, and cost-effectiveness of a product or service, with each type of evidence examined separately. After considering the "most valid and reliable" evidence on all three of these dimensions, the health technology clinical committee -- which must be made up of practicing clinicians -- arrives at one of three recommendations: covered without conditions, covered with conditions (such as criteria defining medical necessity), or not covered. The entire process must be transparent."

HTA is important because it shows what can happen when government intervenes intelligently and carefully. So far, HTA has rendered opinions and set policy on:

* Arthroscopic surgery for osteoarthritis of the knee. (Not covered.)
* Discography for uncomplicated degenerative disk disease. (Not covered.)
* Implantable drug-delivery systems for chronic, non-cancer-related pain. (Not covered.)
* Lumbar fusion for uncomplicated degenerative disk disease. (Covered, with conditions.)
* Upright or positional medical resonance imaging. (Not covered.)
* CT colonography. (Not covered.)
* Pediatric bariatric surgery. (Not covered for patients 18 or younger. Covered with conditions for patients between the ages of 19 to 21.)

These actions have reduced costs by over $20 million since its inception three years ago.

What does this mean for you?

Payers should look closely at following Washington's lead.

Posted by Joe Paduda at 6:38 AM | Link to this post | Comments (4)

The most significant charge leveled against Sandy Blunt, former CEO of the North Dakota State WC fund, never should have been brought. And if it wasn't, he would never have been convicted of a felony.

Blunt was charged with authorizing sick leave for and failing to collect moving expenses from a Fund exec who was terminated within two years. In theory, if he left within the two years, the moving expenses paid by the Fund should have been reimbursed.

Turns out that the prosecutor who brought the charges, Cynthia Feland, knew that failing to collect the moving expenses was not a crime - yet she brought charges anyway.

She had in writing that the ND Attorney General advised state auditors in October of 2006 that the exec did not voluntarily leave and thus there was no legal authority to collect. This fact was then put in writing to Feland a year before the trial and she

- added it as a crime just weeks before the trial and

- withheld the memo proving it was all legally done, thereby not giving the defense exculpatory evidence she was legally required to provide.

Feland clearly violated her obligation not to bring charges without probable cause, she violated her obligation to turn over witness statements, she violated her state obligation to turn over exculpatory evidence, she violated her federally mandated "Brady" obligation to turn over exculpatory evidence, she violated Blunt's due process rights by not allowing him a preliminary hearing for probable cause on the issue, and she lied right to the Judge's face in open court about the whole thing (including that it was in the audit when it was not).

I repeat my query from earlier this week:

What in the hell is going on in North Dakota?

And why is there no coverage of Feland's potentially criminal activity in the press up there?

Is North Dakota some third world country where the State's employees can decide which laws they are going to comply with based on what best suits their personal/political needs? Where a person's personal and professional life can be ruined in what can only be a personal or political vendetta? Shouldn't someone from the State, the FBI, or another law enforcement entity be investigating Feland?

What does this mean for you?

If Sandy Blunt can get absolutely screwed by the system, so can you.

Posted by Joe Paduda at 9:11 AM | Link to this post | Comments (2)

Thanks to the good folks at Workers Comp Insider, I learned of an intriguing study conducted by Conning and Company that concludes (in part) that private work comp insurers don't perform as well as public ones.

Here are a couple of excerpts from the article in Insurance Journal:

- 25 public and quasi-public workers' compensation insurance plans perform better financially than the private market in a number of performance categories and at least as well when it comes to the bottom line.

- public workers' compensation providers tend to have higher losses than the workers' compensation insurance industry as a whole, they more than offset those losses with lower expenses, higher investment returns, bigger dividends to employers and better injury prevention efforts.

- through more stable reserves and superior investment income, state funds have managed to achieve operating income on a par with that of the workers' compensation industry as a whole.

- Spurred by their mission that includes improving safety and their state's economy, state funds blunt the impact of bigger losses through concerted loss prevention efforts. As Jablonowski put it, "They are able to convert the marginal and poor risk into something better."

The public providers offer employers significantly higher dividends, which provide an incentive for businesses to adopt safety measures. These dividends can also create a competitive advantage and build customer loyalty, according to the study.

Congratulations to the good, hard-working, effective folks at SCIF in California, Texas Mutual, NYSIF in NY, the North Dakota state fund, Beacon Mutual in Rhode Island, and the rest of the state funds. While all is not perfect, and as Peter Rousmaniere has pointed out, often quite a distance from perfect, some of the findings of the Conning study are illuminating.

I'm also thinking the study should be carefully reviewed by Federal legislators, as the conclusions may help inform the discussion about the public option in health reform. I'd point to them to this quote:

"When you look at the entire insurance world, there are obviously insurance companies in the private world that do a great job of loss prevention control,"[the study's author said] "But the unique thing about funds is that they all do it. Twenty-five of them and they all do it. So it's not a random sample; it's a sample that suggests that this group puts an emphasis on loss prevention control."

That's exactly, precisely what we need to do with health care - prevent preventable claims that lead to high costs and lousy outcomes.

What does this mean for you?

Once again, the health insurance world can certainly learn something from workers' comp.

Posted by Joe Paduda at 7:13 AM | Link to this post | Comments (3)

For the update, see UPDATE below.

Also, if you would like a copy of Todd's marketing presentation, email me at infoAThealthstrategyassocDOTcom. The presentation is not copyrighted, marked confidential or proprietary, or otherwise protected from distribution.

Original post
The world of work comp managed care is highly competitive, with vendors willing to push pretty hard to win business or hold on to customers. That's the way the market is, and as long as these practices don't cross the line, may the better competitor win.

But sometimes that line is crossed.

