This morning's WorkCompCentral had a piece by Greg Jones noting complaints by medical specialty groups about the study on physician prescribing of opioids recently released by CWCI.

I received a copy of the letter as well, and frankly was surprised - for several reasons.

What was most troubling was the statement that "Alone, the report's findings do not indicate that there is anything inappropriate."

I would argue that the findings absolutely indicate there is something very, very wrong going on here. In fact, a relatively few physicians are "handling the bulk of the prescriptions"; that was amply demonstrated in the analysis and results provided in the report, the details of which were discussed in detail therein.

In addition, the statement that "we are not surprised by these early findings" was quite troubling. I certainly was surprised.

Why was this not surprising to the medical society? Was it not surprising that a relatively few physicians were treating patients with low back sprains and strains for extended periods with relatively high doses of narcotics, when all evidence-based clinical guidelines do not support such treatment?

The letter suggested CWCI conduct a deeper analysis to determine whether the treatment was appropriate based on treatment guidelines.

Huh?

Every treatment guideline I've heard of, including ODG, ACOEM, Washington State - none of them supports extended use of opiods for treatment of musculoskeletal issues. None.

I would also note that the letter called into the question the methodology itself. The author of the letter's statement "it is clearly misleading to use
the initial diagnosis" is inaccurate. Even a cursory review of the study
methodology reveals the researchers used a rather sophisticated clinical grouper to identify the PRIMARY diagnosis, which may well not be the initial diagnosis.

Finally, the letter asserted that others had mis-cited or misinterpreted the CWCI work, and requested CWCI somehow correct, clarify, or take steps to correct those misinterpretations. Studies are cited and discussed and reviewed and analyzed in the media and by individuals all day every day; I just don't think CWCI has the time, resources, or obligation to monitor what everyone says about their research.

I guess is the net is I'm really taken aback by the letter.

There's clearly abuse going on here, along with bad medicine and out of control prescribing of very addictive, dangerous medications that are ripe for diversion and abuse. I'm just very surprised that instead of taking this seriously, a medical society would attack the messenger. There's something very rotten going on, and denying it is the wrong approach.

Posted by Joe Paduda at 10:15 AM | Link to this post | Comments (2)

Yesterday I posted on the most recent CWCI study on Opioids in the California Work Comp system, noting that fewer than a hundred docs were responsible for prescribing 42% of the narcotic spend.

If that isn't troubling enough, in an email conversation with lead author Alex Swedlow, I learned that the top ten physicians prescribe 17% more drugs than their peers in the top one percent of prescribing docs (93 docs are in the top one percent).

And, these top ten docs prescribe 34% more morphine equivalents than the others in the top one percent.

Recall that the top one percent of docs who prescribe narcotics are already prescribing far more than the average prescriber, so the top ten are outliers to the outliers.

Is it possible these outliers to the outliers are doing the right thing? Are they just treating the sickest, most pain-ridden claimants? Doing their best to alleviate high levels of chronic pain?

Highly doubtful. It is much, much more likely that these docs, who represent a mere one-tenth of one percent of all docs who prescribed Schedule II narcotics are a major problem, massively contributing to the addiction problem, adding huge costs to the system, and doing little to help their patients. As I said last fall in a post about CWCI's research on narcotic usage in California's work comp system;

"CWCI analyzed the impact of these drugs on claim costs, and found a strong correlation between increasing levels of Schedule II payments and adverse effects on injured worker recovery. Swedlow reported claimants that received the highest narcotic dosage levels had 200% higher medical costs than claimants receiving lower dosages."

An earlier study reported by Business Insurance' Roberto Ceniceros had similar findings:

"temporary disability claimants treated with opioids average 105 paid days off in contrast to the average of 30 days, than when narcotics are not prescribed.

The preliminary findings also show that when opioids are present in a claim, there is a 322% greater likelihood for litigation, a 264% greater likelihood for lost time from work, and 38% more likely for a claim to remain open longer and incur additional costs." [emphasis added]

Kudos to CWCI for continuing to shine a very bright light on a very ugly problem, one that should be the highest priority for PBMs, regulators, payers, and prosecutors working in California.

Posted by Joe Paduda at 7:06 AM | Link to this post | Comments (1)

A colleague posed an interesting question last week -"does the proliferation of 'new' blogs, newsletters, and other internet-enabled communications vehicles pose a threat to the 'brand' and 'market share' of Managed Care Matters?"

No. In fact, the pie is growing, and it's a better pie today than it was yesterday.

The new entrants are actually helping to expand the online media 'market', increasing the number of users and in many cases upgrading the conversation in the process. People who - a couple years ago - would not ever have considered reading a blog or accessing an online newsletter are now on MCM and other media outlets every day, checking to see what's going on, voicing their opinions, taking the pulse of the market and staying abreast of their competitors.

Perhaps the most notable example of the explosive growth of social media is the Work Comp Analysis Group. Managed by Safety National's Mark Walls, the WCAG now has over 8000 members, is constantly updated, and used by all and sundry for everything from finding out what an adjuster's appropriate case load should be to posting jobs to coordinating social events at industry conferences.

CompTime, WorkCompWire, Workers' Comp Insider, the dozens of state-specific WC law blogs (some of which are in the blog roll over there to your right), and the myriad other publications add a lot to the discussion.

In the olden days - three? four? years ago, most got their 'news' from printed media, which, while professionally assembled and of usually high quality, was limited to what the reporting staff could assemble - and the editorial staff deemed worthy of publication. Today, there is a lot more 'news' available a lot faster than in the old days of snail mail.

With that said, the instant news cycle - and opining on same - has it's risks and downside as well. There's a lot to be said for professional reporters, with high standards, specific training, and great contacts, especially when they are teamed with editors who, while working to deadline, have a LOT more time - and I'd argue ability - to consider, vet, rewrite, and factcheck than most of us in the online community enjoy.

There's absolutely a need for that professionalism, perhaps more so now than in the past as they provide a kind of oversight, an 'adult supervision' role, one that adds seasoning, perspective, objectivity, and thought that may not always be present in those of us in the blog-o-sphere.

Posted by Joe Paduda at 7:53 AM | Link to this post | Comments (2)

Is medicine science, art, some combination of the two, or something else?

That's not an idle question.

If you're trying to get more scientific about how you practice medicine or what services/procedures/drugs/treatments you pay for, you are likely relying on clinical guidelines to help provide a little more perspective, hopefully one based on something other than best guess or generally accepted knowledge or tribal wisdom.

A recent study may well give you pause - the key finding is rather alarming - many guidelines are NOT based on solid research, but on work that is kindly described as rather more superficial.

Published in the Archives of Internal Medicine, the research found "More than half of the current recommendations of the IDSA (Infectious Diseases Society of America) are based on level III evidence [expert opinion] only." [emphasis added] Note that the research focused solely on IDSA guidelines, which cover a relatively small fraction of all the guidelines in use today. Largely as a result of that conclusion, the researchers concluded "Until more data from well-designed controlled clinical trials become available, physicians should remain cautious when using current guidelines as the sole source guiding patient care decisions."

This isn't exactly new news. This from research on guidelines published in The Journal of the American Medical Association over a decade ago "Less than 10% of the guidelines used and described formal methods of combining scientific evidence or expert opinion. Many used informal techniques such as narrative summaries prepared by clinical experts, a type of review shown to be of low mean scientific quality and reproducibility.18​ Indeed, it was difficult to determine if some of the guidelines made any attempt to review evidence, as less than 20% specified how evidence was identified, and more than 25% did not even cite any references."

The risk here is our sound bite-long attention span will lead some to use these studies to discount guidelines in their entirety, ignoring entirely the "Until more data from well-designed controlled clinical trials become available" recommendation.

Truth is there are lots of guidelines based on standards of evidence significantly higher than 'expert opinion'. The pre-eminent organization in this area, and the one with the most rigorous standards, is the Cochrane Collaboration. And while not all will meet the randomized double-blind control methodology that most believe is the gold standard, many will indeed provide an ample and durable foundation on which to base medical decisions, treatment recommendations, and reimbursement.

With that said, there are organizations that trumpet their 'guidelines' as providing the basis for coverage and payment decisions, when a more-than-superficial examination indicates the 'guidelines' are built on mighty shaky ground.

The Agency for Healthcare Research and Quality maintains a database of evidence-based clinical guidelines; the listing is not comprehensive as many organizations choose to not submit their guidelines for business reasons. However, while not meeting the 'gold' standard described above, the standard employed by AHRQ is far superior to that of "expert opinion only"; AHRQ requirements include "Corroborating documentation can be produced and verified that a systematic literature search and review of existing scientific evidence published in peer reviewed journals was performed during the guideline development." (while their science is solid, they really need to get some English majors involved in the whole writing thing...)

What does this mean for you?

If an organization or vendor is touting their medical criteria or guidelines, prepare - and ask - pointed questions about the methodology, development process, quality of the evidence, and staffing of the effort. The good ones will be only too happy to share their work, and the others will either not know why you aren't impressed and/or be exposed.

A thoughtful piece on ranking the evidence used in medical guideline development can be found here. [opens pdf]

Lots more info on guidelines is available here.

Posted by Joe Paduda at 6:55 AM | Link to this post | Comments (11)

Two things - facility costs and pharmacy.

We'll get to pharmacy next week (I'm finishing up the Seventh Annual Survey of Prescription Drug Management in Workers Comp), but for now here's a couple quick hits on the growing problem in facility expenses.

Today's WorkCompCentral [sub req] highlights the results of a recent WCRI study examining cost drivers in North Carolina. a study that indicates the "average hospital payment per claim was about $9500 in North Carolina, the highest among all the states examined. The average charge for inpatient procedures was 49% higher than the median." [emphasis added]

Note this was back in 2007; while WCRI does good work, the nature of their process is such that the results are somewhat dated.

The fee schedule was changed back in mi-2009, lowering the cap on inpatient hospital reimbursement from 77.07% to 75%, a whole 2.07 percentage points and outpatient from 95% to 79%.

If anyone thinks this is going to make any difference at all, they're not thinking.

Gaming the 'percentage off charges' 'fee schedule' is ridiculously easy; this nominal decrease will have zero effect on actual payments to hospitals, and thus will do nothing to lower payers' medical costs in North Carolina, costs which, according to WCRI, wer up 9% in 2007.

The fee schedule reduction was a complete waste of time. That may not endear me to the folks who, I am sure, worked diligently to address the issue, but that's a fact. What NC should have done was change the methodology from a percentage off charges to something much more certain and fair - a cost-plus based system would have been a good, albeit imperfect, alternative.

We need a reality check.

Workers comp will pay about $31 billion in medical expense this year.

Health care costs will total about $2.7 trillion this year.

I raise this often-overlooked fact to point out that employers and insurers will not be able to rely on networks to control costs, as work comp networks have little buying power, and thus little ability to influence price per service.

Therefore, regulators have to step into the breach, and provide real, actionable, metric-based fee schedules based on something much more solid than the facility's charges.

What does this mean for you?

Higher facility costs will drive medical expense which will drive up combined ratios - and premiums.

Posted by Joe Paduda at 5:53 AM | Link to this post | Comments (3)

A new report documents the impact of the recession on the health care system, and for many Americans, the news is proof of what they know all too well - higher deductibles and copays are reducing their ability to access care.

The report [fee req] does not document whether the forgone care would have been necessary/appropriate/supported by evidence-based guidelines, and it is likely some of the forgone care was unnecessary. That said, it's only 'some', and it is highly likely Americans with slimmer benefits, or no benefits at all, are skipping visits, medications, therapies, and operations that will over the long term will have very serious implications.

According to a piece in the NYTimes, the researchers reported "We find strong evidence that the economic crisis -- manifested in job and wealth losses -- has led to reductions in the use of routine medical care." 26.5 percent of respondents reported reducing their use of routine medical care since the start of the global economic crisis in 2007.

The report adds more weight to the increasing evidence that the recession, coupled with the unique American health insurance system, has had a significant impact on Americans' ability to access care.

The importance of primary care in prevention is well documented; [opens pdf] timely use of primary care tends to reduce the need for interventional procedures such as CABG, thereby reducing cost and improving long term quality of life. Delaying or forgoing primary care will likely have the opposite effect, increasing future health care costs.

Impact on workers comp

Over the short term, this 'side effect' of the recession will likely increase work comp costs and extend disability duration, as more injured workers will have poor health status due to forgone care. If diabetics aren't controlling their blood sugar, asthma sufferers have more acute episodes, and hypertensives are taking their meds every other day, it is going to be more difficult, costly, and time-consuming to help these claimants recover functionality.

Over the long term, health reform will reduce work comp costs as many more individuals will have coverage. But until 2015 (or so), we won't see this positive influence.

Posted by Joe Paduda at 7:12 AM | Link to this post | Comments (2)

The work comp pharmacy benefit management industry is growing increasingly sophisticated, and the release of PMSI's Annual Drug Trends Report this morning adds to the trend.

Many of the larger work comp PBMs produce similar reports, providing deep insights into cost drivers, the effectiveness of solutions, and trends that anyone with any responsibility for med loss would be well advised to read.

Here are the quick takes from my admittedly not in-depth read of PMSI's effort.

1. Price was up significantly last year, climbing 4.7%. This is heavily influenced by the price increases pushed thru by big pharma on brand drugs last year in anticipation of health reform.

2. Utilization was up only slightly, driven by more days supply per script.

3. Mail order utilization was up 3.6%, which undoubtedly contributed to the higher utilization as mail order scripts tend to include more days' supply than those dispensed by retail stores.

4. The average number of scripts per injured worker was 11.1 in 2009. Yep, eleven point one. That's a lot of drugs.

5. The report includes an interesting chart graphically illustrating the impact of the age of the claim on scripts per claimant; claims a year old typically had around three scripts at an average price per script of thirty bucks or so; in contrast ten year old claims had 23 scripts averaging over $180 each.

6. Generic efficiency (the percentage of scripts that could have been filled with a generic version) remained at 92%. This is driven by several factors, including state regulations (some have mandatory generic language and others are considering adopting it), PBM and payer intervention and outreach, and the 'macro' pharmacy market's introduction of new brands. Generic efficiency and 'conversion' is key to cost management; according to PMSI (and consistent with other reports) each one point increase in generic utilization reduces cost by 1.4%.