A work comp PBM took my copyrighted work and without my permission, used it in a marketing presentation. They also copied my Survey of Prescription Benefit Management in Workers' Comp and distributed it without my permission.

Not only that, but the PBM mischaracterized the work in such a way that it appeared I endorsed their approach and business model, if not them specifically.

I've repeatedly asked the PBM to retract their statements and have yet to receive confirmation that they did so. Rather than continue to spend money on attorneys, I've decided to publicly disavow any connection between myself, my firm Health Strategy Associates, LLC, and the WC PBM consortium I work with, CompPharma, LLC, and the PBM in question - one WorkComp Rx, Inc, and WCRx' President, Greg Todd. Todd is also affiliated with Integrated Prescription Solutions.

Here are a couple specifics.

The introductory slide in a WorkComp Rx marketing presentation (entitled HSA Comparitive (sic) Summary ) states the: "findings [of my firm's Annual Survey of PBM in WC] support WCRx's performance Is The Best-In-Class". No, it most definitely did not.

Another slide showed WCRx's inability to comprehend the survey. The slide reads "Typical PBM Pharmacy network size is 55-58,000 pharmacies of which "penetration rate" is approximately 65% which totals 38,000 participating pharmacies", showing his firm didn't understand the definition of 'network penetration', which is not how many pharmacies participate but what percentage of scripts are processed thru the retail network. This led to this wildly inaccurate conclusion:

WCRx's pharmacy network includes 99.7% of all US pharmacies (64,000+) and a 100% "participation or penetration" rate. That is more than 30,000 additional pharmacies with 100% participation than any competitor.

Yet another slide stated that the Survey found that Third Party Bills "...amounted to 40% - 50% of all W/C pharmacy bills." Nowhere in the Survey do those words appear.

There are plenty more examples of misinterpretations, fabrications, and distortions, but you get my drift. It could be that Todd et al just don't understand the work comp business, as his company's website reads in part:

"Workers' compensation is mandatory medical insurance that is paid for by employers and is required by law in every state."

There are two errors here - WC is not mandatory in every state (i.e. Texas) and is not 'medical insurance'.

UPDATE - IPS changed its website yesterday; the new description of work comp reads as follows:

"Workers' compensation is a form of insurance that provides compensation medical care [sic] for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence."

end of UPDATE

It also states that work comp medical spend is broken up thusly:

Hospitals & Physicians: $18.4 billion
Physical Medicine: $8.8 billion
Pharmacy: $6.0 billion
Diagnostic Services: $3.2 billion
DME/Home Healthcare: $3.2 billion
Cost Containment (UR): $1.8 billion

Perhaps Todd et al made these data up themselves, or have a source I've never heard of, or used data from one state to extrapolate to the rest of the country (no source is cited); I don't know where else they could come up with these statistics, certainly not from NCCI or WCRI or NASI or DoL BLS reports.

When I learned of the misuse of the Survey's findings and unauthorized duplication of the Survey itself, I immediately contacted my attorney, who sent a firm but polite letter to the PBM's president, Greg Todd, a man heretofore unknown to me. The letter asked Mr Todd to stop using my material, inform all those he or his employees or agents had shared my material with that this was unauthorized, and tell them that I had not and did not endorse his company or approach.

Mr Todd sent a letter back telling me that I was fortunate to have his company spreading the word about me and my firm. But before he sent that letter, he called me and asked if this was about CompPharma, the consortium of workers' comp PBMs I work with and am a part owner of. I said no, it was not; he replied that he knew other CompPharma members were using my work, whereupon I told Todd if they were it was with my permission. He then offered to join CompPharma and inquired about the fee.

He could not seem to understand that this was not about a fee. This was about his company doing something it should not have done, misusing my work and using my reputation and credibility to help him sell his stuff.

A follow up letter to Mr Todd went unanswered. As it appears that Todd is not going to respond to my request that he retract his statements and stop using my materials, I have no choice but to get the message out myself.

I am not today, have never been, and will never be affiliated with, work with, endorse or recommend WorkComp Rx, Integrated Prescription Solutions, or any other firm associated with Greg Todd. Any use by Mr Todd or anyone at either of those firms of any work product of Health Strategy Associates, LLC, CompPharma, LLC, or myself is done without my knowledge or permission.

Posted by Joe Paduda at 6:58 AM | Link to this post | Comments (6)

A few states deliver high levels of benefits to injured workers at low premium rates, and a few deliver low benefits at high premium rates. Peter Rousmaniere's assessment of each state's work comp system not only tells us which states fall into which categories, but provides insights into the 'why' as well.

For example, NJ NY and Montana have the highest work comp insurance costs, but very low benefits. And Massachusetts is at the opposite end of the spectrum, with low premiums and high wage replacement benefits for injured workers. (Mass doesn't treat providers nearly as well, as the Mass fee schedule is among the lowest in the country, while medical costs are not)

Peter delves into the whys, and among his findings are:

- five states deliver both low premiums and high wage replacement benefits (IA AZ VA NV MA)

- five states are the polar opposite, with high premiums and low benefits (AK CA NJ NY MT)

and then there's the majority of states which fall in between costly/poor benefits and cheap insurance/good benefits.

Peter also notes that there is a wide disparity among states in median duration of disability, ranging from 4 days in the best states to 12 in NY.

While some states seem stuck in a dysfunctional morass, making little progress, California's recent success in dramatically reducing premiums and costs should encourage all state legislators to get cracking. Reform can be done, even in a state as large and diverse as California. Montana, which is tiny by comparison and much more homogeneous, should find reform a much less difficult task.

What does this mean for you?

Find out how your key states are ranked, and you may well find where you've got problems in your comp program.

Posted by Joe Paduda at 7:05 AM | Link to this post | Comments (1)