7. Pharmacy in comp remains primarily, and I'd argue overwhelmingly, driven by pain. PMSI's data suggests over three-quarters of drug spend was for pain management - one of the key differences between work comp pharmacy and group/Medicare pharmacy.

8. Our old nemesis OxyContin again accounted for a lot of comp dollars, with 9.9% of spend allocated to the brand and generic versions. On the good news side, Actiq and Fentora usage declined significantly (type 'actiq' into the 'search this site' text box above and to the right for plenty of reasons why this is a very good thing).

9. Finally, the average days supply of narcotic analgesicvs was up 6.4% while the number of claimants getting those drugs actually declined. This may be due to those claimants who could use alternative meds getting off narcotics (or not starting on them in the first place). As a result, the claimants still taking these drugs are more likely to need more meds.

There's a lot more meat in the report, lots of detail on which drugs are driving how much utilization, changes in utilization by class of drug, and most importantly, the impact of clinical programs on utilization and drug mix.

What does this mean to you?

Two things.

While PMSI is one of the largest PBMs, remember that these data refer to their customers' experience and therefore may not be exactly equivalent to your book of business. That said, don't use that as an excuse if your stats aren't up to snuff - instead look for ways to get better.

As you pack for that summer vacation, grab a copy of your PBM's report (go to their site and find it there, or call your rep and have them send it over) and perhaps a couple others.

You know you want to, and you can always hide it inside a Cosmo or Men's Health to prevent mocking stares from the knuckleheads on the next beach towel.

Posted by Joe Paduda at 8:08 AM | Link to this post

Cost-shifting - the practice of seeking higher reimbursement from some payers and patients to cover shortfalls due to low or no reimbursement from others - is rampant in the US health care system. Having worked with providers, health care systems, and payers, I can attest to the pervasive nature of the beast - it happens all the time, everywhere.

More evidence came across my virtual desk yesterday in the form of a study by the Insurance Research Council entitled "Hospital Cost Shifting and Auto Injury Insurance Claims" [available for purchase thru IRC]. The study compared auto injury hospital costs in Maryland to those in 38 other states that don't have the all-payer hospital rates mandated in Maryland. Thus, whether a patient is covered by a health plan or auto insurer in MD doesn't matter - all are reimbursed at the same level.

Here are a few of the highlights.

- the "percentage of a state's population without health insurance was found to be the strongest predictor of avearge hospital costs for auto injury claimants"

- "another important predictor of average hospital costs for auto injury claimants is the percentage of a state's population covered by Medicaid"

- IRC estimated of the impact of cost shifting to auto insurers totaled $1.2 billion in 2007.

It is clear that cost shifting is rampant, particularly to property and casualty payers. Work comp payers are particularly vulnerable as their network arrangements are under growing pressure from hospitals seeking higher reimbursement.

What does this mean for you?

Your hospital costs are headed up. What are you going to do about it?

Posted by Joe Paduda at 9:40 AM | Link to this post

On Thursday I'll be speaking at the Geisinger Clinic in Danville, PA on Comparative Effectiveness; the Payer's ethical dilemma.

This is one of those 'honored to be asked', followed almost immediately by 'I've a lot of work to do' things. And a lot of work it indeed has been, but the deeper I've gotten into this, the more...gratifying it has become.

One example. In my research I came across Jim Sabin, MD. Dr Sabin, clinical professor in the departments of Population Medicine and Psychiatry at Harvard Medical School; he also directs the ethics program at Harvard Pilgrim Health Care and writes an excellent blog, Health Care Organizational Ethics.

Here's a few of the things I've learned from Dr Sabin.

1. Harvard Pilgrim may be the only health insurer in the country that has an inhouse ethics program that includes members, employers, brokers, community members, administrators and physicians. (If there are others out there I'd love to hear about them)

2, This isn't a program set up merely for PR; rather it has studied significant issues, taken tough stands, and been public about its role and results.

3. The issue of ethics in medical research on effectiveness has another dimension, one that I hadn't thought thru or explored in enough detail - health plans and health systems can be and in many cases are 'sites' for research; there are several ethical issues inherent in that role, issues that involve informed consent, public involvement and education, funding sources and use of those funds, the balance of cost and effectiveness, and the potential impact on the physician-patient relationship inherent in many research efforts.

4. Perhaps the most helpful discussion was around the not for profit status of HPHC. As a not for profit, Harvard Pilgrim doesn't have to deal with the primacy of stockholder returns inherent in the for profit world; that's not to say it doesn't have to ensure financial stability and long-term viability. The difference is in what's most important - profits or patients.

The primacy of stockholder returns influences ethical and business decisions, or rather should. For profit companies must consider shareholder returns first and foremost; to do otherwise would be an ethical problem. There are for-profit health plans and insurers that work diligently to deliver services ethically and responsibly, bending over backwards to do the right thing. Aetna is one that comes first to mind. And there are others that don't bend at all.

Which is 'right'? A compelling argument could be made for either position.

Posted by Joe Paduda at 8:52 AM | Link to this post | Comments (6)

In preparing for a talk on the ethics of comparative effectiveness I'm to give at the Geisinger Clinic in Danville PA in April, I've been interviewing medical directors from several health plans and workers comp insurers, along with physicians - both practicing and managing, in an effort to get their views on guidelines.

I've been somewhat surprised at what I've learned.

The real problem may not be payers' efforts to deny medical care, but their willingness to 'go along to get along'; to avoid making tough coverage decisions, and when in the slightest doubt, to approve the procedure/drug/treatment/therapy rather than run the risk of upsetting someone.

One would think payers would be keenly interested in supporting and using evidence-based clinical guidelines; costs would be reduced and outcomes improved, benefiting both patients and profits. And one might very well be wrong.

Payers operate in a market where public opinion matters a lot; if the payer has a negative image, it will be harder to convince employers and their employees to sign up for their health plan. It may also be harder to convince physicians and other providers to join and stay in their provider networks. And families may well be reluctant to carry an insurance card from a payer known for their tight controls on medical care.

We all know that restricting unnecessary care is not bad or immoral, but to the general public, it can certainly look like a profit-driven effort to cut costs, regardless of the effect on patients. To be sure, payers' public efforts to terminate patients on the flimsiest of excuses and refuse coverage to anyone who might actually get sick haven't helped their image. But the sense I get from the medical directors and practitioners I've spoken with is they are quite reluctant to deny treatment.

Part of this may be influenced by reality - when claims costs go up, so do premiums, and so does the health plan's top line. There are few industries where built-in inflation results in near-double-growth same-store growth every year; health insurance is certainly one. This 'reality' is closely related to health plans' motivations. Wall Street demands revenue growth, and for those health plans that are for-profit, their primary obligation is to their stockholders.

Allowing questionable treatments drives up revenues which benefits stockholders.

Of course, it isn't anywhere near that simple or straightforward in the real world. Health plans' profits are higher if medical costs are lower - at least over the short term. And most of the health plan execs I know are honestly trying to ensure their members get the care they need, care that they can't afford if they approve any and all treatments no matter how ineffective.

But there is no question payers face an ethical dilemma, one complicated by patient demand, provider relations, market influences, and the obligation to their owners. (I'm not addressing the not for profits in this post)

A lot of Federal (taxpayer) dollars are going to be spent on comparative effectiveness research over the next few years, and if there's a better use of my money I'm not aware of it. It is widely acknowledged that much of what we spend is wasted on unnecessary tests, advertising-driven consumer demand, unproven treatments and procedures that benefit device companies, specialists, and facility owners far more than patients.

It's also equally clear that reining in those costs is going to be incredibly difficult, because much of it occurs in the somewhat grey area between procedures that are clearly useless or harmful, and those that are undeniably appropriate. And that grey area is where hundreds of billions are spent every year.

What does this mean for you?

Perhaps an ethical dilemma.

Posted by Joe Paduda at 7:13 AM | Link to this post | Comments (5)

Prostate cancer may be one of the most over-diagnosed and over-treated conditions in the nation. It is also one of the most over-publicized, with ex-politicians (Bob Dole) and sports figures (Ed Randall) encouraging all men over 50 to get a test that is no more accurate than a flip of the coin, costs big bucks, and may well lead to costly, unnecessary, and painful surgery.

In an editorial in today's NYTimes, Richard Ablin, who discovered PSA (the enzyme that is the target of the test), publicly disavowed the test, calling it a "hugely expensive public health disaster". He went on to detail the statistics: "American men have a 16 percent lifetime chance of receiving a diagnosis of prostate cancer, but only a 3 percent chance of dying from it. That's because the majority of prostate cancers grow slowly. In other words, men lucky enough to reach old age are much more likely to die with prostate cancer than to die of it." [emphasis added]

The cost of prostate hysteria comes to about $3 billion a year for the tests, plus the pain and discomfort and sexual dysfunction - and cost - of men treated unnecessarily.

One study found "1410 men would need to be screened and 48 additional cases of prostate cancer would need to be treated to prevent one death from prostate cancer."

Another study found "94% of the cancers detected with the routine PSA blood test would not cause death before the age of 85."

What's really disturbing about this is the evidence was there 15 years ago. I wrote a paper for a now-defunct journal describing the results of AHCPR's Prostate Outcome Research Team which documented much of the problems described by Dr Amblin today. Yet the science is hard-pressed to overcome the marketing muscle behind the test, muscle that has been used to develop fake grassroots organizations supporting the testing (aka astroturf). These organizations are funded by companies who benefit not only from the test, but the devices and seeds used to 'treat' positive results.

Here's one example.

Michael Milken, the principle founder of the Prostate Cancer Foundation, is a significant investor in the venture capital industries. Are you aware that Michael Milken founded Proquest Investments, a $1 billion venture capital fund, with a specific investment thesis centered around prostate cancer after founding the Prostate Cancer Foundation? If you review the board members to ProQuest, you will find that six of the seven scientific advisors to ProQuest Investments are executives or member doctors to the Prostate Cancer Foundation. It seems clear that ProQuest Investments operates as a for profit extension of the Prostate Cancer Foundation, a 501(c)(3) designated non-profit

This not for profit encourages testing and screening, resulting in millions of unnecessary tests, thousands of impotent and incontinent men, and billions in revenue for the physicians, device and pharma companies, and facilities providing the testing and treatment.

What does this mean for you?

Payers are wasting money, patients are getting unnecessary treatment, and physicians are violating their oath to do no harm. Which category are you in?

Note - I've contacted Ed Randall, the host of the popular (and very good) Talking Baseball radio program several times in an effort to encourage him to stop promoting PSA testing. He's never responded. I encourage you to contact Mr Randall yourself here - http://www.erbatforthecure.org/ and ask him to reconsider his advocacy that harms patients and increases costs while benefiting for profit companies.

Posted by Joe Paduda at 7:18 AM | Link to this post

Next month I'm going to be speaking at the Geisinger Clinic on the subject of Comparative Effectiveness - the payer's ethical dilemma. I'm fascinated by this issue as it strikes at the heart of the problems with, and perhaps solutions for, the health insurance crisis.

If we are to solve the access and cost problem, payers, providers, and patients must be comfortable with the decision process and methodology. Today, there's precious little 'comfort' with the current 'system'. And that's understandable.

There's a lot of 'art' in medicine; physicians diagnose conditions and recommend specific treatments based on what they think will help, often without much in the way of peer-reviewed research supporting their views. Much is based on their own training and experience and the knowledge passed on to them by their medical school professors and colleagues, provided in specialty society and other medical journals, passed on by medical device and pharmaceutical firms, and learned at conferences and symposia.

Most of the time this knowledge delivers the 'right' outcome; the patient gets better. But in some instances there are at least a couple different treatment options for the patient's condition. Physicians recommend what they think will work based on the patient's unique characteristics (physical, emotional, financial, history), and these 'recommendations' may be several. For example, chronic lower back pain treatment options may include surgery, physical therapy, medications, some of the above, all of the above, and variations of each of the above.

Sticking with the back pain issue, think of this from the payer's perspective. The wide variation in back surgery rates is well-documented, with Medicare data indicating a 500% variation between Ft Myers and Miami Florida. We don't know why there's such a wide difference, but it is safe to assume that the rate is too high in Ft Myers, too low in Miami, or perhaps both.

When a physician in Ft Myers recommends surgery for a patient with a back condition, it is understandable why payers would have concern over the appropriateness of the procedure. To address this concern, payers utilize clinical treatment guidelines in an effort to determine if the recommendation is 'appropriate'.

In some cases, the guidelines provide clear and convincing support for or against the procedure, but in many others the finding is not so clear cut. The patient may have some but not all of the clinical findings that are 'necessary' to support surgery; there may be other medical conditions present that complicate treatment determination; the patient may want one type of treatment for their own reasons.

The result is the payer - and the physician - are functioning in a somewhat grey area.

There are obvious financial factors in play as well. The physician gets paid to do the procedure, the pharma company gets paid if the patient takes their meds, the device company gains revenue for each device sold, the payer saves money if expensive procedures aren't performed, the patient may want drugs for inappropriate reasons.

The ethical issues are apparent. While we would hope that decisions would be based solely on the evidence, there often isn't enough of the right type of evidence to arrive at a clear cut decision. When that occurs, what other factors affect the decision? How are disagreements resolved, and what is that resolution? When there's strong disagreement, what factors, evidence, criteria are 'used' to support the parties' different positions?

If you have experience with situations that speak to this ethical dilemma, I'd appreciate hearing from you.

Posted by Joe Paduda at 7:35 AM | Link to this post | Comments (5)

As anyone who has studied physician practice patterns is only too aware, there is wide variation in how physicians practice; the kinds of tests they order, whether they admit patients to the hospital or treat on an outpatient basis, the drugs they prescribe and the outcomes they deliver.

If we are to gain control over health care costs and ensure patients receive the right treatment and payers get value for their dollars, we have to force more science into the art of medicine.

Texas' Division of Workers Comp's push to publish data [sub req] on work comp physicians' compliance with clinical guidelines is a step in the right direction. While only in the formative stage, and pretty limited at that, the effort is long overdue but nonetheless a critical step in reforming the dysfunctional mess that is our health care system.

Unlike any other good or service, when employers 'buy' health care they have no idea of what that investment returns; they don't know what they get for their dollars. When an automobile manufacturer buys tires, it makes its decision on which tires it buys based on the performance of those tires, their durability, ability to carry the car's weight, handling, cost, and value compared to other tires on the market.

That same auto manufacturer has no idea what it gets when it spends millions on health care. What is the return on investment on the premiums paid and the services bought with its dollars? How does it measure the value of the office visit, the return on the MRI, the 30 day supply of medication?

Because employers don't know and can't measure the return on their medical spend, they focus on spending as little as possible - they have to provide health and workers comp insurance, but want to spend as few dollars as they can because there's no way to know what the return is on that investment.

Which is why Texas' efforts are so important. While one can (and I'm sure some will) argue that they are starting too small, (WorkCompCentral reports that one recommendation is to begin looking "at compliance by doctors with treatment guidelines in ordering MRIs for back and spine injuries"), it is far more beneficial for all concerned to begin the effort, to engage providers, payers, regulators, and claimant advocates than to wait till there's broad consensus on multiple performance measures.

What's great about workers' comp is that unlike group health or medicare or medicaid, the same dataset includes information about return to work, the cost and duration of disability, and the final 'functional' outcome (I'll concede that these data aren't always accurate or consistent). When we're evaluating medical care, the ultimate outcome should always be based on the degree to which the patient recovered and returned to functionality.

What does this mean for you?

Do not let the perfect be the enemy of the good - encourage Texas' DWC to proceed quickly with their initial efforts, engage with them in a positive way, share data, and push for more measures, more results, more openness. Understand that physicians have concerns about outcomes, many of them legitimate, and work with them wherever possible.

Posted by Joe Paduda at 6:47 AM | Link to this post | Comments (1)

Probably a lot. Perhaps most. And certainly a big chunk of the bucks your insurer/TPA is paying.

Unlike surgery, imaging, drugs, and other types of medical treatment, PT has long been a bit of a black art.

The clinical guidelines for PT that do exist (with one exception I'll get to in a minute) usually say something like 'two visits a week for four weeks', without describing what is to be done during those visits, who's supposed to do what gets done, and equally important, what shouldn't be done.

That's the primary reason physical medicine (PT and chiro) accounts for about one out of every five dollars spent on medical care in work comp, and would account for big bucks in group if it weren't for tightly written benefit limits (x visits at a 50% copay).

Before the PTs out there start flaming me, know that I'm a believer in the ability of appropriate PT and have seen lots of data that support the use of PT in helping injured folks return to functionality. But I've also audited many work comp claims where the claimant had been to PT hundreds of times. I recall one where the claimant had over five hundred (500) visits over a three year period, with each PT note looking identical to the previous one. The payer couldn't cut off the treatment because the treating physician had ordered it, and the clinical guidelines weren't robust enough to force the issue in court.

Last month the NYTimes had an excellent article by Gina Kolata on just this issue. Here's an excerpt:

"My doctor at the Hospital for Special Surgery in New York, Joseph Feinberg, seems to share my opinion [that much of PT is waste]. "Very often, I think the hot packs, cold packs, ultrasound and electrostimulation are unnecessary," he said, adding, "For sure, in many cases these modalities are a waste of time."

So has physical therapy been tested for garden-variety sports injuries like tendinosis? Or is it just accepted without much question by people who urgently want to get better?

It depends, says James J. Irrgang, a researcher in the department of orthopedic surgery at the University of Pittsburgh and president of the orthopedic section of the American Physical Therapy Association.

"There is a growing body of evidence that supports what physical therapists do, but there is a lot of voodoo out there, too," Dr. Irrgang said. "You can waste a lot of time and money on things that aren't very helpful."

(not in Ms Kolata's article, but helpful for perspective...)

Sometimes, manual stretching by a physical therapist can actually eliminate a sports injury, he said...They are the exceptions. More common are the "voodoo" treatments, he said. And what might those be? None other than ice and heat and ultrasound, Dr. Irrgang said.

Ice and heat, Dr. Irrgang said, "can control pain a little bit" but "are not going to take care of the problem." The underlying injury remains."

But the lack of credible evidence-based clinical guidelines can make it difficult for payers to contest unnecessary treatment, especially in those states where regulations make it tough for payers to stop paying for unnecessary treatments.

There are credible, thoroughly researched clinical guidelines specific to PT, with the best focused not only on how many visits over how many weeks, but what should be done during those visits. I've reviewed all of the guidelines used in work comp for PT, and the most thorough are published by Expert Clinical Benchmarks, a subsidiary of MedRisk. (MedRisk is an HSA client)

Guidelines can't be developed in six months; rather they must be carefully researched, assessed by acknowledged experts in the field, tested against claims and medical billing data, and reviewed periodically. There are far too many companies touting their 'utilization review' programs which are based on little more than the 'same old same old' guidelines that have never worked in the past, or quickly-assembled amalgamations of journal articles, neither of which will be of any help in front of a work comp judge.

What does this mean for you?

If you're serious about managing PT, start with science.

UPDATE

I received an email from a good friend and colleague in the PT business who felt my post was an insult.

Let me reiterate - there are good PTs, and bad PTs.

There is good PT management, and bad PT management.

Some PT is quite useful, appropriate, and necessary, and some is not. When payers don't use solid clinical guidelines it makes it very difficult for adjusters, case managers, peer reviewers, and hearing judges to differentiate between appropriate and inappropriate PT. And there's lots of inappropriate PT in work comp.

In the course of my consulting practice, I've seen dozens of cases where claimants received more than a hundred PT visits over a year, and many where the total number was well over two hundred. This type of utilization is simply indefensible, and unfortunately often results in adoption of regulatory control mechanisms.

Some states have chosen to use caps on visits as proxies for utilization management, with 24 appearing to be the most common limit. This is at best a blunt instrument, but nonetheless it appears to have resulted in lower costs for physical medicine in the jurisdictions that have adopted the '24 visit rule'.

Posted by Joe Paduda at 8:08 AM | Link to this post | Comments (2)

Recently NCCI released a white paper entitled "Medicare and Workers Compensation Medical Cost Containment". The report goes well beyond a discussion of the relationship between Medicare's physician and hospital reimbursement policies' impact on workers comp; not that it doesn't address that timely topic in some detail, but it also details the unforeseen implications of using Medicare reimbursement, the impact of the growing Medicare deficit on future health care, and the demographic factors and how they are felt differently in work comp and Medicare.

Ok, pretty geeky stuff I'll admit, but interesting nonetheless. (wait, isn't that contradictory?)

Here's my summary of takeaways you should know.

The Center for Medicare and Medicaid Services (CMS) projects health care as % of GDP will go up one full point to 17.6% this year, driven by a declining economy while the demand for health care decline. US health care costs continue to be the highest in the world, by far.

Unlike group health, there's an increasing disparity between Medicare reimbursement for specialty care, sx and radiology and Work comp fee schedule rates. Comp pays relatively more than group for these services.

One of the (many) issues inherent in basing WC on Medicare is that Medicare rates change for reasons specific to Medicare. As an example, the adoption of changes due to the budget neutrality factor legislation in 2008 changed the basic formula used in setting physician reimbursement. The changes increased relative value units (RVUs) and decreased conversion factors (CF). For those WC states that only adjust CFs, this may well have unintended consequences. The NCCI report stated "simply updating CFs for inflation and not offsetting the RVU change will give MARs that are about 8% higher than is likely to be intended."

One conclusion in the study really stood out: CMS says the vast majority of Medicare patients "have access to specialty care, so it follows that many wc specialty care MARs (fee schedules) are well above what is needed to assure access [for wc patients]".

As an example IL work comp pays 450% of Medicare, AK 510%, CT 360% for surgery.

That does raise a question: If most reimbursement for WC is below the WC fee schedule, does that not at least partially negate the importance of the FS as a price setting mechanism?

Finally here's another finding worthy of consideration. The percentage of comp medical costs subject to physician fee schedules has declined from 58% in 2001 to 53% in 2006 (+/-). And, more and more procedures are being done on outpatient basis, and many states don't have outpatient reimbursement schedules that have limits on utilization or even address it like Medicare's methodologies do.

What does this mean for you?

Watch what happens with Medicare. Closely.

Posted by Joe Paduda at 7:28 AM | Link to this post

To no one's surprise. work comp medical costs appear to be on their way up, and at a rate significantly higher than the medical CPI.

First the what, then the why.

The latest data from NCCI indicate comp medical inflation (based on lost time claims) was 6% in 2008, just a bit more than the previous year. While I've no doubt the figure is accurate, it is important to understand that NCCI's figure is derived from data that doesn't include some fairly significant states - CA and NY being two of the more important.

Another data point comes from an admittedly highly selective source: from conversations with large payer clients, I get the distinct impression that their 2009 medical expenses are trending much closer to ten percent higher than 2008.

Add these data to the latest data from WCRI [subscription required] that indicates California's trend is hitting 9% - a number that may well undervalue the latest figures as WCRI's data is somewhat dated, and the picture gets a bit clearer. In fact, more recent data suggests the inflation rate is well into double digits, with the WCIRB reporting comp medical trend at 16%.

To be sure, California is a unique environment, with unique fee schedule quirks (including allowing hospitals to charge twice (!!) for surgical implants), a recent history of ever-lower work comp premiums, and a mix of managed care programs and providers that is quite diverse. Add those factors to the significant increase in ultimate medical costs due to the Ogilvie and Almarez/Guzman decision and California looks particularly problematic. Yet it also has a reputation as a 'leading indicator', a reputation that work comp observers would do well to respect.

What's driving the increase?

There is a very long answer to this, which involves cost-shifting, increases in the number of individuals without health insurance, reduced Medicaid and Medicare reimbursement, ineffective fee schedules, physician dispensing of repackaged drugs, the growth of narcotic opioid usage, Part D, the nursing shortage and a host of other macro and micro influences, most of which are addressed elsewhere in other seventeen hundred posts on MCM (this blog, to the newcomer).

There's also a shorter answer - misaligned incentives for work comp managed care programs, and payers' increased reliance on managed care program revenue and profits. This leads to a focus on processing bills (which generate fees) and doing utilization review (which generate fees) and using huge provider networks (which generate fees) and sending lots of claims to case management (which generates fees), instead of actually managing the medical components of the claim.

Here's one blatant example of this situation:

Workers comp payers spend hundreds of millions of dollars each year on medical management - pre-cert, utilization review, peer review, case management, clinical guidelines, and the variations and permutations thereof. Dozens of companies from mom-and-pops to regional players to industry giants like Coventry and Genex employ highly trained professional medical personnel to watch over the care delivered to injured workers, carefully reviewing and approving or not approving thousands of medical procedures.

Then, the medical bills come in to the payer. The frightening/amazing/unconscionable truth is that many non-approved medical treatments actually are performed, and billed for, and likely paid - because those determinations are not automatically fed into the bill review system's database, and/or the bill review system can't link the determination to the bill/provider/claimant.

How much of this actually occurs on a national basis is impossible to say, and there's no doubt some payers have the links in place to ensure most if not all medical management determinations are linked to the right claimant/provider/event.

And because many (not all, but many) payers rely on managed care to generate departmental and corporate margins, they aren't focused on the results of UR and bill review, but rather the dollars generated by those functions.

What does this mean for you?

Time to ask what's important and what isn't, and why you are in business, and how you produce results, and whether or not your incentives are aligned with employers'.

Posted by Joe Paduda at 7:26 AM | Link to this post | Comments (3)

I've been working with a mid-sized self-insured employer on their health benefits plan; they got hit hard with costs from diabetes last year and the (relatively thin) data available suggests it's going to get worse in the near future; there are many more individuals at high risk for diabetes (among other ills). If they don't do something to reduce their employees' risks, their costs are going up, and fast.

While muddling thru the data, we all agreed that if we all exercised, maintained a reasonable weight, ate healthy foods and amounts, drank in moderation, and didn't smoke, their costs would be much lower; heck, as a nation there'd be no health care financial crisis.

Good luck with that.

Alas, we're getting fatter, lazier, and many of us are getting sicker as a result. With so much of our health care budget spent on lifestyle-driven diseases, it's increasingly obvious that getting people to change behaviors - stop smoking, reduce their drinking, get off their duffs and get out for a walk/ski/cycle - would go a long way to reducing expenses.

So I've been investigating motivational techniques and results, looking for ways to help my client get their employees to make long term commitments to healthy behaviors/ There's been lots published about this; Employers try to motivate healthy behavior by paying for gym memberships and smoking cessation, reducing premiums for employees who earn points for maintaining healthy weight levels, and hire fitness and health promotion experts to staff their wellness centers. These efforts have had some positive effect, but only on the margins.

Turns out the positive, reward-based motivation may well be misdirected. Instead of rewarding people for good behavior, the evidence suggests that penalizing them for 'bad' behavior by taking something away is much more effective.

Here, from a brief piece in The Economist:

In a new paper Tanjim Hossain of the University of Toronto and John List of the University of Chicago explore a real-world use of these insights. The economists worked with the managers of a Chinese electronics factory, who were interested in exploring ways to make their employee-bonus scheme more effective. Most might have recommended changes to the amounts of money on offer. But Mr Hossain and Mr List chose instead to concentrate on the wording of the letter informing workers of the details of the bonus scheme.

At the beginning of the week, some groups of workers were told that they would receive a bonus of 80 yuan ($12) at the end of the week if they met a given production target. Other groups were told that they had "provisionally" been awarded the same bonus, also due at the end of the week, but that they would "lose" it if their productivity fell short of the same threshold.

Objectively these are two ways of describing the same scheme. But under a theory of loss aversion, the second way of presenting the bonus should work better. Workers would think of the provisional bonus as theirs, and work harder to prevent it from being taken away.

This is just what the economists found. The fear of loss was a better motivator than the prospect of gain (which worked too, but less well). [emphasis added] And the difference persisted over time: the results were not simply a consequence of workers' misunderstanding of the system.

What does this mean for you?

For managed care companies and employers, think of basing benefits on a plan with relatively modest employee coinsurance/contribution level, adjusted upwards for failure to comply with health standards. Yes, there will be complaining about what constitutes lifestyle issues v genetics, and how it may be unfair to penalize this or that lack of compliance, but while you're dickering around with these points, your costs are continuing to escalate.

Posted by Joe Paduda at 7:57 AM | Link to this post | Comments (5)

A recent dialogue on the LinkedIn WC group got me to dive back into the question of what, if any, influence does the presence of health insurance have on work comp claim frequency? The data aren't conclusive, but the answer appears to be 'There is a trend, but not in the direction you'd think.'

Commonly accepted thinking holds that workers without health insurance will claim off the job injuries under work comp so the medical bills get paid. (That's what I thought too.) Turns out that the opposite appears to be the case; workers who have health insurance are more likely to file WC claims than those who don't.

It isn't quite that straightforward, so don't just read this and take it at face value; there are significant complicating factors.

The seminal study on the health insurance: WC claims relationship was done by RAND and published in 2005 . If anything, it appears to indicate that workers with health insurance are more likely to file WC claims, however the driver is not the presence of health insurance but rather the nature of the employer.

From the study abstract:

...uninsured and more vulnerable workers are less likely to file claims than the insured. We study this relationship and find that it emerges as the result of employer characteristics. Workers at firms who offer health insurance to employees are more likely to file workers' compensation claims: the characteristics of the firm are more important than the insurance status of workers themselves; [emphasis added] moreover, even repeat injury sufferers are more likely to file during episodes in which their employer offers health insurance. This suggests that the workplace environment and employer incentives may have a significant impact on the utilization of the workers' compensation system.

Key highlights from the study itself:

- injured workers without health insurance are about 15% less likely to file a WC claim than workers with health insurance

- workers in firms that offer health insurance are twenty-one points more likely to file a claim than those in firms that don't offer health insurance

RAND's conclusion that the workplace environment is the key factor affecting claim rates and frequency was supported by several recent reports indicating injured low wage workers are particularly unlikely to file work comp claims. One of the more intriguing studies was done under the auspices of the National Employment Law Project which focused on the problems faced by low-wage workers when they are injured on the job. The study looked at a population that accounts for fifteen percent of all workers in just three cities; Chicago, New York, and Los Angeles. Extrapolating the numbers out in just those three cities indicates that 75,446 workers comp injuries were not reported.

Nationally, that works out to about a million claims unreported.

The study reported 92% of low-wage workers don't file work comp claims for injuries that require medical attention.

Fully half of the workers with on the job injuries "experienced an illegal employer reaction", including firing the worker, calling immigration authorities, or telling the worker not to file a comp claim.

What does this mean for you?

With health reform with some form of mandate looking increasingly likely, some, steeped in conventional wisdom, will expect claims frequency to decline. Others will expect it to increase now that more workers will have coverage.

The latter group's view will be more correct than the former's; or more accurately 'less wrong'. Bad employers will remain bad employers regardless of whether or not they offer health insurance, therefore, after the mandate is in place, injury reporting behavior may increase somewhat but probably not by much.

(kudos to Mark Walls for starting and managing the LinkedIn group)

Posted by Joe Paduda at 6:58 AM | Link to this post | Comments (3)

Just in time for Christmas, the good folks at NCCI have released their study of Narcotics in Workers Compensation, providing readers with just what they want - more evidence that the workers comp industry has a long way to go to get prescription drug use under control.

Sorry to spoil your pre-holiday glee, but the news is pretty troubling. Here, according to Barry Lipton et al, are the 'highlights':

- Narcotics account for nearly one quarter of all workers compensation Rx costs
- The share of drug costs attributed to narcotics increases as claims age
- Narcotics are used mostly for back injuries in workers compensation
- and perhaps most troubling, the use of narcotics early in the life of claims is increasing

NCCI's report (which uses 2007 data) comes on the heels of my firm's Sixth Annual Survey of Prescription Drug Management in Workers Comp, which found drug cost inflation jumped top 7.5% in 2008, marking the first increase in the inflation rate in the six years the Survey has been conducted.

The 'good news' is that the percentage of drug dollars spent on narcotics has stayed relatively flat for the last eight years, this despite the rapid, and close to complete, penetration of PBMs into the work comp space. While that good news may not appear to reflect well on PBMs (and payers' efforts too), NCCI found that average narcotic costs per claim stabilized several years ago after several years of rapid growth. (I'm a big believer in cost per claim as a metric, as it does away with the influence of variations in claim frequency and is thus a better way to assess drug management performance)

The net? Cost increases have flattened out, but to this non-pharmacist's eye there appears to be a lot more narcotic spend than necessary.

There are some rather interesting geographical nuances here as well; states with above average use of narcotics include CA, OK, TX, LA, AL, SC, MA, DE, and NH, proving that it isn't just the deep South that has a narcotics problem.

What does this mean for you?

Time to get focused and get after your drug problem. This isn't just a drug cost issue; the extended use of narcotics is also associated with longer duration of disability and higher claims costs.

And a note of compliments to NCCI on the study - this is precisely the kind of information payers need to know.

Posted by Joe Paduda at 8:16 AM | Link to this post

The ongoing battle over the work comp hospital fee schedule in Florida continues, as challenges have been filed by two hospitals, the Florida Hospital Association, and FairPay Solutions that prevent implementation of a dramatic revision to existing fees pending further action by an administrative law court.

According to Mike Whitely's piece in WCC, the suits, reported this morning in WorkCompCentral (sub req) allege that the FL Department of Workers Compensation

"DWC exceeded its rule-making authority and strayed into the legislative realm by abandoning the usual-and-customary charge system.

Florida Statute Section 440.13 gives the final authority for setting workers' compensation medical fees to the state's Three-Member Panel. But it specifies that all outpatient fees are to be paid at 75% of usual and customary charges, except as otherwise provided by state law. The statute separately sets the payment for outpatient surgeries at 60% of charges.

FHA and FairPay argue in the filings the proposed fee plan "enlarges, modifies and contravenes" the law by shifting to a Medicare multiple fee schedule."

Fortunately for employers and insurers in the Sunshine State, the actions of FairPay and the hospitals will save them from much higher hospital costs, costs that the payers have done nothing to address.

I'm bewildered as to why payers - insurers, employers, TPAs, self-insured groups - have not vociferously protested the proposed changes. As I've noted repeatedly, the proposed changes will dramatically increase medical costs in Florida's work comp system with no concomitant increase in value, return to work effectiveness, quality of care, or reduction in total claim cost or duration of disability.

No, this is nothing more than a giveaway to hospitals, a big increase in their income from treating workers comp patients. Here's how work comp payers are going to be harmed by the proposed changes.

First, this methodology means work comp will pay 174% of Medicare for surgeries and 395% for other hospital outpatient services. Does anyone, at any payer, think that it is reasonable for them to pay hospitals four times more than Medicare does?

Second, the location of services will likely change dramatically to the higher cost hospital location. Thus procedures which were being done in offices will now be billed - at the much higher rates - by hospitals.

Yet not a single payer filed a protest that would have delayed the implementation of this onerous and costly regulatory change.

Not one.

What does this mean for you?

Who's looking out for your interests?

Posted by Joe Paduda at 6:33 AM | Link to this post | Comments (3)

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)

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)

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)

We now know who will replace Ingenix as the nation's provider of usual, customary and reasonable (UCR) data; we also know when (by the end of 2010). As to the how, that's a bit less certain.

Syracuse University will be the home of a non-profit data house' to be called FAIR Health (Fair and Independent Research Health); Cornell, Upstate Medical Center, SUNY Buffalo, and the University of Rochester will also contribute (got to spread the largesse around). (full disclosure - Syracuse is my alma mater)

The new entity will be funded at least in part by the $100 million NY Attorney General Andrew Cuomo has gotten in settlements from Ingenix' UCR database customers. In addition to Cuomo's successes, Ingenix' parent company, UnitedHealth Group paid $350 million earlier this year to settle a class action suit, and other legal action is continuing which Cuomo expects to add to the $100 million total. The cash will be used to develop the database and set up a mechanism to deliver data to payers and consumers via a website. This last is a great idea - providing health care consumers and providers with access to UCR data should help promote transparency and enable price comparisons by consumers and price competition by providers.

FAIR will be headed up by SU Professor Deborah Freund, an expert in health economics, Distinguished Professor of public administration and economics in SU's Maxwell School and Senior Research Associate at Maxwell's Center for Policy Research. Dr Freund has a wealth of experience on the academic side of health policy and economics and has published on a wide range of topics in those fields.

I'll see if I can stop in for a chat when I'm back up on the Hill in January for another alumni meeting.

The timetable seems...aggressive - there's a lot to do to avoid some of the problems that plagued Ingenix' MDR and PHCS databases; non-existent quality control on source data and inadequate volume of data in some areas are just two of the problems that led to the settlements. While Freund et al at FAIR may want very much to provide comprehensive, clean data that covers all procedures delivered by all providers, they don't control the quality, accuracy, and consistency of the data collected by health insurance companies and other payers. And after the Ingenix debacle, they sure want to be absolutely positively comfortable with their data before they release it to the public.

My guess is the website and initial data will be up and running by the end of next year, but it won't be comprehensive. Even if FAIR is able to come up with standards and a rigorous QA process, it will take more time for payers to develop and implement processes to ensure the data they provide FAIR meets those standards.

And you can bet your last hundred million that no payer is going to send data they aren't absolutely sure is up to snuff.

What does this mean for you?

Good news, as the new UCR provider will help reduce payers' exposure.

Health plans have a new vendor to work with - on the vendor's terms.

Over the longer term, there's another 'outcome' - Health data quality is about to go under the microscope, and the view may be pretty ugly. Healthplans and other payers may well have to upgrade their technology, training, and staffing to meet FAIR's demands

Background

For those who don't follow these things on a daily basis (hard to believe I know), some background. Years ago, the health insurance industry's lobbying and service arm (HIAA) aggregated and compiled physician charge data as a service to its members. HIAA collected the data and fed it back to members, who then used the data to determine how much they should pay providers in specific areas for specific services (services defined by CPT codes). HIAA was taken over/disappeared about a decade ago, and Ingenix took over the aggregation and distribution of the data, which has become known as "UCR" for "Usual, Customary, and Reasonable".

For about ten years, all was fine, at least as far as most insurers were concerned. Sure, physicians complained at times and consumers railed about the low reimbursement paid by companies citing their UCR, but the complaints didn't really make any difference until Cuomo got involved. The problem arose when a few folks in New York complained about the amount they still owed providers after their insurers had paid their portion - according to Ingenix' UCR. After a lengthy investigation, Cuomo found reason to charge UHC and other insurers, and that action ultimately resulted in this settlement.

Posted by Joe Paduda at 7:14 AM | Link to this post | Comments (5)

Depends on who you ask. If you ask group practice administrators about how Medicare compares to the private insurance industry, it is pretty darn good - in several categories, Medicare Part B is rated higher than any other large payer.

That's partly due to the lousy performance of some of the private insurers, but administrators actually rate Medicare's responsiveness, transparency, prompt payment, and overall administrative functions highly.

Yes, you read that correctly.

On a five-point scale, with 5 the highest rating, the much-maligned and oft-decried public plan for the aged has an overall satisfaction rating of 3.6, with Aetna at 3.1 and UnitedHealthcare bringing up the rear at 2.5.

Medicare was considered the most timely responder to inquiries, with Aetna second and UHC at the back of the pack; the same standings hold for accuracy and consistency of the payer's responses to questions, speed of payment (Medicare 4.1, Aetna 3.5, UHC 3.1), disclosure of payment policies, and claims appeal process (Aetna was excluded from the report).

Medicare doesn't appear on the list of questions regarding satisfaction with the contracting process, except in the 'willingness to disclose the fee schedule' category, where it is again rated at the top. This isn't surprising, as CMS is not engaged in '2-way good-faith negotiations' nor do practices have 'leverage during the negotiation process'. I don't know if responders didn't ask about Medicare or if Medicare was ranked at all; I'll let you know when I hear back from the Medical Group Management Association (MGMA), the organization that conducted the study.

As with any study or survey, you can find data to support any perspective.

That said, the ratings of the health plans are generally consistent with those reported by the Verden Group, an independent firm focused on helping providers deal with managed care organizations.

Aetna received top marks for clarity of communications, and was rated the most 'provider friendly network' by respondents to the Verden Survey in 2008.

As the public option becomes possible once more, and opponents lament the inefficiency, lousy service, and incompetence of the faceless bureaucrats that run Medicare, it is helpful to know what the people on the other end of the transaction think.

If you listen to them, on a number of fronts, Medicare's a darn sight better than most of the private insurers they have to deal with

Posted by Joe Paduda at 7:13 AM | Link to this post | Comments (6)

For at least a couple weeks, many of the 1642 people who subscribe to MCM didn't receive notices when new posts went up. It looks like we've figured out the problem (electronic fingers crossed), so here's what's been on the blog while we were in a technical hiatus.

Yesterday I opined that the recent AHIP/PwC report is more right than wrong; the report misses a lot - and much of what it misses is less than favorable to the report's funders - health insurance companies. But the central point is indeed accurate; without a tough, enforceable universal mandate, you can't force insurers to take all comers without charging more for higher risks or excluding them altogether.

Last week was devoted to the recent report by the state of Texas' Research and Evaluation Group's report on workers comp networks. The initial post generated a good bit of dialogue with the report's authors wherein they clarified a confusing (at least to me and several large payer clients) statement; the follow up post detailed the issue, adn explored another concern; "the report didn't note that three of the networks are provided by one company - Coventry, which also administers a network that is likely underpinning much of the 'non-network' category."

The 'Texas Week' concluded with a post on the larger issue with the report - the fallout in workers comp "C" suites, and the potential damage to managed care.

Two posts the week before covered the AmComp meeting in NYC, with one lamenting the lack of concern about medical costs among work comp execs and another summarizing a talk by industry veteran John Burton.

Before I got all wrapped up in workers comp, i handicapped the health reform odds, saying "If the Baucus bill comes out of committee with unified Democratic support, that tells a lot. And if Snowe signs on, that's even more telling...The Democrats are almost all-in on health reform; at the end it will come down to some Dems deciding if they're better off holding their nose and voting in favor or handing the victory to the GOP."

So far, looks like those Dems are indeed holding their collective nose.

This was preceded by a confession - I'm one of those nerds that actually reads Health Affairs - the latest issue has a great piece on the primacy of price in health care inflation. I don't necessarily agree, but the authors make a compelling case.

It appears that the problem started just before the end of September; readers can always check the main page, sort by category, or type in key words to find specific posts.

Thanks for the forbearance, and here's hoping the gremlins are back in wherever gremlins live..

Posted by Joe Paduda at 7:08 AM | Link to this post

New news on yesterday's post - turns out that 'costs' are not based on billed charges, but on payments. Unfortunately, the report doesn't make that clear - nowhere in the report does it define 'costs' as payments, it does state costs are based on billing data, and in the data sources section it explicitly links cost to billing data.

Here's where the confusion lies.

On page 2, the report reads "Utilization measures represent the services that were billed by health care providers, regardless of whether those services were ultimately paid by insurance carriers. Duplicate medical bills and bills that were denied due to extent of injury or compensability issues as well as other outlier medical bills were excluded from the analyses. Cost and utilization measures were examined separately by type of medical service..."

Note there is no differentiation between utilization and cost, and no specific definition of 'cost'. So, perhaps that's a bit misleading.

But wait, there is another statement that certainly seems to describe how 'cost' figures were derived:

In the data sources section (also on page 2), the report reads "Medical cost, utilization of care, and administrative access to care measures were calculated using the Division of Workers Compensation's medical billing data [emphasis added]. Seemed pretty straightforward to me.

Unfortunately I wasn't the only one confused; two large payer clients interpreted the statement the same way I did.

My post generated a good bit of excitement at the REG and among stakeholders. Bill Kidd reported on it at WorkCompCentral, where DC Campbell, director of the department's Workers' Compensation Research and Evaluation Group, was quoted as saying ""Paduda expresses concern about the results since Coventry covers 'much' of the non-network claim population. It's not clear from his statements [emphasis added] whether this refers to Coventry's market share in terms of utilization review activities, bill review activities, contractual discounts outside of certified networks, etc."

I'm not sure where the confusion lies, as I clearly referred to 'networks' in the post yesterday...

For example, several of the networks are based on the Coventry work comp network - Liberty, Travelers, and Texas Star (the Star network was designed by Texas Mutual, and is much smaller than the overall Coventry network). There was significant variation among and between these three Coventry networks, variation that may well be due to the relatively small sample size and relative "newness" of the claims analyzed - the claims haven't developed sufficiently to draw 'conclusive conclusions'.

The net is the report uses payments for all cost calculations. Thanks to Amy Lee and DC Campbell for setting me straight. OK, now that that's behind us, I'm still not sure what to make of the report's findings. According to the report, claimant demographics were accounted for, I assume to enable fair comparisons among and between the various networks. Yet the report didn't note that three of the networks are provided by one company - Coventry, which also administers a network that is likely underpinning much of the 'non-network' category.

Consider that Liberty's average medical costs were lower than non-networks in 4 categories, and Coventry's in 3, yet the Coventry network was utilized by all three entities. And that's just one of the findings. Claims in the Coventry network had higher overall medical costs than non-network claims, as well as higher hospital inpatient and outpatient costs. Both Coventry and Travelers network claims had higher inpatient utilization than non-network claims, but Liberty's was lower. Coventry outperformed non-networks in release to return to work, but Liberty and Travelers underperformed non-networks.

So, what does this mean for you?

It sure doesn't look like one can draw any meaningful conclusions from the report's findings.

Kudos to the Texas REG and their supporters for funding and conducting the research. More time for the data to mature, more clarity on definitions, more disclosure about the similarities among the networks being studied, and more discussion about possible reasons for the disparate results from all-but-identical networks and their work will be much more useful.

Posted by Joe Paduda at 6:58 AM | Link to this post | Comments (1)

Texas' Department of Insurance has been analyzing the performance of workers comp networks for the last couple of years, and the latest report has some pretty interesting results.

Unfortunately, those results look to be based on a faulty analysis, making the whole report questionable.

Before we delve into the results, here's the problem. On page 2, it reads "Utilization measures represent the services that were billed by health care providers, regardless of whether those services were ultimately paid by insurance carriers. [emphasis added]." Thanks to a comp insurer's managed care exec for the tip - should have caught this myself, but really, who would have thought they'd count 'charges' as 'costs'?

There is little to no correlation between medical charges and actual costs - defined as amount paid. Providers, especially facilities, charge much more than they're reimbursed. Reimbursement is affected by fee schedules, medical management determinations, network discount arrangements, prompt pay deals, and bundling/unbundling edits, among other factors.

The findings from the report are also somewhat misleading. For example, several of the networks are based on the Coventry work comp network - Liberty, Travelers, and Texas Star (the Star network was designed by Texas Mutual, and is much smaller than the overall Coventry network). There was significant variation among and between these three Coventry networks, variation that may well be due to the relatively small sample size and relative "newness" of the claims analyzed - the claims haven't developed sufficiently to draw 'conclusive conclusions'.

I contacted Coventry in an effort to get their take on the report - which at first blush was pretty damning. I was quite surprised to get a call back from one of their execs - as loyal readers know I've been trying - till now unsuccessfully - to get Coventry to talk with me for as long as I've been writing this blog - which is now more than five years. This is the first of what I hope will be an ongoing dialogue.

We'll see.

Coventry's take on Texas' report was rather limited as it was just released. They were pleased with the return to work results; but noted their medical resutls (which, according to the report, were not good) may have been tainted by seven outlier cases. Perhaps, but the other networks and the non-network results may suffer from the same issue.

More compelling was the Coventry exec's observation that much of the "Non network" business actually is handled by the Coventry network. That adds a bit of wonder to the report's first finding: "Overall, networks had higher average medical costs than non-networks."

I asked the Coventry exec to get back to me asap with a more complete analysis, but I'll suggest he save the dime. I may be missing something here (and if I am I'm sure you'll tell me), but I'm hard-pressed to see how anyone can draw any meaningful conclusions from an analysis based on medical charges.

Lest my comments be construed as damning Texas for their efforts - absolutely not. I applaud the Texas REG for the efforts. I don't know what limitations they have in terms of resources, access to data, or access to payment data. I do know that they are one of the few states making a serious effort at analyzing cost drivers and the impact of managed care programs. I've done enough data analysis to understand you've got to use what you can, even if it is far from perfect. Here's hoping the REG continues to improve their analysis.

What does this mean for you?

An object lesson in not jumping to conclusions, and why abstracts and executive summaries can be misleading.

Posted by Joe Paduda at 7:00 AM | Link to this post | Comments (1)

I've been accused of being one of the few that actually reads the bimonthly journal Health Affairs. Well, guilty as charged, although the pub has a lot more than a 'few' devotees. What it does particularly well is challenge core beliefs.

The latest edition focuses on bending the cost curve - a phrase likely to inspire William Safire to dissect it in detail in one of his discourses on language. The idea is to find ways to reduce the rate of growth in health care costs, and this edition has plenty of ideas.

One of the most thought provoking articles contends that price controls are "central to curbing cost growth". I'm going to comment on the article next week in detail, but here are a couple of points made by the authors.

• "out of pocket spending in the United States is roughly twice the OECD median. If some Americans have "Cadillac coverage," than most workers in Germany or France must have "Mercedes coverage" - and they would likely view many American insurance policies as "Yugo coverage."
• patients in OECD countries average more hospitaldays, more physician visits, and greater consumption of prescription drugs than American patients do. Higher US spending is not primarily explained by greater volume of services.
• analyzing data from Massachusetts, David Cutler and colleagues found<, for example, that virtually all of the savings that managed care plans achieved for heart disease treatment, relative to indemnity insurance, came from price reductions./li>
  

I've long believed, and still do, that utilization is a more significant cost driver than price. I've seen this time and time again - in data on physician in-office utilization from CMS (up 11% in 2006), in NCCI's analysis of workers comp prescription drug costs, in analyzing client physical medicine experience, in the correlation between workers comp medical expenses and state fee schedules - or rather lack thereof, and a host of other examples.

What doe this mean for you?
The authors make a compelling case - not just for price as a cost driver, but to always question your assumptions.

Posted by Joe Paduda at 9:50 AM | Link to this post | Comments (6)

A new RAND study reports California's employers are paying $60 million more than they should for surgical implants. Not the surgery, or the follow up care, or the facility costs - just the devices themselves.

According to Jim Sams' piece in today's WorkCompCentral,

"the state's fee schedules allow hospitals to bill separately for the hardware that is used in spinal fusion surgeries plus an administrative fee. [lead researcher for the cost-savings project Barbara] Wynn said the resource-based relative value scale that Medicare uses to calculate the appropriate fee for spinal surgery hardware procedures already includes the cost of the hardware, and California's fee schedule pays 120% of the Medicare rate.

"Passing through WC device costs on top of 120% of the Medicare payment results in paying for the spinal hardware twice, creates incentives for unnecessary device usage, and imposes unnecessary administrative burden," she said in her report.

Wynn said repealing the rules that allow pass-through charges would save $60 million annually."

There's a lot more to the RAND study, but this highlights a big problem area - one much larger than $60 million.

First, why is work comp paying 20% more than Medicare?

Second, surgical implants are not "one and done". It is fairly common for patients to have to undergo surgery to replace defective or incorrectly used devices.

Third, the cost of the implant can often push total expense for inpatient care past the outlier limit, making the stay substantially more expensive.

Fourth, the cost of implants is growing much faster than overall medical inflation - one projection has the spinal implant market increasing 16% per year.

What does this mean for you?

California hasn't fixed this problem yet, despite knowing about it for eight years. And don't think this is unique to the Golden State (a term likely coined by implant manufacturer Stryker); the use of implants is up all over the country.

Posted by Joe Paduda at 9:25 AM | Link to this post

More than 75,000 work comp injuries were not reported in just three cities last year. Close to a million may have gone unreported nationally.

Yesterday's news (sub req) that 92% of low-wage workers don't file work comp claims for injuries that require medical attention was a shocker. I'd long thought the actual injury rate is higher than the reported rate - but nowhere near that high.

Fully half of the workers with on the job injuries "experienced an illegal employer reaction", including firing the worker, calling immigration authorities, or telling the worker not to file a comp claim.

Here's a quick summary from the piece in WorkCompCentral:

The survey found:

* 43% of the injured respondents were required to work despite their injury.
* 30% said their employer refused to help them with the injury.
* 13% were fired shortly after the injury.
* 10% said their employer made them come into work and sit around all day.
* 4% said they were threatened with deportation or at least notification to Immigration and Customs Enforcement.
* 3% were told not to file a workers' compensation claim.
* 8% were told by employers to file a claim.

You can read the WCC or other article to understand the methodology, which looks pretty solid. And some of the stats above aren't as troubling as they might first appear - requiring injured workers to work, or come in and not work, may be OK if the injury wasn't that severe. I'm trying to give the employer the benefit of the doubt here, but for those workers who were threatened, whose employers refused to help with the injury, or were fired because of the injury there is not only a work comp problem, there's a legal, ethical, and moral failing.

As our economy has become more service-based, the number of low wage jobs has increased - jobs that are held by people that tend to be minorities, undereducated, and recent immigrants, legal or undocumented. My sense is the drop in work comp claim frequency may be - at least partially - due to the failure to report injuries as well as structural changes in the economy and improvements in safety and loss prevention.

The study looked at a population that accounts for fifteen percent of all workers in three cities; Chicago, New York, and Los Angeles. Extrapolating the numbers out in just those three cities indicates that 75,446 workers comp injuries were not reported.

Moreover, according to the study, "workers compensation insurance paid the medical expenses for only 6 percent of the workers in our sample who visited a doctor for an on-the-job injury or illness." [emphasis added]

What does this mean for you?

For the comp industry, the declining frequency years may be coming to a screeching halt.

If you're a work comp payer, you've been 'lucky' if you insure these businesses. That 'luck' will soon change as the Department of Labor is dramatically ramping up enforcement efforts. (I don't mean to imply that comp carriers have somehow been complicit in this, in fact the opposite is much more likely as insurers work very hard to ensure rapid and accurate claim reporting.)

If you're a TPA or other servicing entity, your revenues have been suppressed by the failure to report injuries.

And if you're one of these low-wage workers, perhaps there's hope that the situation will improve.

Posted by Joe Paduda at 6:51 AM | Link to this post | Comments (1)

My firm, Health Strategy Associates, has conducted a survey of prescription drug management each year for the last five. I'm well into the survey portion of the Sixth Annual Survey, and here are some preliminary findings.

1. Drug cost inflation appears to show signs of rebounding after five years of decreases in the rate of increase. The data is by no means complete, but most of the respondents to date reported cost inflation was higher in 2008 than the previous year.

2. More respondents are tracking their first fill capture rate this year than last. There appears to be a significant focus on this metric, based at least in part on the sense that the earlier the PBM can get involved in a claim, the more likely it will be able to minimize over-prescribing and inappropriate dispensing.

3. Respondents are more aware of the actual strengths and weaknesses of specific PBMs than they were in the past; the buyers with strong knowledge of and experience in this niche are pretty savvy.

4. The primary cost driver remains utilization - too many of the wrong type of drugs dispensed by too many physicians, especially for pain.

5. Clinical management programs are increasingly important to payers (see 5. above), and they are getting smarter about these programs, what works and what doesn't, and why. Marketing pitches aren't cutting it any more; these folks want to see programs in action, study the reports, and understand the logic.

The report will be out next month. If you'd like to download copies of the previous reports, click here.

Posted by Joe Paduda at 10:14 AM | Link to this post

Workers comp PBM and medical services company PMSI released its annual Drug Trends Report at RIMS earlier this week. I noted a couple highlights in an earlier post; you can download a copy here.

One of the more notable findings is the increase in the rate of inflation in drug costs, this coming after several years of decreasing inflation rates. A key contributor was per-script price increases which amounted to 6.1% in 2008.

There's lots of good information in the Report, and you can't beat the price.

My firm will be conducting the Sixth Annual Survey of Prescription Drug Management in Workers Comp next month; this survey focuses on tools and techniques employed to manage costs as well as payer executives' views on cost drivers and PBMs.

For the fourth consecutive year the Survey is sponsored by Cypress Care.

Send an email to infoAThealthstrategyassocDOTcom if you'd like a copy of the report.

Posted by Joe Paduda at 7:43 AM | Link to this post

Horrors! Those big-government Democrats are at it already, actually trying to get taxpayers to fund medical effectiveness research!

How dare the government actually fund research. The nerve! The gall! The (sputter sputter) utter brazenosity! (I know it's not a word but it fits)

Why, doctors would actually know what works and what doesn't! Care would improve, costs would drop, people would be healthier, there would be fewer medical errors; oh, the horror of it all!

And worst of all, taxpayers would get better results for their tax dollars!

Everyone knows there is just nothing more to learn about medicine, disease, physiology. We have learned all there is to know, and any money spent on effectiveness research would be wasted.

That, and the government might actually use that information to decide what types of care to pay for, and what types will not be reimbursed. Wow, what a concept. Why would the government ever contemplate basing reimbursement on effectiveness?

We would never want the government to be careful how they spend our tax dollars. Why, we never want to use taxpayer dollars to study the effectiveness of, say, military equipment. Or air traffic control. Or emergency preparedness. Or flood control. No, we should just pay vendors for any services they provide, regardless of whether or not those services actually work.

OK, forgive me for the over-the-top sarcastic rant. I'm completely disgusted with the hypocrisy of the libertarian right; those who have screamed for years about the ineffectiveness of government, ranting nonstop about how government can't do anything right, yet are now screaming even louder as government attempts to make sure they are responsible stewards of the public's funds.

Here's an example from the health care experts at the National Review. "The [stimulus] bill provides $1.1 billion for a new program of comparative effectiveness research. The idea is to study medical practice patterns, new products, and new technology to determine what is “cost effective.” In the UK, a similar program run by the National Institute for Clinical Evidence (NICE) is used to deny payment by the government for certain drugs and procedures that are said to be “cost ineffective.”

Democratic lawmakers will deny that rationing is their intent, but that is not credible. Why create a government program to study what’s cost effective if not to use the information to inform payment and coverage decisions?"

Notice the use of the scary word 'rationing' to define appropriate coverage and payment. Using the author's (James Capretta) reasoning, Medicare should pay for voodoo, cancer treatment with peach pits, snake oil, rhino horn, and universal cancer vaccines.

Why, not paying for these 'treatments' would be 'rationing'...at least according to Capretta.

Capretta has zero experience in the real world of health insurance. Insurance companies make decisions every day to not pay for treatments that have been proven ineffective. If Mr Capretta had ever worked in the insurance or health care industries, he would know that. But he hasn't.

That's not 'rationing', it's good business. Would you not want your government to only pay for services that work?

What does this mean for you?

Everyone knows government is the problem; how dare they try to be part of the solution?

Posted by Joe Paduda at 8:31 AM | Link to this post | Comments (8)

The phone and email has been buzzing today. So has the blog-o-sphere, at least among those bloggers who follow this. Both of us.

Today's follow up announcement by Ingenix' parent UHC revealed the giant health plan will pay $350 million to settle a class action lawsuit directly related to the use of the Ingenix UCR database. This brings the total (to date) cost for legal settlements to $400 million after yesterday's NY settlement. Here's the key language from UHC's statement today.

"UnitedHealth Group (NYSE: UNH) announced today that it has reached an agreement to settle class action litigation related to reimbursement for out-of-network medical services. The agreement resolves class action litigation filed on behalf of the American Medical Association (AMA), health plan members, health care providers and state medical societies.

Under the terms of the proposed nationwide settlement, UnitedHealth Group and its affiliated entities will be released from claims relating to its out-of-network reimbursement policies from March 15, 1994, through the date of final court approval of the settlement. UnitedHealth Group will pay a total of $350 million to fund the settlement for health plan members and out-of-network providers in connection with out-of-network procedures performed since 1994. The agreement contains no admission of wrongdoing."

The real problems with the Ingenix UCR database weren't the subject of much discussion in the settlement documents or the various analyses of the settlement. But underlying the case are some significant problems with the database, how it is put together, and its uses. These issues were highlighted in the Davekos case in Massachusetts, and are discussed in the court record. Among the problems are:

- the accuracy and consistency of the underlying data is questionable. Ingenix cannot assure that the entities (health plans and claims administrators and insurance companies) that supply the data that Ingenix uses to determine what usual customary and reasonable charges are in specific areas are all using the same criteria, are coding consistently and accurately, and are aggregating the data in the same way.

- Ingenix may not always have enough charge data to provide a statistically valid sample for every CPT code. In that case, it appears that Ingenix may aggregate data from similar codes to produce a large enough sample. The potential issue with this work-around is obvious. In some instances, Ingenix actually called medical providers in specific areas where it did not have enough data to ask what they would charge for specific procedures. Thus they were combining telephonic survey data with actual charge data in their UCR databases, a commingling of very different data from very different sources with varying reliability.

- Ingenix itself defines the sociodemographic region boundary lines that are used to determine which charges are relevant for which geographic areas. In the Davekos case, the court appeared to be concerned when Ingenix could not give a defensible rationale for the logic or process they used to determine the boundaries for charge areas.

- Ingenix scrubs the data to extract charges that they decide are outliers for reasons that appear to be subjective. It also appears Ingenix removes high end values but not low end outliers. If this is the case, it would likely skew the charge data towards the lower end.

Those are some of the details behind the Ingenix UCR settlements. As to what will happen next, Bob Laszewski's perspective provides insights as only he can.

What does this mean for you?

If you are using the Ingenix UCR database, you may want to look for other options.

Posted by Joe Paduda at 3:55 PM | Link to this post | Comments (5)

Last week a study hit the wires indicating that managed care plans did not have better outcomes for carotid endarterectomies (CEs), a surgical procedure ostensibly intended to reduce the risk of stroke.

Here's the headline from UPI - "No managed care link for stroke-prevention".

A quick read of the headline and abstract leads the reader to the conclusion that managed care is ineffective. But there's much more to it than the headline and brief synopsis. For starters, the data was ten years old. It was from one state (NY), that is not exactly known as a hotbed of managed care. And it lumps all kinds of 'managed care' - from group model HMOs to PPOs under the same category.

And the study's conclusions are muddy. In fact, there had been a good bit of research into the procedure itself (it involves cleaning out the carotid artery (the big one in the neck that bad guys are forever threatening to cut in movies), and the data used indicated "the rate of inappropriate surgery dropped substantially from 32 percent in 1981 prior to the RCTs [randomized controlled trials] to 8.6 percent in 1998/1999 after publication of the clinical trials [by AHRQ]." Clearly, medical practice had changed dramatically over that period, due primarily to publication of data indicating the procedure "reduced the risk of stroke and death compared to medication alone among carefully selected patients and surgeons."; the research also showed many patients did not benefit from the surgery.

It wasn't that simple. In fact, the surgery rate had dropped in the mid-eighties after publication of research indicating the procedure had high complication risks. A decade later, additional research seemed to show that CEs did benefit some patients, and the rate shot up again, only to start a gradual decline.

What happened? Generally accepted medical practice changed. Was the rate different within "managed care' plans? No. But why would it have been?

I worked for large managed care/health plan companies during the late eighties and early nineties, with responsibilities in customer reporting and managed care product development. We all knew there were probably too many carotid endarterectomies performed, but we didn't really know which ones were inappropriate. The indications were rather uncertain, and it did appear the procedure helped some patients. What was not clear was which patients would benefit and which would likely not. The 'choice' we made was to encourage/mandate/require second surgical opinions (at that time the state of the art in managed care) to ensure the patient got at least one other physician's views on the potential risks and benefits. There wasn't much in the way of clinical guidelines that we could use to deny the procedure outright, and the legal risks of a denial were so high that this option was never seriously considered.

Truth be told, the managed care firms I worked for had little 'control' over medical practice. Sure, we had contracts with physicians, but our influence was minimal - we were 'two inches deep and a hundred miles wide'. With little 'market share' in any one physician's office, it was unlikely most of 'our' docs would pay much attention to directives from one of our Medical Directors. We did notice that our rate of surgeries was dropping, but did not have the data to know if this was occurring across the board and thereby due to our efforts (I'm pretty sure we took credit for the decrease...) or was driven by external factors.

Contrast our very loose 'managed care' with the much different model exemplified by group and staff HMOs - Kaiser Permanente, Group Health of Puget Sound, HIP, etc. I don't know what the group/staff model HMO rates were, but I'd bet they were lower than my employers'.

In retrospect, it is obvious that external factors were the reason for the decline in my employer's number and rate of carotid endarterectomies. In retrospect.

What does this mean for you?

There's far too much superficiality in the press, superficiality that can distort public views of managed care and the effectiveness thereof. In this case, the headline, although nominally accurate, is highly misleading.

Posted by Joe Paduda at 6:15 AM | Link to this post

I'm a baseball fan. Weekend mornings I always listen to Ed Randall, one of the more knowledgeable and listen-able baseball analysts; he really knows the game and has a style that is modest yet insightful. For years Mr Randall has been a tireless advocate for prostate cancer screening, and by his efforts he has likely encouraged thousands of men to get tested.

As much as I admire Mr Randall's expertise in baseball and desire to do good, he's really doing a disservice to public health. While his efforts undoubtedly result in an increased early diagnosis of many cancers, they are also increasing costs, scaring many men and their families, and likely harming a portion of men who follow his advice.

In his quest to get as many men tested as possible, Mr Randall is causing as least as much harm as good.

First, a little background about prostate cancer. According to the National Cancer Institute, between 27 percent and 37 percent of men between 55 to 74 years of age have prostate cancer. It is a very slow growing cancer; most men who have it end up dying of something else.

The ugly truth about prostate cancer testing is it doesn't work. The most common test, a blood test known as PSA (Prostate Specific Antigen) is terribly inaccurate. Men who have been tested have no better survival rate than men who have not.

This isn't my opinion, it is the finding of research published in The Archives of Internal Medicine in 2006. The authors found that neither a PSA test, nor a rectal exam reduced the chance of death from prostate cancer.

OK, so what's the problem? Men get tested, no harm no foul? Actually there are lots of problems. First they aren't free - PSA tests range in cost from $70 - $200, dollars that could be saved or spent on more effective medical services. OK, what happens if you decide the heck with the cost, I'm going to get a PSA test. The PSA level can be abnormal even when a man does not have prostate cancer. Seventy percent of positive PSA tests are false positives; the patient does not have prostate cancer. (if you test negative, there's only a one-to-two percent chance you still have prostate cancer.) Of course, those who test positive worry about the result, and think they may well have cancer. I don't know how to place a value on peace of mind, but anyone who has worried about a positive cancer test certainly knows how scary it is. (

When an abnormal P.S.A. level is discovered, most often the next step is a biopsy. Which are often inconclusive. Tissue from a negative screening may have come from parts of the prostate that are free of cancerous cells. If a cancer is found, an operation may not be necessary; remember this cancer grows so slowly most victims die of something else. So, you get an operation, what's the big deal?

The big deal is patients who undergo treatment (radiation and/or surgery) may well end up impotent (38% - 63%) or incontinent (13% to 52%) or have bowel issues (5% to 17%. As a fifty year old man, I don't much like those odds.

This doesn't mean testing is futile or pointless. There are undoubtedly many men who would have never discovered their cancer until it had progressed quite far; the men in this group have to thank people like Mr Randall - on a personal level, he has undoubtedly helped save them. But there's a societal cost for that benefit. Here's one physician's view (from the NYTimes):

“I’m a little worried we may look back on the prostate cancer screening era, after we learn results of clinical trials, and see that we’ve harmed a lot of people without doing them good [emphasis added],” said Dr. David Ransohoff, a professor of medicine and cancer screening researcher at the University of North Carolina at Chapel Hill. “By being so aggressive with so many people, did we do the right thing? I don’t know that it’s going to turn out that way.”

Posted by Joe Paduda at 7:42 AM | Link to this post

From the world of workers comp comes a crystal clear picture of what's wrong with America's health care system, and how difficult it will be to get it right.

WorkCompCentral has a piece this morning about California's proposal to not recommend topical analgesics - creams and ointment that are compounded at the pharmacy.

The pharmacy community doesn't like the proposal, claiming "there's [sic] prescriptions for these medications, patients have been getting relief, and we think that they should continue to be reimbursed for the medications that are being prescribed for them".

Opponents of the proposed language also noted that it "conflicts with the DWC's written policy stating that only “evidence-based, peer-reviewed research concerning the efficacy of a treatment can be the basis for recommending or not recommending a treatment.”

I'd suggest the opposite is the real issue - there is no evidence-based peer reviewed research documenting the effectiveness or efficacy of compounded medications. The pharmacists want to be paid for preparing and dispensing a medication which has not been shown to work. And they are pulling out the lobbyists and PR folks and 'inhouse experts' in an attempt to get California to back down.

Further. compounded medications are outside the scope of the the FDA's authority.

About a third of US health care dollars are spent on treatments that are likely not effective. One has only to look at the history of MRIs, carotid endarterectomy, and angioplasty to identify billions of dollars that have been wasted on treatments that did not help, and may well have harmed, thousands of patients. These treatments, devices, and providers make money for their purveyors and manufacturers, dollars that they are loathe to give up.

Yet the approval process for these treatments/drugs/devices is is almost laughably low. Here's how a UK researcher put it:

"the FDA dossier showed that the average improvement produced by drugs introduced in the 1960s was 17%, whereas with the drugs introduced in the 1990s it was 16%![emphasis added]...If one looks at the medical interventions we have for many diseases, whether they be psychiatric or neurological disorders, cancer, cardiovascular or respiratory or gastrointestinal problems, or almost any type of illness other than bacterial infections, what evidence-based medicine shows is that, as my colleague found, many of our interventions are pitifully inadequate. Our studies, although beautifully conducted, have been done on patient populations that bear only a limited relationship to those patients we actually see. The number needed to treat to achieve one success over and above that which could be achieved by placebo may be 10, 20, or even as high as 50. Thus, the trials actually give us almost no guidance as to the likely outcome of an intervention in the individual patient who sits in front of us. For many conditions, therapeutic effects are so small that neither the patient, nor the relative, nor the doctor is likely to be able to recognize any differences in the patient's state as a result of our intervention. We pride ourselves on our large, well-conducted, immaculately analyzed trials that give significant results. But we have forgotten that we need to conduct such enormous trials only because our interventions are so minimally effective. If we were making a really large difference to the outcome, small trials would suffice and provide clearly significant results."

That's one side of the argument. Here's the other.

I give you the condition known as 'chronic lyme disease'. This tick borne ailment is pretty common in my area (central coast of Connecticut), in fact I live about twenty miles from Lyme. Walk down the main street in Madison and chances are you'll encounter at least one person who has had recurrent Lyme disease - the mechanic, artist, college student, mom. Yet try to find a doctor who will treat chronic Lyme and you'll find very few who will risk their reputation and medical license, as several physicians have been disciplined for just that.

The battle over chronic Lyme (and it is a battle) has been brutal, nasty, and vicious. Nay sayers claim no such disease exists, and cite research and articles in prestigious publications such as the New England Journal of Medicine as support for their opinions. Their opponents decry the poor quality and selective nature of that 'research', accuse the authors and study leaders of conflicts of interest, and note the successes - patients treated for chronic Lyme that get better.

Anecdotally, I know at least a half-dozen friends and neighbors who have suffered from some condition that robbed them of their energy, caused great pain, and prevented them from doing many of the things the rest of us take for granted. After extensive treatment (we're talking over a year) with antibiotics, all have gotten better. Much better.

It is abundantly clear that medicine is an art as much as a science, and art is, as famously described, in the eye of the beholder.

And that's one reason health reform, which must attack cost, will be so very difficult.

Posted by Joe Paduda at 7:38 AM | Link to this post

According to market research firm Supplier Relations LLC, the total US surgical appliance and device industry's revenue for the year 2007 was "approximately $30.4 billion USD, with an estimated gross profit of 46.15%".

Note that this total includes more than just implantable devices - sutures, surgical dressings, and prosthetics and other stuff are also counted towards the totals. Without buying the report for $600, you won't know exactly how much is spent on which categories. But research indicates the orthopedic and surgical device share of the total has been quite significant - well above 50%.

The growth of the implant market has been marred by allegations of illegal kickbacks, sleazy business deals between manufacturers and physicians, and hugely inflated prices to payers.

That hasn't slowed the market.

Another report (more specific to orthopedics) predicts total implant demand will rise "9.8 percent annually to $23 billion in 2012. The four major product segments -- reconstructive joint replacements, spinal implants, orthobiologics and trauma implants -- will all provide strong growth opportunities."

But the big growth will come from spine. According to an excerpt from the report,

"Spinal implants will show strong growth due to advances in product technologies and related surgical techniques, coupled with an increasing prevalence of chronic back conditions. Fixation devices and artificial discs used in spinal fusion and motion preservation surgeries, especially procedures for the repair of vertebrae and replacement of degenerative discs, will account for the largest share of the market and best growth opportunities."[emphasis added]

What does this mean for you?

Higher costs with uncertain results.

Posted by Joe Paduda at 8:08 AM | Link to this post | Comments (1)

Pundits (myself included) are detecting a sea change on the Hill - the health plans' power meter is just barely registering while physicians are pegging the needle. If you're wondering why physicians were so adamantly opposed to the Medicare reimbursement cut, it is because their compensation is barely keeping up with inflation.

Recall that the GOP was going to cut their Medicare reimbursement by 10.6% (while also reducing Medicaid and other Medicare-linked compensation). And this after physicians had gone several years with their income not even keeping pace with inflation.

According to the latest data from 2007, primary care docs enjoyed a 3.35% increase in compensation after inflation (6.3% before accounting for the 2.85% CPI uptick last year). This rather modest increase is way better than their specialist colleagues saw - inflation-wise, specialists broke even. However, specialists' median income was almost a third of a million bucks, while specialists were just over $182k, so the primary care docs have a long way to go to catch up.

And some of them have a really really long way - median general practice income was $119k, whlle Family practice docs made $129k.

Not bad money, but not exactly huge bucks either. The other part of the equation has to do with job satisfaction - if you love your job, you're likely to be less concerned with how much you make. But if you don't love your job, and some damn President/Congressperson is threatening to cut your already low income, while paying big health plans billions more than they should...

Job satisfaction amongst primary care docs is declining. 60% of PCPs (primary care practitioners) would not choose primary care if they got a do-over. 39% would pick surgery or diagnostics, and over one-fifth would not choose medicine.

Looking at changes from 2006 to 2007, the percentage of docs who counted themselves as 'very satisfied' declined from 24% to 18%, while those who were 'very dissatisfied' went up from 9.4% to 13.2%.

So what do these newly-empowered, angry docs want?

36% want a Canadian-style single payer system.

66% agreed that the "US should move to a market driven system that reduces the role of third party payers."

(note these were separate questions and therefore don't add up to 100%)

Yes, working with physicians has heretofore required cat-wrangling skills. And their egos require outdoor meetings as no hall is big enough. And all want more for their specialty and their patients are sicker than average. And they are all better than average.

And they've recently found out what they can accomplish when they stop acting like Augustus Gloop and work together.

Thanks to FierceHealthcare for the triggering tip.

Posted by Joe Paduda at 6:16 PM | Link to this post | Comments (2)

Workers comp medical expenses account for less one-fiftieth of total US health care costs - $30 billion(see WC report pdf) out of $2 trillion.

Yet workers comp generates almost one-sixth of hospital profits.

Here's how the numbers work. About one-third of comp medical payments are issued to healthcare facilities. The average US hospital cost-to-charge ratio (what it costs the hospital to provide a service compared to what they bill for that service) is approximately 31.2%; in comparison workers’ compensation payers reimburse about 55% of hospitals' billed charges.

Thus workers comp payers pay hospitals 176% of their costs.

(There is another, very big argument over the methodology hospitals use to calculate their 'costs', my opinion is there is conclusive evidence that costs are exaggerated and overstated)

In dollar terms, in 2007 workers comp insurers and self-insured employers paid facilities roughly $9.1 billion. $3.9 billion of that $9.1 billion was profit for hospitals.

The entire US hospital industry generated profits of roughly $25 billion, workers’ compensation – which you will remember represents only about 1.5% of total hospital revenues – accounts for approximately 16 percent of all the profits for US hospitals.

Few dispute that workers comp insurers and SI employers should adequately reimburse hospitals. It is equally indisputable that under the current systems, comp payers are paying much more than their fair share.

How much should workers’ compensation payers pay? According to Vincent Drucker of FairPay Solutions, "something between what Medicare pays and the costs + twenty percent that group payers are reported to be paying." (FPS is an HSA client)

Why are comp payers overpaying hospitals? That's a subject for a later post.

Posted by Joe Paduda at 7:53 AM | Link to this post | Comments (3)

The Fifth Annual Survey of Prescription Drug Management in Workers Comp has been completed, and copies of the Public version of the report are available at no charge. (email infoAThealthstrategyassocDOTcom)

A few late respondents contributed significantly to the report, and their data also moved the figures around a bit. Here are a few key statistics.

Drug inflation for 2007 was 4.9% (looking at the increase in total dollars for 2007 over 2006).

Generic utilization was in the high seventies, with generic efficiency in the ninety-percent range.

Essentially all larger payers are now using PBMs, although are many are not using them as effectively as they could be. PBMs' clinical, reporting, outreach, paper bill processing, and related capabilities are not being utilized to their fullest by all but a very few payers.

The use of home delivery has jumped and is close to 5% across all respondents. This is a major improvement over a couple years ago, when it was in the 2% range for most payers.

And finally, the first fill capture rate is in the low twenties - although half of the respondents did not have the figure readily available.

Copies of past surveys are available here.

Posted by Joe Paduda at 2:26 PM | Link to this post | Comments (3)

Most back pain cases resolve themselves within a month. At least, that's what many believe.

And, like much of what we accept without investigation, it is wrong.

Turns out most back pain patients stop going to their doctor within a month - but their symptoms persist. Fully three-quarters of them still have symptoms a year after the initial onset of pain. This isn't 'new news', in fact it was reported in the British Medical Journal a decade ago.

This wasn't one of those "publish and forget" articles. The British have been focused on the diagnosis and treatment of back pain for years, and in subsequent years several studies analyzed different types of treatment, complicating factors, and the prevalence of back pain.

A 2003 study reported that although the condition may have been resolved within a few weeks, it looks like once you've had low back pain, there is a pretty good chance the symptoms will reappear. Seventy-three percent of patients will experience a recurrence, a figure essentially identical to that noted above.

One of the more interesting analyses indicated that rapid diagnosis and referral to a physiotherapist (PT) produced good results, as "More than 70% of patients required only a single [PT] clinic visit and <5% were referred on to specialist orthopaedic or back pain rehabilitation services."

Another examined the tendency of some patients to 'catastrophize' their condition - exaggerate it and make it seem worse than it appeared from objective findings. Unsurprisingly, the results showed that a high level of pain catastrophizing or kinesiophobia (fear of movement) increased the individual's risk of future chronic low back pain - and disability. This held true regardless of whether the study subjects had low back pain at baseline and still existed after correction for severity of back pain at baseline. The patients with those characteristics, who did not have pain at the time of the study were significantly more likely to experience pain.

So...what does work?

There is little evidence that invasive surgery produces better results (for most patients) than other forms of treatment.

From the BMJ:

"A number of interventions, including facet joint, epidural, trigger point, and sclerosant injections, have not clearly been shown to be effective. No sound evidence is available for the efficacy of spinal stenosis surgery. Surgical discectomy may be considered for selected patients with sciatica due to lumbar disc prolapse that do not respond to initial conservative management. The role of fusion surgery for chronic low back pain is under debate. Recent randomised clinical trials comparing fusion surgery with conservative treatment showed conflicting results. Recommendations that fusion surgery should be applied in carefully selected patients are difficult to follow because no clear and validated criteria exist to identify these patients in advance."

But there is evidence that more conservative treatments do produce results - the BMJ (again) :

"That exercise and intensive multidisciplinary pain treatment programmes are effective for chronic low back pain is supported by strong evidence. Some evidence supports the effectiveness of (cognitive) behaviour therapy, analgesics, antidepressants, nonsteroidal anti-inflammatory drugs, and back schools and spinal manipulation."

Extensive citations are available here.

What does this mean for you?

I reported yesterday on the explosive growth of spinal surgery using implanted devices. Undoubtedly this type of care is highly beneficial - for some patients. What we don't really know is which patients should be getting implants and who would be better off with conservative treatment.

Clearly, there is strong evidence that more patients would benefit from conservative treatment, leading one to suspect that the growth of invasive surgery is not driven by best practice.

Posted by Joe Paduda at 7:17 AM | Link to this post | Comments (2)

Disclaimer - This is the kind of post that makes one want to take a shower after reading. My apologies to readers without convenient access to bathing facilities.

One of the fastest growing segments of the surgical industry is the spinal implant business. In what may be the most comprehensive review of the problem, the Orange County Register reported:

"About 70 percent of U.S. adults -- or 153 million people -- have lower back pain, according to Millennium Research Group. Of those, about 15 million require medical treatment, and most eventually get spinal implants." My take is that is a wildly overstated estimate; one survey reported that the total world market for devices was $4.2 billion; note this study used 2006 data. Another indicated the market was $5 billion in 2005, and predicted growth to $20 billion by 2015. Stryker, one of the major manufacturers, expects growth of 16% per year in the spinal implant market. Yet another report(note opens .pdf) indicated the 2007 worldwide market was $7 billion, with the US accounting for $5.4 billion of that total.

And boy is it profitable. One manufacturer (Allez Spine) sold screws to an implant device company for $79.31 each - screws that were then sold to hospitals for $1000 each (who then marked them up even more when billing insurers).

Yep, there are $480 worth of screws in this xray (wholesale), $6000 retail, and probably $9-12,000 to the insurer/patient. And that doesn't include the other parts...

Medtronic, one of the larger device companies with about 45% market share in the US and the same worldwide, reported sales of $869 million for spinal implants last quarter, driven in part by a big jump in sales of its Kyphon technology. The $869 million represents growth of 35% from the same quarter last year.

The Kyphon story is an ugly one, and points to one potentially significant problem in the spine surgery industry - the focus on devices as a tool to maximize reimbursement.

Kyphon (the company) was acquired by Medtronic in 2005. The company settled a lawsuit filed by the Feds, agreeing to pay $75 million in fines. Kyphon agreed to stop providing inappropriate advice on reimbursement to providers, advice that resulted in hospitals filing inflated claims with Medicare for a spine procedure with the otherworldly name of kyphoplasty.

The details of the case, as reported by the New York Times, are revealing.

Kyphon "persuaded hospitals to keep people overnight for a simple outpatient procedure [bold added] to repair small fissures of the spine. Medicare then reimbursed the hospitals much more generously than it otherwise would have for the procedure, which was developed as a noninvasive approach that could usually be done in about an hour.

By marketing its products this way, Kyphon was able to artificially drive up demand among hospitals, bolstering its revenue and driving up its stock price. Medtronic subsequently bought the company, its competitor, for $3.9 billion, greatly enriching Kyphon’s senior executives. "

Margins for Kyphon's devices approached 90%, due in large part to the high price the company charged, a price that hospitals offset by extending hospital stays (as advised by Kyphon's sales reps and reimbursement experts), thus generating higher bills and much higher revenue.

Another major contributor to the rapid increase in spinal implant surgeries may be the growth of device companies that have spine surgeons as stockholders. The OCR article reported that physician-owned companies are now under investigation by HHS' Office of the Inspector General (OIG). In testimony before the Senate Special Committee on Aging, Gregory E. Demske, Assistant Inspector General for Legal Affairs at the OIG said:

"These financial relationships [between device manufacturers and physicians] can benefit patients and Federal health care programs by promoting innovation and improving patient care. However, these relationships also can create conflicts of interest that must be effectively managed to safeguard patients and ensure the integrity of the health care system...during the years 2002 through 2006, four manufacturers (which controlled almost 75 percent of the hip and knee replacement market) paid physician consultants over $800 million [bold added] under the terms of roughly 6,500 consulting agreements. Although many of these payments were for legitimate services, others were not. The Government has found that sometimes industry payments to physicians are not related to the actual contributions of the physicians, but instead are kickbacks designed to influence the physicians’ medical decisionmaking [bold added]. These abusive practices are sometimes disguised as consulting contracts, royalty agreements, or gifts."

All this growth may well be based on a focus on surgical treatment that is just not supported by research. Some studies indicate surgery is not the best treatment for a substantial number of patients. According to the OCR article (source above);

a "2005 study of patients with back pain published in the journal of the British Medical Association concluded: "No clear evidence emerged that primary spinal fusion surgery was any more beneficial than intensive rehabilitation."

"You look at the number of procedures and the rate of growth and it seems to far outstrip the number of patients who need this," said Dr. Steven J. Atlas, a back specialist and Assistant Professor of Medicine at Harvard Medical School."

And that old nemesis, provider practice pattern variation, is nowhere as obvious as with back surgeries. Looking at Medicare data, the back surgery rate in Fort Myers, Florida was 5 times higher than in Miami. Same population demographics, same state, but different providers.

Perhaps the best explanation for the considerable growth in the use of implants and spine surgery is the lack of evidence either for or against these procedures. There are some reports that indicate positive or negative outcomes, but nothing definitive has been published that could be used by payers and providers to judge the appropriateness of surgery for most patients with back injuries or degenerative conditions.

Posted by Joe Paduda at 7:10 AM | Link to this post

I've just about completed compiling results of the Fifth Annual Survey of Prescription Drug Management in Workers Comp. While the report won't be completed for a couple weeks, here are a few factoids that are rather compelling.

Drug trend continues to moderate, with inflation in 2007 coming in at 4.3%. That's a big improvement over last year's 6.5%, which was a big improvement over the previous year's 9.5%...

Generic fills (the percentage of scripts that are filled with generics) looks to be in the high seventy percent range, with generic efficiency around 90% (that's the percentage of scripts that could be filled with generics that are).

New this year is a question about first fill capture rate, defined as the percentage of initial scripts that are routed through the PBM's network. This is starting to get attention, with the average respondent rating it just under 'very important'. That doesn't mean they have the data - about half of the twenty payers surveyed couldn't identify their first fill rate. Of those who could, the numbers indicate about one-fifth of initial scripts are in-network.

Many of the survey respondents (primarily large and mid-size carriers, state funds, and TPAs) have a lot more insight into their drug spend, know what the cost drivers are, and the ones with the lowest inflation have all put programs in place to clinically manage drugs.

Thanks to all the folks who set aside time to help with the survey - you know who you are.

Posted by Joe Paduda at 6:47 AM | Link to this post | Comments (2)

I'm knee deep in my annual survey of pharmacy management in workers' comp, and if I look at one more column of data I'm going to need a few class 2's myself.

So in the interest of my sanity, here are a few early findings from the survey.

Inflation looks to be down from last year's 6.5%, marking the fifth consecutive year of 'decreases in the rate of increase'. More detail to follow on what's causing the decline, but preliminary review indicates the focus on utilization is continuing to reduce the volume and type of drugs dispensed. As NCCI has noted, utilization is significantly more important cost driver than price.

Clinical programs are getting better, more targeted, more sophisticated, and more effective. A focus on addressing high cost claimants is almost universal among the best performing payers - this may seem blindingly obvious, but requires one to have data, know what to look for, and be able to develop and implement programs to attack the issue.

I try to use the same questions each year so we can track trends and changes in the industry. But new things, points of interest, and queries come in each year which requires that some old and not-as-interesting-any-more questions have to get dropped to make room for the new stuff.

This year we added questions on generic efficiency and fill rates. While the analysis is not yet complete, and a couple more respondents are going to send their data in, the preliminary figures indicate the average generic fill rate is right around 70%, with generic efficiency (the percentage of scripts that could be filled with generics that are) around 90%.

This is an average - types of business written and managed, jurisdictional nuances, data availability, accuracy, and consistency all make this stat somewhat questionable.

That said, better to start asking then to wait for perfection.

Thanks to Cypress Care for sponsoring the survey for the third consecutive year.

Posted by Joe Paduda at 8:41 AM | Link to this post

Friend and colleague Peter Rousmaniere recently attended the NCCI conference and was kind enough to provide a comprehensive report. Here it is, and thank Peter when you see him.

Continue reading "NCCI Conference - the Rousmaniere Report" »

Posted by Joe Paduda at 4:58 PM | Link to this post

It's 2008. There are thousands of really smart people working to change the delivery of health care, reduce inappropriate use, and improve outcomes.

But in one state, things aren't getting better - they are getting worse. (I'm not picking on Pennsylvania; they just have the misfortune of being in the news more than other states lately)

A study of admission rates in Pennsylvania found that patients with chronic conditions are being admitted to the hospital more often. The analysis focused on HMO members with diabetes, asthma, and/or hypertension and the result is particularly troubling as these conditions are responsible for a large percentage of US health care costs.

Notably, these HMOs have also been lauded for their effectiveness in delivering preventive care, care that should help reduce the number of admissions for these conditions.

Previous studies indicate that effective primary care can dramatically reduce the number of admissions for these conditions. And further reductions can be achieved by implementing quality improvement programs, programs that have well-documented results.

So we're left with the conclusion that despite the fact that we know how to keep patients with chronic conditions out of the hospital, admission rates are going up. And Pennsylvania is not particularly bad - there are a dozen other states that spend a lot more money on inpatient chronic care than the national average.

Can you sense the frustration?

Posted by Joe Paduda at 7:21 AM | Link to this post | Comments (1)

Alex Swedlow and the good folks at CWCI have published a study that clearly demonstrates the amount of waste in the US health care system, waste generated by nothing other than greed and lousy medicine. While the analysis focused on workers comp, the lessons cross all coverage.

The great thing about workers comp is that unlike health insurance, payers are actually concerned about and financially motivated to ensure claimants get the amount and type of care needed to help them recover and get back to work. And there is a wealth of data to evaluate the effects of medical treatment on RTW.

California changed its workers comp rules a few years ago to limit the number of physical or occupational therapy or chiropractic visits a claimant would get covered by workers comp. The limit was 24 (for each, not together), which all the data suggest is more than adequate to take care of 90%+ of WC medical conditions - surgical or non.

So, what happened?

The average number of PT, OT, or chiro visits per patient dropped by almost half, and the number of patients with more than 24 visits dropped from 30.4% to 9.7% (a decline of 68%). Costs declined dramatically as well.

But did this lead to poorer outcomes?

The results, while encouraging, are not as clear.

While there are data from California that appear to show reductions in the length of disability, the results are muddled by a cap on benefit payments that was also part of the WC reforms. The duration of disability (the length of time claimants were out of work) did decline post-reform. Comparing disability duration two years post-injury, the median length of disability declined by 21.4% (average was down 17.4%).

My sense is the reduction in physical medicine visits contributed to the drop in disability duration - without endless visits to PTs and Chiros to receive 'care' that was not helping them recover but merely extending the process, claimants were more likely to be released to return to work.

There's a lesson here for the non-workers comp world, and policy wonks in particular. It is this - providers overtreat, to the detriment of the patient and the payer. Draconian measures such as flat limits on the amount of treatment do work.

With health reform on the horizon, here's a great example of the waste in our health care 'system', waste that benefits the provider.

Posted by Joe Paduda at 6:26 AM | Link to this post | Comments (4)

Oregon's workers comp system is a success.

It is 42nd lowest in insurance rates and among the highest benefits for injured workers in the nation.

Premium rates have not gone up for eighteen (18) years.

Costs have declined 50% during that time.

Here are some of the factors behind that success.

Continue reading "How does Oregon do it?" »

Posted by Joe Paduda at 4:29 PM | Link to this post | Comments (2)

Carol Gentry of the Tampa Tribune has authored one of the more accessible pieces on the hows and whats of hospital price variation.

Carol's piece illustrates two key issues - the data is available, and consumers aren't using it.

Continue reading "Humana's good effort" »

Posted by Joe Paduda at 7:29 PM | Link to this post | Comments (2)

Back and neck injuries account for a third of all workers comp claims costs. That's no surprise to industry types, and is a further affirmation of how tough it can be to manage comp claims.

Back injuries can be notoriously difficult to resolve, expensive to treat and impossible to determine if a back injury was related to employment.

Continue reading "Back and neck factoids" »

Posted by Joe Paduda at 6:16 AM | Link to this post | Comments (3)

If you're wondering why your company's drug costs are going up, one likely contributor is the dramatic increase in the use of pain medications. Retail sales of five leading pain drugs jumped 90% from 1997 to 2005 led by oxycodone's six-fold increase.

Continue reading "Pain meds are driving drug costs" »

Posted by Joe Paduda at 7:26 AM | Link to this post

Texas just released workers comp medical payment data for 2005 and 2006. There's some really great stuff here.

Continue reading "Applause applause for the Lone Star State" »

Posted by Joe Paduda at 8:37 AM | Link to this post | Comments (3)

Obese people. 85% of those injured at a major manufacturer were overweight or obese.

Continue reading "Who gets hurt?" »

Posted by Joe Paduda at 11:25 AM | Link to this post

Richard Eskow of Sentinel Effect reports on the latest revelations about a bit of book-cooking at the VA. Seems the VA has been a bit, or perhaps more than a bit, overly positive about its record.

More troubling than boosterism is the allegation that the VA selectively reported results, and even fabricated conclusions to make the system appear better than it actually is.

As a fan of the VA, I'm concerned about two things.

Continue reading "The VA's been cooking the books" »

Posted by Joe Paduda at 7:13 AM | Link to this post

The largest health plan trade group wants to form a new agency to "compare the cost and effectiveness of medical treatments as part of a series of recommendations to reduce health care costs." (California HealthLine from CongressDaily) At first blush that's pretty similar to what the Agency for Health Care Research and Quality is doing today.

Continue reading "Desperate times, desperate measures" »

Posted by Joe Paduda at 6:32 AM | Link to this post | Comments (2)

Jason Shafrin reports on the link between physician compensation mechanisms and surgery rates.

Here's the "money quote" -

"When specialists are paid through a fee-for-system (FFS) methodology rather than a capitation or salaried basis, surgery rates increase 155%. There is suggestive evidence that surgery rates fall when primary care physicians are paid on a fee-for-service basis compared to capitation or salaried payments."

Not addressed is the key question - is the rate of surgery appropriate under either compensation mechanism?

Posted by Joe Paduda at 7:24 AM | Link to this post | Comments (2)

The state of Washington is a monopolistic workers comp state; unless an employer is large enough to be self-insured, it has to buy workers comp insurance from the state itself.

As a monopolistic state, the regulators have even more power than in the highly regulated but non-monopolistic states. One area of particular interest is how the state deals with the WC drug formulary, which specifically excludes Actiq and Lyrica.

Washington's Health Dept. just released new guidelines on the use of narcotic opioids; the guidelines, their development process, and the impact of same should be watched carefully by regulators, insurers, managed care firms and most of all prescribing physicians.

Continue reading "Washington's smart policy on opioids" »

Posted by Joe Paduda at 7:14 AM | Link to this post

URAC, the accreditation body that seems to be into every aspect of managed care, is now looking to certify PBMs. In a presentation at the PBMI conference in Phoenix last week, a representative provided an overview of the process, modules, timing and certification levels contemplated by URAC.

While the process is only for health lines today, URAC is seriously looking into accrediting WC PBMs...

Brace yourselves.

Continue reading "URAC's foray into pharmacy benefit management" »

Posted by Joe Paduda at 6:33 AM | Link to this post | Comments (1)

Actiq is a narcotic taken in lollypop form, a technique that gets the drug to the pain centers quickly. Developed for break-through cancer pain, evidence now suggests that only 10% of Actiq users have cancer.The high-powered narcotic has been the subject of several recent reports and a state attorney general investigation concerning off-label use.

Continue reading "Actiq - the off-label poster child" »

Posted by Joe Paduda at 7:23 AM | Link to this post | Comments (1)

Controversy over treatment types, overly generous payments to physicians to endorse a product, lawsuits alleging faulty research, the FDA under fire for inadequate evaluation, fights over reimbursement for a new procedure, and confusion over the usefulness of a common and very expensive procedure.

If you want to know why the US health care system is so dysfunctional, I give you low back pain.

Continue reading "my aching back" »

Posted by Joe Paduda at 8:11 AM | Link to this post | Comments (2)

Kudos to USAToday for publishing a pretty good article on variations in practice patterns related to back surgeries. In a front page story today, the paper that has been derided by some as "McNews" explores the issues surrounding the explosion in the number of spinal fusions.

The reporting is balanced, insightful, and thorough, a bit of a surprise coming from a paper that prides itself on short sentences, really short words, and lots of color, not depth and nuance.

Noted throughout the article is the primary problem - no one knows how many spinal fusions are the right number, and there is significant disagreement among stakeholders re when a patient should have surgery. (free registration required) That's all true, and that's where workers compensation comes in.

Continue reading "Workers' Comp - the answer to the spinal fusion question" »

Posted by Joe Paduda at 7:11 AM | Link to this post | Comments (2)

There has been a substantial increase in the use of emergency departments in recent years. A new report from the Centers for Disease Control indicates the number of ED visits reached an all-time high of 114 million in 2003.

The increase was attributed to adults, and more specifically Medicaid recipients who used EDs four times as often as those with private insurance. One of the report's editors noted that the ED has become the provider "of first resort" for many of the poor and uninsured.

With the present political wrangling over the future of Medicaid and the uninsured, this report points out one of the most troubling aspects of the "delivery systems" used by the poor. Care delivered through the ED is typically more expensive, time-consuming, and less coordinated than care delivered through a primary care provider. Tests and imaging are often duplicated, there are often problems with continuity of care, and patients with chronic conditions seek care for acute episodes in the ED rather than through their primary doc.

It is impossible to calculate exactly how much money is wasted in this process, but it is certainly in the billions of dollars.

Clearly the industry needs to do a better job of directing patients to appropriate levels and locations of care. Having been involved (albeit years ago) in a state Medicaid reform effort, I have some understanding of the problems involved. However, it is clear that the quality of care delivered is too low and the cost of that care is too high when it is provided at an emergency department.

What does this mean for you?

Redouble efforts to direct patients to primary care. Work with providers to set up streamlined primary care access next to the ED. Yes this is a big problem with lots of issues, but we can't afford to not address it.

Posted by Joe Paduda at 7:03 AM | Link to this post

Bob Laszewski of Health Policy and Strategy Associates (no affiliation with HSA) notes that CMS' latest health care cost report includes the following:

"in 2002, the percentage of health insurance premiums spent on profit and admin expense was 12.8%; in 2003, the expense and profit ratio had rised to 13.6%. Undoubtedly, this gain is not in expenses but in health insurance company profits."

This occured at a time when overall health care costs were still increasing by almost 9% a year.

At the risk of stating the obvious, profits and admin expenses have increased at a rate greater than that of total medical expenses. Not only does this not say much for the "efficiency" of the private market, it also may add fuel to the argument againts private insurance.

We'll have more details on the CMS report's notable findings in a future post.

Posted by Joe Paduda at 7:52 AM | Link to this post